The $1 billion-asset Vast Bank announced this week that it was disabling and removing the Vast Crypto Mobile Banking platform from both Apple and Google app stores effective Jan. 31, at which time all assets were liquidated and accounts closed.
The $1 billion-asset bank announced this week that it was disabling and removing the Vast Crypto Mobile Banking platform from both Apple and Google app stores effective Jan. 31, at which time all assets were liquidated and accounts closed. Customers who had money remaining in their accounts will have a cashier's check mailed to the address on file with the bank.
The shift comes in the wake of the Office of the Comptroller of the Currency's consent order signed by Vast in October of last year, which held that the bank "engaged in unsafe or unsound practices, including those related to capital, capital and strategic planning, liquidity risk management" and other areas.
"That order is directed towards our crypto-currency play." Tom Biolchini, chief executive of Vast Bank, said in a local news story. "Vast Bank has made the strategic decision to exit it. … You have to separate cryptocurrency from the community banking that is Vast Bank." The bank did not comment prior to American Banker's deadline.
As part of the conditions of settling the OCC's prior cease-and-desist actions, the bank was required to draft new frameworks for managing capital, liquidity risk, interest rate risk, custody and more within 60 days of the order. These plans require the approval by the director of the OCC's Special Supervision Division before being put into action.
Additional requirements include meeting and maintaining a total capital ratio of at least 13% as well as a leverage ratio of 10% or higher within that same period of time. As of Jan. 30, Vast reported a total capital ratio of 4.8% and a leverage ratio of 2.5% according to data from the Federal Financial Institutions Examination Council.
The bank's holding company entered into a personal investment agreement with Greg Kidd, founder of the Crystal Bay, Nevada-based investment firm Hard Yaka, around the time of the order. Kidd, subject to regulatory approval, will provide the organization with $48 million for a "refocus on traditional core bank functions'' while also "reevaluating investments made into cryptocurrency and other technology," according to a press release.
Financial institutions are hesitant to enter the space due to the lack of clear regulatory structure as well as skepticism in the wake of FTX's collapse and other high-profile failures, according to Larry Pruss, managing director of the digital assets and emerging technologies advisory practice at Memphis-based Strategic Resource Management.
"In the U.S., banking regulators have encouraged banks to not be involved in the sector and most banks have abandoned any thoughts of offering customers options to buy, sell or hold crypto. … That may change now that 11 Bitcoin exchange-traded funds have been approved," Pruss said.
Examples of those currently forging ahead regardless include leaders of the Dallas-based distributed ledger technology firm BankSocial, which is currently working with the National Credit Union Administration to obtain a federal charter for its proposed Defy Federal Credit Union. Initial planned product offerings include a self-custody crypto exchange for buying and selling currencies like bitcoin and ether, in addition to a deposit account.
"Our end goal is not to create the largest credit union ever invented with [the proposed] Defy Federal Credit Union, but rather to create a template" where credit unions can easily participate in a Web3 ecosystem, said John Wingate, chief executive and founder of BankSocial.
This year promises to be a battleground for both crypto-focused institutions and legislative efforts alike, as court cases between regulators and firms like Coinbase, Binance, and more recently Kraken, continue to progress.
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