Start-ups in the cryptocurrency industry are facing a growing crisis of “debanking,” as banks across the United States are increasingly hesitant to work with them. Echoing a sentiment of frustration felt by many in the industry, Ryne Saxe, founder of the San Francisco-based start-up Eco, described the challenges his company faced early last year.
Saxe’s experience highlights a common problem: banks are imposing stricter compliance and reporting requirements on crypto firms. These demands stem from increasing pressure from government agencies, which are scrutinizing the crypto industry more closely than ever. Eco’s payroll provider, Bill.com, canceled the company’s account, citing a new policy, further isolating the company from essential financial services. After enduring eight months of mounting pressure, Saxe took drastic measures, shutting down Eco’s app and changing his business plan to avoid partnerships with banks.
“It was like hell,” Saxe recounted. “We were getting progressively debanked.” For years, many crypto start-ups have struggled to secure and maintain banking relationships in the U.S. This has led to accusations that the government is orchestrating a broad campaign to stifle the crypto industry. Critics have taken to social media and other platforms to decry the government’s actions as unconstitutional, while some have even filed lawsuits against banking regulators and raised the issue with Congressional members.
The debate recently captured wider attention. Last month, Marc Andreessen, a prominent venture capitalist, appeared on Joe Rogan’s podcast, a program with millions of listeners, and sharply criticized Democrats for allegedly “terrorizing” crypto start-ups by pressuring banks to distance themselves. His remarks gained amplification from Elon Musk, as well as well-known crypto executives such as Brian Armstrong, the C.E.O. of Coinbase, and Tyler Winklevoss, who labeled the actions of the government and banking sector as “evil behavior.”
The situation underscores the profound challenges faced by the crypto sector and the high stakes of the ongoing regulatory debate. Key figures in crypto are vocalizing their stance, and the issue is rapidly becoming more mainstream.
