Unbanked, a crypto fintech firm specializing in crypto custody and payments services, has decided to close its operations, citing a harsh regulatory environment for cryptocurrencies in the United States.
In a blog post published on May 26, Unbanked’s co-founders, Ian Kane and Daniel Gouldman, revealed that despite initially believing that establishing their company in the US would be a wise long-term strategy, their expectations were unmet after five years of operation.
Unbanked succumbs to regulatory pressure
The founders explained that while other crypto companies thrived by operating offshore and evading strict regulations, Unbanked took a different approach by engaging with regulators and adhering to their complex processes to position themselves favorably in the market. However, this decision resulted in substantial time wasted and excessive costs.
Kane and Gouldman candidly stated that US regulators are actively hindering banks and fintech companies from supporting crypto assets, even when they strive to do so in compliance with regulations.
Unbanked’s closure comes despite the firm’s recent successful partnerships with major companies, including a collaboration with payments giant Mastercard.
Although the firm had expected a $5 million funding injection, it has not materialized. The co-founders attribute this setback to the regulatory climate for cryptocurrencies in the US, severely limiting Unbanked’s ability to raise capital and operate as a self-sustaining business.
The company disclosed that it had signed a term sheet for a $5 million investment three weeks ago, with a valuation of $20 million that would have allowed Unbanked to continue its operations and expand. However, the funds were not received at the time of the announcement.
As a result, 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.
Although Unbanked did not mention whether it plans to file for bankruptcy, its closure highlights the challenging circumstances crypto businesses face in the US.
Other crypto firms grappling with regulatory challenges
Unbanked is not the only company to face difficulties in this space, as crypto exchange HotBit also recently announced its decision to wind down operations and urged its customers to withdraw funds promptly.
HotBit attributed its deteriorating situation to various factors, including the collapse of FTX and a former team member who became the subject of an investigation in August 2022, which temporarily suspended its business.
In another development, Digital Currency Group (DCG), the parent company of Genesis Global Capital, has reportedly been unable to meet its obligations of approximately $630 million to creditors.
This situation has sparked discussions among stakeholders, including Genesis, the Unsecured Creditors Committee (UCC), the Ad Hoc Group of Creditors (AHG), and Gemini, regarding potential forbearance options to prevent a default by DCG.
Meanwhile, Binance, the world’s largest cryptocurrency exchange company, faces allegations of violating US financial rules by mixing customer funds with company revenue.
Binance has refuted these allegations, maintaining that its accounts were exclusively dedicated to facilitating customer transactions.
However, the spotlight on Binance underscores the ongoing challenges faced by crypto firms operating in the US, where regulatory clarity and compliance remain significant concerns.