Interesting read in today's WSJ (paywall):
Lack of Banking Options a Big Problem for Crypto Businesses
Bitfinex’s loss of access to $850 million in customer funds after using a Panama-based processing firm highlights a persistent issue for crypto companies.
An extended excerpt:
"... Crypto exchanges including Coinbase and Gemini embraced regulation and have cultivated normal relationships with banks. Others haven’t. That has made them popular with some of the customers attracted to crypto’s anonymity, but it has also made them off-limits to most banks.
Bitfinex’s problems with Wells Fargo made it increasingly reliant on Crypto Capital. There was no contract between the two companies, even though by 2018 Crypto Capital held about $850 million worth of Bitfinex customer money in accounts at various banks in several nations.
After some Crypto Capital overseas accounts were seized by authorities, Bitfinex had increasing problems getting it to process transactions. “Too much money is trapped with you,” a Bitfinex employee nicknamed Merlin wrote in a text to a Crypto Capital employee he called Oz, according to a report from the New York Attorney General’s Office. “We are currently walking on a very thin crust of ice.”
The report revealed that Bitfinex concluded late in 2018 that it had to go around Crypto Capital, leading the exchange to tap the accounts held by a sister company, Tether Ltd. Tether’s money was supposed to be held in a reserve dedicated to keeping the stablecoin pegged to the U.S. dollar. Without telling investors or customers, the attorney general’s office said, Tether gave Bitfinex a line of credit allowing it access to up to $900 million of its reserves. "