A little-known, NYC-based bank called “Quontic” has become the latest of a handful of US-based financial institutions to have agreed to work with the cryptocurrency sector, according to a recent report from CoinDesk.
The bank, which has just $420 million in assets (JPMorgan,by comparison, has more than $30 trillion), opened a checking account for an unnamed Bitcoin ATM firm–its first crypto client–several weeks ago, and claims to be in contract negotiations to open accounts for another new cryptocurrency company, which was also unnamed.
Quontic CEO Steve Schnall told CoinDesk said that while the regulatory environment in the US isn’t the clearest or most conducive for relationships between banks and cryptocurrency companies, he is hoping that acting early will provide the bank with an advantage when regulations become more lucid: “we’re just taking steps so that , we don’t have a lot of catching up to do,” he said.
“We’re looking to diversify our product offering and our customer mix by entering into that field.”
And indeed, the plan to diversify could attract a number of new crypto-industry customers to Quontic–the shortlist of US banks who are willing to work with the cryptocurrency industry is still so small that a number of new companies are eagerly
Why are banks so hesitant to accept crypto-industry clients? For one thing, it’s a lot more paperwork–banks have to do a more thorough KYC and AML process around cryptocurrency companies because of the ways that crypto companies may have raised their funds.
“If you have a startup that raised money doing an ICO and didn’t do proper KYC or AML, that bank doesn’t know who the proceeds are from,” said Joshua Klayman, head of the blockchain and digital assets practice at law firm Linklaters, to CoinDesk.
The problem isn’t necessarily limited to the United States–the CEO of Credit Suisse that the reason that banks have “little or no appetite” for getting involved with cryptocurrencies is because of the fears of market manipulation and connections with illicit activity that still surround the cryptocurrency industry.
”You don’t have mom-and-pop financial institutions.”
But so far, Quontic claims to be up to the challenge, pointing to the fact that it initially turned away its Bitcoin ATM client when it first approached the bank a year ago. But instead of cutting off contact, Quontic reportedly worked closely with the company for a year in order to properly prepare it to become a banking client.
“Crypto companies have to have strong controls, internal audit, and a very robust system of compliance,” Schnall said to CoinDesk. “You don’t have mom-and-pop financial institutions. You’re not going to have mom-and-pop crypto players of any significance.”
Quontic CIO to Finance Magnates: Bitcoin is “a universal payments solution”
Additionally, Schnall seems to have been involved in the cryptocurrency industry long enough to operate undeterred by rumours of bad actors within the space. Schnall’s interest in cryptocurrency reportedly began in 2015, when he purchased his first Bitcoin for $75; since then, he has worked to educate Quontic’s employees about cryptocurrency, and at one point, even gave each employee a small amount of BTC to allow them to learn about how it works.
“Bitcoin is fundamentally a protocol for how finance could work,” he added. “It offers many benefits, such as the ability to easily send money, removing the cost of cash, sending money overseas, [and is] a universal payments solution.”