United Texas Bank Faces Federal Scrutiny Over Crypto Dealings

• United Texas Bank received a cease-and-desist order from the Federal Reserve over AML compliance issues related to its crypto dealings.
• The bank has 90 days to submit a five-part action plan to improve adherence to anti-money laundering regulations.
• Other crypto-friendly banks, like Customers Bank, have also faced increased federal scrutiny following the collapse of Signature and Silvergate banks.

United Texas Bank, among the small number of U.S. banks that continue to serve cryptocurrency businesses, is being investigated by the Federal Reserve. 

The Fed issued a cease and desist directive on Wednesday against the Dallas-based institution due to major concerns about its adherence to anti-money laundering (AML) laws. The order highlights multiple instances where the bank’s interactions with cryptocurrency customers reportedly did not meet regulatory criteria.

Bank Agrees to Compliance Action Plan

The Federal Reserve’s notice did not detail the specific methods in which United Texas Bank breached AML rules . Nonetheless, it mentioned that the bank’s management decided to agree to the directive, thus sidestepping official legal action. The bank has a 90-day period to create and execute a five-step action plan to strengthen its adherence to AML regulations.

Growing Scrutiny of Crypto-Friendly Banks

United Texas Bank, with a staff of 75 and approximately $1 million in assets, is the most recent crypto-friendly financial institution to come under federal scrutiny. The Federal Reserve has been more diligent in monitoring banks involved in the cryptocurrency sector. Recently, Customers Bank and other banks have also been placed under federal monitoring for similar reasons.

Crypto Industry Faces Ongoing Banking Challenges

Customers Bank in Pennsylvania has recently agreed to face increased scrutiny from the Federal Reserve because of its connections to cryptocurrency companies. 

The lender became well-known in the crypto industry following the downfall of Signature and Silvergate banks in 2023, creating a big gap for U.S.-based cryptocurrency companies. Many crypto companies resorted to institutions such as United Texas Bank and Customers Bank to uphold banking connections due to the limited choices they had.

The actions taken by the Federal Reserve underscore the continuing regulatory hurdles that cryptocurrency companies encounter when trying to establish banking relationships within the U.S. banking system. As regulations become stricter, these companies could still face challenges in securing banking partnerships.