All businesses need capital to survive. That is especially true for embryonic firms with untested business models or products or services.

The lack of access to capital can truncate firms’ ability to grab onto new opportunities, to gain scale, to build an audience or even to launch. Thus, if traditional banking conduits are off-limits, companies tend to go where the lenders are … and sometimes down proverbial dark alleys.

So it is that The Wall Street Journal reported Friday (May 17) that for a number of cryptocurrency companies, lack of access to capital is a problem, and these firms turn to “shadowy middlemen” to meet their financial needs.

Look no further than the recent Bitfinex scandal, where as previously reported that cryptocurrency exchange – which is tied (no pun intended) to Tether, a digital currency – has lost access to $850 million. That money went from the exchange’s coffers to Crypto Capital Corp., a firm based in Panama, in order to process customer withdrawal requests. The matter has been under investigation by the New York attorney general.

The Panama firm, in turn, has been under siege, as Polish authorities, said the Journal, have seized $270 million from its bank accounts.

Amid labyrinthine twists and turns, the financial publication said, “It is not clear who owns Crypto Capital. Ivan Manuel Molina Lee is listed as its president in public documents, but Panamanian law allows for “nominee directors” – directors in name only – and doesn’t require owners to be listed publicly.”

The cryptos have found no haven with banks in an environment where cryptos have been used for all manner of illicit activities – but the tech upstarts need a middleman to process bitcoin (and other cryptocurrency) transactions using dollars or other hard currencies. There are some examples of traditional banking relationships cemented with cryptocurrency firms, noted the report – where, for example, Coinbase has tapped into more traditional, service-oriented banking pacts.

Bitfinex, though, had lost a relationship with Wells Fargo (for transaction processing between Taiwanese banks and U.S. customers) and then opted to use Crypto Capital for those services. Once Crypto Capital was shut down, Bitfinex lost access to the aforementioned $850 million, and used Tether to bridge the gap as customers demanded their money back.

In examples of how fluid cryptocurrency firms’ banking relationships can be, the Journal offered up a few other examples. Jered Kenna debuted one of the earliest bitcoin exchanges in 2011, and bank relationships could last months … or days. “Banks absolutely fear the unknown,” he said. “The banks will drop you in a heartbeat.”



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