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Bank Handling Millions From Crypto Clients

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New York financial institution, Metropolitan Commercial Bank court deposit business from crypto firms.

“We’re certainly very interested in growing this vertical,” Rosenberg, its CTO said of the bank’s crypto clientele. “We’ve learned that it’s a serious industry. There are some very smart people involved. There are some very interesting ideas coming out that could really change the way people do business.”

These clients include a few exchanges, as well as hedge funds and other crypto investors that bank at Metropolitan because it’s easier to quickly move their money to those exchanges. (the bank only handles fiat for customers and does not touch crypto itself.)

So far, it’s proven a lucrative niche for Metropolitan. In the first quarter, cash management and foreign exchange conversion fees from cryptocurrency clients totaled $3.4 million, the bank disclosed in an investor presentation. This helped drive a more than 300 percent increase from a year earlier in Metropolitan’s total non-interest income, to $5.4 million, according to a Securities and Exchange Commission filing.

If that doesn’t sound like a lot of money, keep in mind that Metropolitan is a community bank. With just $1.9 billion in total assets, it’s less than one-1,000th the size of JPMorgan.

“It’s extremely challenging,” said Joe Ciccolo, president of the compliance service provider BitAML Inc. Referring to another sector that banks have famously shunned, he added:

“The legalized cannabis industry are having a much easier time than our cryptocurrency clients.”

One reason Metropolitan Bank is an outlier in embracing the crypto industry is that most banks can’t stomach the risks. Especially regulatory risks.

As bullish as they may be, Metropolitan’s bankers still recognize the risks of working with crypto clients. “It’s a high-touch relationship,” Rosenberg said, meaning one requiring extra diligence.

With regard to risk management, Rosenberg said there are two crucial keys to serving crypto clients.

The first is being extremely selective about client acquisition, only working with companies that take compliance as seriously as the bank does. The second is maintaining an open dialogue with regulators.

“Law enforcement departments, in general, are understanding that cryptocurrency is not all about illicit payments, it has a value and it has a legitimate purpose,” Rosenberg said. “It’s just a matter of spending time explaining it, understanding what their concerns are, making them feel comfortable that we are mitigating those concerns, and that we have the right controls in place.”

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