Vast Bank, First to Offer Crypto Checking Accounts, Exits Crypto Amidst Regulatory Challenges

Vast Bank, claiming to be the pioneer in offering cryptocurrency services alongside traditional banking, has decided to exit the crypto industry. This strategic move involves the closure of its mobile crypto banking app, marking a significant shift in the institution’s focus. The decision comes after the Office of the Comptroller of the Currency (OCC) issued a consent order in October 2023, citing concerns about Vast Bank’s engagement in “unsafe or unsound practices” related to risk management, control, and cryptocurrency activities.

The bank’s foray into the crypto space began in 2019, with the introduction of digital banking services, including cryptocurrency options, in its product mix. Partnering with Coinbase and SAP in 2021, Vast Bank aimed to allow customers to seamlessly buy, sell, and hold cryptocurrencies alongside their traditional checking accounts. However, the regulatory landscape and macroeconomic challenges prompted a reevaluation of the bank’s strategic direction.

Effective January 31, 2024, Vast Bank disabled and removed its Vast Crypto Mobile Banking application from Google and Apple platforms. This move entails the liquidation and closure of customers’ Vast Crypto Mobile Banking accounts, including any digital assets held in custody. The bank has committed to refunding remaining crypto holdings through the liquidation process.

The OCC consent order outlined specific requirements for Vast Bank, including achieving and maintaining a total capital ratio of at least 13% and a leverage ratio of at least 10% within 60 days of the order. As of December 31, 2023, the bank reported a total capital ratio of 4.75% and a leverage ratio of 2.46%, indicating a significant gap from the regulatory stipulations.

To address the OCC’s concerns, Vast Bank is mandated to form a compliance committee that will submit progress reports detailing corrective actions undertaken. The closure of the crypto mobile app aligns with the bank’s decision to refocus on traditional banking services.

While the FAQ provided by Vast Bank does not explicitly mention the reasons for exiting the crypto space, Chairman Tom Biolchini clarified in a November 2023 interview that the OCC order was specifically directed towards their cryptocurrency strategy. He emphasized the strategic nature of the decision, highlighting the importance of separating cryptocurrency operations from the core community banking services offered by Vast Bank.

As Vast Bank takes steps to exit the crypto industry, the regulatory challenges and the evolving regulatory environment in digital banking are increasingly apparent. This move echoes a broader trend in the financial industry, where institutions must navigate the delicate balance between embracing innovative financial technologies and ensuring compliance with regulatory requirements.