Businesses managing cryptocurrencies have had a tough time maintaining relationships with legacy banks because of the perception that bitcoin-type transactions are connected to criminal behavior.
DAG Global submitted a banking application in May, but it never moved forward. The startup is reapplying in March in hopes that it can start offering bank accounts to crypto companies in 2021.
“It’s a lack of understanding and reputation risk that has kept others away – we think it can be a cleaner sector [than mainstream finance],” said Sean Kiernan, founder and chief executive of DAG.
Kiernan said that since its May application, DAG has had “constructive dialogue” with U.K. regulators, including the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). “Thus far, the regulators have not raised any red flags.”
Stephanie Ramezan, chief commercial officer at DAG, told Finance Magnates that the companies in the crypto space have reached out “because people are fed up with what they’re faced with to meet basic business banking needs at the moment.”
The FCA has expanded oversight of the crypto industry due to anti-money laundering (AML) and counter-terror financing (CTF) procedures. The agency made it mandatory that all crypto firms must register.
The FCA awarded a payments license to London-based Clearbank and its partner BCB Group last month.
The PRA advised banks in 2018 to “act in a prudent manner” when it comes to crypto assets.
For a number of cryptocurrency companies, lack of access to capital is a problem, and these firms turn to “shadowy middlemen” to meet their financial needs. The cryptos have found no haven with banks in an environment where cryptos have been used for all manner of illicit activities.