Crypto fintech Unbanked, which aimed to provide digital asset banking services to the underbanked, has announced that it is shutting down due to regulatory hurdles in the United States.
The company, founded in 2018, aimed to bridge the gap between traditional banking services and the growing cryptocurrency market. However, Unbanked has been unable to obtain the necessary regulatory approvals to operate in the US, leading to the decision to shut down the platform.
In a statement, Unbanked CEO Alex Alexandrov said: “We worked really hard to develop a platform that would help people access banking services using digital assets. Unfortunately, regulatory hurdles made it difficult for us to continue our operations in the US.”
The closure of Unbanked highlights the challenges faced by fintech companies operating in the cryptocurrency space, particularly in the highly regulated US market. The lack of clear regulations and the ambiguity around the legality of cryptocurrency have made it difficult for many companies to obtain the necessary approvals to offer their services.
As of 2021, there are over 11,000 cryptocurrencies in circulation, and the total market capitalization of the industry exceeded $2 trillion earlier this year. Despite the growing popularity of digital assets, there are still many regulatory hurdles to overcome before they become mainstream.
In the US, the Securities and Exchange Commission (SEC) has been cracking down on companies offering cryptocurrency-related services that it deems to be operating illegally. In recent years, the SEC has brought numerous enforcement actions against companies that have raised funds through initial coin offerings (ICOs) without complying with securities laws.
The lack of clear regulations has also made it difficult for cryptocurrency companies to obtain banking services. Many banks are hesitant to work with companies in the industry due to the regulatory uncertainty. This has led to the rise of companies like Unbanked, which aimed to offer banking services to the underbanked using digital assets.
In addition to the regulatory hurdles, Unbanked also faced other challenges, including a lack of funding. The company had initially raised $1.2 million in seed funding, but this proved to be insufficient to sustain the platform.
In the statement announcing the closure of the platform, Alexandrov said: “We are disappointed that we were not able to achieve our goal of bringing digital asset banking services to the underbanked. We believe that this is an important mission, and we hope that other companies will continue to work towards this goal.”
The closure of Unbanked serves as a reminder of the challenges faced by fintech companies operating in the cryptocurrency space. While the potential benefits of digital assets are clear, the regulatory uncertainty and the lack of clear regulations make it difficult for companies to operate in the industry.
Despite these challenges, there are still many companies working to develop innovative solutions that make it easier for people to access banking services using digital assets. As the industry continues to mature, it is likely that we will see more companies emerge that are able to navigate the regulatory landscape and offer innovative solutions to the underbanked.
In conclusion, while it is unfortunate that Unbanked had to shut down due to regulatory hurdles in the US, it is important to recognize that the company was working towards an important mission. The challenges faced by fintech companies operating in the cryptocurrency space are well known, and it is likely that more companies will face similar hurdles in the coming years. However, as the industry continues to evolve and mature, it is likely that we will see more innovative solutions emerge that make it easier for people to access banking services using digital assets.
Unbanked, a cryptocurrency fintech company, has announced that it will be winding down its operations due to regulatory challenges in the United States. The company specializes in cryptocurrency custody and payments services, and the decision to close its doors comes after a long period of regulatory scrutiny and a hostile environment towards crypto-related businesses in the country.
In a blog post published on May 26, Unbanked’s co-founders, Ian Kane and Daniel Gouldman, explained that despite their initial belief that building their company in the US would be a sound long-term strategy, their expectations were unmet after five years of operation. The company chose to engage with regulators and adhere to their processes, which resulted in substantial time wasted and excessive costs.
Kane and Gouldman candidly stated that US regulators actively hinder banks and fintech companies from supporting crypto assets, even when they aim to do so in compliance with regulations. This has severely limited Unbanked’s ability to raise capital and operate as a self-sustaining business.
Despite recent successful partnerships with companies such as Mastercard and an expected $5 million funding injection, Unbanked has advised all its customers to withdraw their cryptocurrency and US dollar balances immediately. The company has provided a 30-day withdrawal window but strongly encourages customers to initiate the process as soon as possible.
While Unbanked has not mentioned whether it plans to file for bankruptcy, its closure highlights the challenging circumstances crypto businesses face in the US. HotBit, a crypto exchange, has also recently announced its decision to wind down operations and urged its customers to withdraw funds promptly due to unfavorable market conditions. Additionally, Digital Currency Group has reportedly been unable to meet its obligations of approximately $630 million to creditors.
Crypto companies face regulatory challenges not only in the US but also globally. Binance, the world’s largest crypto exchange company, is facing allegations of violating US financial rules by mixing customer funds with company revenue. Meanwhile, regulatory clarity and compliance remain significant concerns, and crypto companies are facing increasing scrutiny from governments and regulatory bodies worldwide.
In conclusion, the closure of Unbanked highlights the hostile regulatory environment crypto companies face in the US. It also serves as a cautionary tale for other crypto firms grappling with similar challenges. Despite recent successes, the regulatory challenges and inconsistencies ultimately proved too difficult for Unbanked to overcome. For the long-term growth of the crypto industry, governments and regulatory bodies must provide greater regulatory clarity and adopt more consistent policies towards crypto businesses.