Crypto’s Banking Access Shrinks: United Texas Bank Latest Casualty

• The US Fed issues a cease and desist order against United Texas Bank.
• David Schwartz slams it as an indirect attack on the crypto sector.
• The community calls the government’s approach a “Chokepoint 2.0.”

The U.S. Federal Reserve has ordered United Texas Bank to halt operations, citing concerns about its risk management and crypto dealings. This move has sparked a debate about the government’s approach to regulating the crypto industry, with Ripple CTO David Schwartz criticizing what he calls “indirect regulation.”

The Fed’s order highlights specific deficiencies in the bank’s handling of virtual currency customers and anti-money laundering compliance. Schwartz argues that if the government has issues with crypto companies, it should address them directly rather than targeting their banking partners.

In a September 4 order, the Fed detailed concerns about United Texas Bank’s corporate governance and risk management, particularly regarding foreign correspondent banking and virtual currency customers. The statement read:

The examination identified significant deficiencies related to foreign correspondent banking and virtual currency customers, specifically risk management and compliance with applicable laws, rules, and regulations relating to anti-money laundering including the Bank Secrecy Act.”

Schwartz: Government Should Take Direct Action

Schwartz criticized the government’s tactics, calling for the courts to intervene. He argued that if the government has concerns about crypto companies, it should address them directly rather than penalizing their banking partners.

Read also: CTO Clarifies Ripple’s Commitment to Community Input on XRPL

Schwartz also warned that targeting banks like United Texas Bank could have a chilling effect on the crypto industry, limiting its access to essential financial services. He emphasized that when a bank faces consequences for its crypto ties, it’s the crypto companies themselves that ultimately pay the price.

This latest move against United Texas Bank follows a similar action against Customers Bancorp, another bank involved in the crypto space. These developments have led some industry leaders to speculate that the Fed is implementing “Chokepoint 2.0,” a coordinated effort to stifle the crypto industry.