On Sunday, Hayden Adams, CEO and founder of the popular decentralized exchange, or DEX, Uniswap (UNI), said his JP Morgan Chase bank accounts had been closed without explanation. Additionally, Adams stated that the incident was personal in nature, as he knew “many people and companies who were similarly attacked simply for working in the crypto industry.”
Former Commodity Futures Trading Commissioner Brian Quentins responded with a comment that the move was likely an example of “hidden liquidation of cryptocurrencies by the Federal Reserve and the Office of the Comptroller of Currency Banks.”
Quintins explained that banks are contractually prohibited from giving clients a reason to end a business relationship if they consider it too risky. While most users agreed with Adams regarding the alleged deduction, others have argued that there is no universal right to a bank account, and thus banks are free to act as they see fit.
Quentins did not provide any additional information to support his claim, but did provide a link to an opinion article by Wyoming Senator Cynthia Loomis that was published in the Wall Street Journal in November. In the article, Lummis Federal Bank criticized the failure to register several Wyoming-based Special Purpose Depository Institutions (SPDIs) as banks, preventing them from accessing the federal payment system.
In another response to Adams’ post, Kraken CEO Jesse Powell cited a tweet of his own from 2018 describing how JP Morgan Chase closed his crypto exchange’s payroll account with five days’ notice sent in the mail.
The risk level of customers in relation to a bank is usually assessed on the basis of compliance with regulatory requirements. While the motivation behind the bank’s cuts is unclear, last September the Securities and Exchange Commission launched an investigation into DEX developers for their marketing and investment services.
Under US financial law, brokers and dealers must register with the Financial Industry Regulatory Authority (FINRA) before they can process customer transactions. However, since the funds are held in consumer wallets rather than the Uniswap DEX, and cryptocurrencies are not classified as securities, Uniswap, like other DEXs and decentralized finance protocols, does not need to be registered with the relevant regulatory authorities. Uniswap is currently the largest DEX in the world with a 24-hour trading volume of $2.74 billion, according to CoinGecko.