Federal Reserve Suspends Bank Over Crypto Customers

On Wednesday, the Federal Reserve issued an order suspending United Texas Bank in Dallas, citing significant deficiencies in the bank's compliance with anti-money laundering (AML) regulations related to its cryptocurrency customers.

The bank consented to the order to avoid formal legal action, and must now submit a five-part action plan within 90 days to address these deficiencies, which include improving governance, customer due diligence, and monitoring of suspicious activities, particularly in crypto transactions.

This order highlights the bank’s failure to meet the Federal Reserve’s risk management and compliance standards in the cryptocurrency area.

This development follows a similar situation with Customers Bank, which has also come under pressure from the Fed to improve its compliance with anti-money laundering and Bank Secrecy Act (BSA) requirements, particularly with respect to digital asset transactions. The enforcement action required the bank to submit plans to improve its risk management practices with respect to cryptocurrency–related activities.

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Tighter regulatory oversight from agencies such as the Federal Reserve and FDIC has prompted banks to review their relationships with crypto businesses, especially as the closure of crypto-friendly institutions such as Signature and Silvergate highlighted the risks.

Concerns about money laundering, fraud and the volatile nature of cryptocurrencies are driving regulators to enforce stricter compliance, forcing crypto companies to explore international banking options or develop decentralized financial systems. This shift could further accelerate the crypto industry’s move away from traditional banking.

Alexander Stefanov