Metropolitan Commercial Bank has indicated that it will close its crypto business owing to the regulatory environment.
The New York-based bank has been providing crypto services since 2015. The bank’s decision to shutter its crypto operations comes at a time when the regulatory landscape for digital currencies is changing.
Earlier this year, the Office of the Comptroller of the Currency (OCC) published a statement confirming that banks are permitted to provide cryptocurrency custody services. However, this advise has not yet been applied, creating uncertainty for banks wishing to enter the market.
Recent statements from the OCC, the Federal Reserve, and the FDIC warning of the dangers to banks of doing business with crypto startups have only served to increase doubt.
Metropolitan Commercial Bank said in a statement that it had:
“made the difficult decision to exit the cryptocurrency business due to the numerous regulatory hurdles and the evolving nature of the market.”
The bank also stated that it would keep providing services to its current crypto clients until they had a chance to switch to other operators.
The bank’s president and CEO, Mark DiFazio, was cited in an article by American Banker on the subject. He stated:
“Crypto-related clients, assets and deposits have never represented a material portion of the company’s business and have never exposed the company to material financial risks,”
Additionally, the article states that the bank only had four institutional customers with a current interest in cryptocurrency for whom it provided “debit card, payment, and account services.” They were said to make up 6% of all deposits and 1.5% of all revenue.
The decision by Metropolitan Commercial Bank to shut down its cryptocurrency operations serves as a reminder of the difficulties that face banks attempting to enter the digital currency market. Although banks are now able to offer crypto services thanks to OCC guidelines, these institutions have found it challenging to operate in the market due to a lack of clear regulations.
Other banks will probably be reluctant to enter the crypto sector as well until there is more clarity on the regulatory front.