Vast Bank, the first United States banking institution to let customers buy, sell, and hold cryptocurrencies, has left the crypto market. The Tulsa-based bank posted a notice on its website saying, “we will be disabling and removing the Vast Crypto Mobile Banking application from Google and Apple.”
Vast Bank said any remaining digital assets “will be liquidated and closed.”It does not support transferring the crypto assets to another exchange or platform.
The decision seems to result from regulatory concerns rather than a market failure, despite the fact that Vast claimed the move was intended to “strategically align our operations.” Vast received a cease-and-desist letter from the U.S. Office of the Comptroller of the Currency in October. The letter stated that Vast Bank “engaged in unsafe or unsound practices, including those related to capital; capital and strategic planning; liquidity risk management; project management; books and records; interest rate risk management; IT controls; risk management for new products; and its custody account controls.”
The letter also emphasized that Vast needed to achieve and maintain a total capital ratio of at least 13% and a leverage ratio of at least 10% within 60 days after the order was issued. On December 31, Vast Bank had a total capital ratio of 4.75% and a leverage ratio of 2.46%.
Vast said its crypto accounts amounted to less than 1% of holdings. As of November, Vast held about $2 million in crypto assets, with none of them being the bank’s own assets.
“Vast’s exit from the crypto space, as well as the overall lack of other banks following Vast’s early entry into offering a crypto product, is as much about lack of traction as it is any regulatory pressure,” said James Wester, Director of Digital Assets and Crypto at Javelin Strategy & Research. “The lack of clarity around holding cryptocurrencies is an issue banks simply don’t want to deal with.
“The retail adoption of crypto via a traditional demand deposit account with no capabilities beyond basic buying, selling, and holding of cryptocurrencies has limited appeal,” Wester added. “Had there been a wave of consumers demanding the service from their banks, there might have been more pressure on regulators to work with institutions on a workable regulatory solution. But most consumers are using exchanges like Coinbase, or even companies like PayPal, who provide more utility in their crypto products.”
High Hopes for Crypto
Vast Bank began its crypto offering in the summer of 2021. The first step was partnering with software firm SAP to ensure that it was compatible with the Payment Service Providers Directive, a European regulation for electronic payment services intended to boost innovation in digital assets. The bank also partnered with Coinbase and allowed its customers to buy and sell Bitcoin, Bitcoin Cash, Cardano, Ethereum, Litecoin, Orchid, and Algorand.
Vast Bank CEO Brad Scrivener said in October 2021 that the bank had already opened crypto accounts for customers from all 50 states. “With our initial announcement, we had significant ‘whales,’ meaning very high-net-worth crypto players, contacting us, because right now they have self-custody, where they have the equivalent of hundreds of millions of dollars buried in their backyard,” he said at the time. “Because we are regulated, this is a place where customers can feel more comfortable being able to get involved and have clarity.”