Many crypto-related projects have found it nearly impossible to find a crypto-friendly US bank. A challenge that is stifling the expansion of many promising projects.
In fact, it is even a challenge for suppliers of hardware to the crypto industry to open US bank accounts. I’ve written before about the struggles of companies like Lamassu, a Bitcoin ATM manufacturer. For 15 months the company couldn’t get access to the US banking system. So its founders packed up and moved to Switzerland. There, they were finally able to gain access to crypto-friendly banks.
But crypto-related businesses are not the only ones struggling to have access to the US banking system.
Due to increased pressure from international and US regulators, gaining access to US banking solutions has become more difficult for companies across all industries and countries.
Luckily, there’s a solution…
Recently, Horizen Labs has teamed up with a leading international digital invoicing provider to find a workaround for its clients through blockchain.
Read on in today’s post to discover the substantial challenges unbanked companies face internationally and how those companies have started to use crypto as a solution.
The Latin American unbanked crisis
At the end of every month, businesses around the world send and receive invoices for their goods and services.
Smaller businesses do this in house, while bigger businesses use third-party services to take care of their payroll and invoicing.
It’s a simple task that keeps things ticking for most companies.
But it gets far more complicated as soon as that invoicing crosses international borders or involves different currencies. Because nearly every international transaction is denominated in US dollars, it must go through a US-based correspondent bank.
Essentially the way things stand now, if you don’t have access to the US banking system, you can’t do international business. At least not efficiently.
One of Latin America’s largest digital invoicing service providers, is struggling to deal with this very problem.
The company provides an online platform used for electronic billing by tens of thousands of companies in Latin America. Locally, its service works well. The invoicing company sends out invoices and receives payments within its system. For deals denominated in the local currency there are no hiccups.
But making deals denominated in US dollars? That’s a real nightmare.
KYC AML kills crypto-friendly US bank options
Given the amount of international business transactions, many of these Latin American companies accept US dollar payments. But thanks to increasing regulatory pressure, US banks have become increasingly reluctant to provide financial services to Latin America-based companies.
Any slip-ups in a bank’s KYC AML compliance can mean serious fines and the loss of its correspondent banking licenses. So to stay safe, many of these banks have completely turned their backs on Latin American companies.
It has become nearly impossible to find a LatAm-friendly or crypto-friendly US bank today.
Bank or no bank, Latin American businesses continue to make transactions in US dollars—through cash or other means of processing payments.
Unable to make these transactions through the digital invoicing company’s online platform, the businesses pay invoices offline. When the recipient receives its funds, it informs the invoicing company, which manually records the transation.
It’s a headache for everyone. And at the end of the day, they might as well not use the digital invoicing system at all.
Eager to stay relevant, the invoicing company approached Horizen Labs to come up with a solution…
The stablecoin solution to US banks
Horizen Labs is a company that creates enterprise blockchain solutions for businesses to streamline their operations.
Though there are endless potential use cases for blockchain, cryptocurrencies are the most prominent example. Through this medium, people can make instantaneous transactions to anyone in the world outside of the traditional banking system.
We hope that in the future, all transactions in the world might be done through crypto. But we’re not there yet.
For now, the use of crypto is not sufficiently widespread and the values of most cryptocurrencies are too volatile to be a viable solution for most businesses.
However, a new class of cryptocurrency is emerging that stands to remedy that: the stablecoin.
How stablecoins provide a crypto-friendly US bank alternative
Stablecoins are cryptocurrencies pegged to a specific fiat currency or a commodity like gold or other precious metals. You can transfer these in the same way as any other cryptocurrency, directly from one wallet to another. And thanks to their pegged exchange rate, they are easily exchangeable for fiat currency.
It’s the best of both worlds. With stablecoins, you can take advantage of the benefits of cryptocurrency-based transactions and be shielded from the price volatility of traditional cryptocurrencies.
Now, this is precisely what Horizen Labs is creating for the digital invoicing provider. With a stablecoin pegged to the US dollar, the invoicing company will be able to process payments on behalf of its clients instantly and easily within its online platform and effectively eliminate their dependency on the US banking system altogether.
What does this mean for Crypto Law Insiders?
Insiders should see the trend is clear. US regulators are freezing out a huge portion of the world’s economy from the US banking system due to ridiculous KYC AML and its correspondent banking mafia.
Given the extreme barriers to entry to the US banking system, more companies are turning to crypto as a solution. And now we’re starting to see large multinational service providers incorporate crypto into their platforms as well.
If you can’t find a crypto-friendly US bank, that’s OK. You can still get access to the banking system.
The harder the US banking system becomes to work with, the faster companies around the world will turn to alternatives to replace it. The irony is that if the US had a more inclusive banking system there wouldn’t be a need for many of these people to turn to crypto.
It’s like a good Greek tragedy, where taking action to avoid a prophecy is exactly what makes it a reality.