Why do banks close or refuse crypto company accounts?

What a bank has to know about you

US banks must understand the nature and purpose of each customer relationship, so they can build a "customer risk profile".³ They must also keep monitoring accounts, report suspicious transactions and keep customer information up to date.³ The FATF's global standard asks for the same kind of checks.⁴

So a bank does not only ask "who are you?" once. It keeps asking what the money is, where it comes from and whether the account is used as expected.^3,4

How US regulators described crypto deposits in 2023

In February 2023, the three US federal bank regulators, the Federal Reserve, the FDIC and the OCC, described why some crypto-related deposits carry extra liquidity risk.⁵ Liquidity risk here means the risk that a bank can't pay out money as fast as depositors ask for it, which is what happened to Signature Bank in 2023.⁶ The regulators named:⁵

• Deposits a crypto firm places for the benefit of its own customers. These can rise and fall with how those end customers behave.⁵
• Deposits that are stablecoin reserves. These can leave fast if holders redeem the stablecoin.⁵
• Deposits from many crypto firms that are closely linked or similar. These may all move at the same time.⁵

They suggested banks do robust due diligence on crypto firms that open deposit accounts, and keep monitoring them.⁵ The regulators also wrote that banks were "neither prohibited nor discouraged" from serving any type of customer allowed by law.^5,7 In 2025, all three regulators withdrew these statements; lesson 6 covers that.^8,9

Correspondent banking: banks need banks

Banks also depend on other banks. In correspondent banking, one bank holds deposits for other banks and provides them with payment services.¹⁰ The central banks' payments committee called it an essential part of the global payment system, especially for payments across borders.¹⁰

In 2016, that committee found correspondent banks were cutting relationships, especially with banks that:¹⁰

• Don't send enough business to cover the cost of compliance checks.¹⁰
• Are in countries seen as too risky.¹⁰
• Serve customers the bank can't get enough information about to judge the risk.¹⁰

De-risking

In 2014, the FATF defined de-risking as financial firms ending or restricting relationships with clients, or whole groups of clients, to avoid risk rather than manage it.² It listed drivers such as profitability, prudential requirements (rules that keep banks safe), worry after the 2008 financial crisis and reputational risk.²

The FATF said its standards only require a firm to end a customer relationship case by case, where the money laundering risks cannot be reduced.² What does not fit its standards, it said, is "the wholesale cutting loose of entire classes of customer".² It warned that de-risking can push money into less regulated channels, adding risk to the system.²

In April 2023, the US Treasury described de-risking the same way: cutting off broad groups of clients "indiscriminately", instead of managing each client's risk.¹ It found profitability was the main factor. Other factors were reputational risk, how much risk a bank wants to take, unclear expectations from regulators, and the burden of the rules.¹

Crypto firms and the "pause" letters

In February 2025, the FDIC released 175 documents about how it had supervised banks that took part in, or wanted to take part in, crypto activities.¹¹ It had earlier released 25 so-called "pause" letters, sent to 24 institutions.¹¹

Travis Hill, the FDIC's Acting Chairman when the documents were released, said they showed these banks' requests were "almost universally met with resistance", including directives to pause or not expand crypto activity.¹¹ In January 2023, the regulators had explained their caution by pointing to fraud, sharp price swings and the failures of several large crypto companies.⁷