Vast Bank Exits Cryptocurrency Industry

Vast Bank, a United States entity that claimed to be the first to allow its users to buy, sell and hold crypto alongside a traditional checking account, has revealed its intention to shut its mobile crypto banking application and declared that it is exiting the crypto industry.

Overview

At the beginning of February 2024, the bank’s exit was first spotted by the American Banker, which revealed that from January 31 2024, the $1 billion bank was disabling and removing the Vast Crypto Mobile Banking platform on its Apple and Google app stores. According to an FAQ post on the bank’s website, Vast Bank mentioned that it would refund any holders’ remaining crypto through liquidation. The FAQ noted, “To strategically align our operations, effective Wednesday 31st, 2024, we will be disabling and removing the Vast crypto Mobile Banking account(s), including any Digital Assets held in custody, will be liquidated and closed.

Background into Vast Bank in Cryptocurrency

In 2019, Vast Bank in Tulsa, Oklahoma, entered the crypto industry and two years later partnered with Coinbase and SAP on the company’s crypto-friendly mobile banking app, allowing users to buy crypto from their bank accounts, a feature more commonly associated with third payment apps, such as PayPal and Square. According to American Banker, Vast Bank was issued a consent order from the Office of the Comptroller of the Currency (OCC) in late 2023. The OCC order claimed that Vast Bank allegedly engaged in “unsafe or unsound practices surrounding risk management and control, with the apparent focus being on the institute’s involvement in cryptocurrency.” 

Not long after the OCC order, in November 2023, Vast Bank issued a press release highlighting its efforts to refocus on traditional banking and move away from crypto. Vast Bank noted, “Beginning in 2019, Vast added a range of digital banking services such as cryptocurrency to its product mix. … However, the ever-changing and unclear regulatory environment in digital banking coupled with macroeconomic headwinds make future growth more difficult to predict.” O

n January 31 2024, a United States Securities and Exchange Commission (SEC) commissioner, Hester Peirce, disagreed with the agency’s settlement gag rule that undermines regulatory integrity. Peirce said, “The policy of denying defendants the right to criticise a settlement publicly after it is signed is unnecessary, undermines regulatory integrity, and raises First Amendment concerns.”

Regulatory Uncertainty

According to the report, Vast Bank did not specifically cite regulatory uncertainty; many analysts attribute the US banking industry’s general reluctance to commit to the crypto sector to precisely that. On February 14 2023, banking regulators released a statement regarding their stand on crypto guidance and policy. According to banking regulators, digital assets threaten the soundness and safety of the banking industry, and banks are advised to proceed cautiously. A formal proposal rule regarding banks’ involvement in crypto activities has yet to be issued. Recent volatility in the crypto space has signalled to regulators that digital assets pose a risk to the soundness and safety of the banking system, which left most banks hesitant to get involved in the crypto space. 

James Stevens, co-leader of the Financial Services Industry Group at Troutman Pepper, said, “The federal banking regulators have now said, consistently across the board, that we think it’s questionable whether crypto activities in the cryptocurrency space are safe and sound for banks.” Stevens added, “We’re not saying never, we’re not saying it’s impossible, but we’re saying it’s a very, very high bar.” The fallout of crypto firms such as FTX did not help, as banks are getting involved in the crypto space as they are risks. Recent reports reveal that pro-crypto government officials have been vocal over the SEC’s purported catch-as-catch-can approach to crypto regulation. On January 2 2024, US members of Congress sought to remove the Staff Accounting Bulletin 121 (SAB 121) from the SEC. 

Lawmakers argued that SAB 121 limits banks wishing to hold their clients’ crypto assets, requiring them to keep their investors’ assets on the balance sheet. On February 1 2023, US representatives Mike Flood and Senator Cynthia Lummis introduced a resolution to repeal the SEC’s SAB 121 under the Congressional Review Act.

 



Fhumulani Lukoto Cryptocurrency Journalist

Fhumulani Lukoto holds a Bachelors Degree in Journalism enabling her to become the writer she is today. Her passion for cryptocurrency and bitcoin started in 2021 when she began producing content in the space. A naturally inquisitive person, she dove head first into all things crypto to gain the huge wealth of knowledge she has today. Based out of Gauteng, South Africa, Fhumulani is a core member of the content team at Coin Insider.

View all posts by Fhumulani Lukoto >

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