Cryptocurrency companies want access to federal payment systems, banks are resisting

Washington — Cryptocurrency companies want to take advantage of the Federal Reserve payment system traditional banks use to move money quickly. Banks are retreating.

Both companies include Avanti Bank, which aims to provide cryptocurrency institutional investors with custody services, and Kraken, a cryptocurrency exchange platform. They say that direct access to the Fed’s payment system will allow them to process orders from customers who buy and sell digital assets faster and cheaper. Currently, they have to partner with a traditional bank that has an account with the Fed.

Traditional banks say new financial companies are relatively lightly supervised and lack the internal controls needed to prevent money laundering and other illegal activities. This is a concern that regulators have expressed more widely about the crypto industry. And they say the company is more dangerous because they are not insured by the Federal Deposit Insurance Corporation.

“It is reasonable to expect such applicants to be at increased risk in terms of money laundering prevention, cybersecurity, consumer protection, security and health issues,” said the Banking Policy Institute, which represents a major bank. Said the Independent Community Banking Association. of America wrote to the Fed last month.

Avanti and Kraken, who have a “special purpose” banking charter in Wyoming, say they have the same compliance, management and supervision requirements as traditional banks. They say that the only US banking regulator that has a crypto supervision exam manual is in Wyoming.