Vast Bank has announced the termination of its crypto banking app and services, signaling a significant retreat from its once crypto-friendly stance. This decision underscores the growing trend among financial institutions to prioritize stability over innovation in the face of regulatory challenges.
Vast Bank, a trailblazer in integrating cryptocurrency transactions with conventional checking accounts, recently declared the closure of its Vast Crypto Mobile Banking application.
Another Crypto-Friendly Bank Pulls Support
The move, effective January 31, 2024, involves disabling the app from Google and Apple app stores, leading to the liquidation and closure of all digital asset accounts.
This marks a pivotal shift for Vast Bank, which initially launched its crypto-friendly application in 2019 in partnership with Coinbase and SAP. It enabled customers to manage cryptocurrencies alongside traditional banking services.
And it’s not just the US that is cracking down. The bank’s pivot aligns with a broader industry trend, as seen with JPMorgan Chase UK bank, which, amid escalating scam concerns, banned crypto payments in September 2023. The banking giant took steps to prevent UK customers from transferring funds to crypto firms and blocked crypto trades using Chase debit cards.
Read more: Crypto vs. Banking: Which Is a Smarter Choice?
This move by the JPMorgan-owned neobank reflects growing apprehension within the financial sector, despite crypto trading being a regulated financial activity under the UK’s new Financial Services and Markets Bill.
The journey into digital banking has been fraught with challenges for Vast Bank. In late 2023, the Office of the Comptroller of the Currency issued a consent order citing the bank’s cryptocurrency activities. The official consent order stated:
“The Comptroller finds, and the Bank neither admits nor denies: The Bank has engaged in unsafe or unsound practices, including those related to capital; capital and strategic planning; liquidity risk management; project management; books and records; interest rate risk management; IT controls; risk management for new products; and its custody account controls.”
This regulatory scrutiny was most likely a key factor in the bank’s decision to return to its core banking services.
The Spark that Ignited the Fire
The collapses of crypto-friendly banks like Silvergate and Silicon Valley Bank in early 2023 further shook the industry. These incidents were major catalysts for increased regulatory scrutiny in the US, prompting a reevaluation of crypto services by banks.
The failures of these banks exposed the risks associated with digital assets. This led to a tightening of regulatory policies and an increased focus on risk management.
Read more: 2023 US Banking Crisis Explained: Causes, Impact, and Solutions
In light of these developments, Vast Bank’s exit from the cryptocurrency sector serves as a cautionary tale. It highlights the need for financial institutions to balance innovation with stringent risk management and compliance with regulatory standards.
As the bank returns to traditional banking practices, it leaves behind a legacy of pioneering digital asset integration. It’s venture, while promising, ultimately proved unsustainable in the current regulatory climate.
As institutions like Vast Bank reassess their involvement in the cryptocurrency space, the financial industry at large grapples with finding a balance between seizing digital asset opportunities and adhering to regulatory and economic realities.
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