Finally, a cease and desist order issued to United Texas Bank on September 4 reveals “significant deficiencies” in that bank’s crypto transactions and risk management. This comes as part of the regulatory challenges faced by financial institutions associated with the crypto industry.

In its review in May, the Federal Reserve found problems in United Texas Bank’s management structure and oversight of the bank’s board of directors as well as senior management.

This review identified serious deficiencies in risk management and compliance with anti-money laundering laws, rules and regulations, particularly regarding foreign correspondent banking and virtual currency customers. In particular, it was emphasized that there were problems with compliance with Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) requirements.

However, the order does not specifically explain how the bank failed to comply with regulations regarding crypto customers. This comes at a time when the crypto industry is facing regulatory uncertainties. In an environment where regulatory risks for crypto-friendly banks are increasing, correcting such deficiencies is of great importance.

United Texas Bank stated that following this review, it took various steps to strengthen its compliance with the BSA and AML program. The bank’s board of directors agreed to present a formal plan with stronger supervisory measures to increase compliance within this framework.

United Texas Bank is a financial institution with approximately 75 employees and management of $1 billion in assets. Such small and medium-sized banks may come under more regulatory pressure than larger banks, especially when operating in the crypto space.

The Federal Reserve’s tough stance on the bank’s risk management and transactions with crypto customers is seen as part of a growing crackdown on crypto-friendly banks within a broader regulatory framework.

As a matter of fact, this is not a situation unique to United Texas Bank. In August, Pennsylvania-based Customers Bancorp and its subsidiary Customers Bank faced similar regulatory scrutiny. In the investigations carried out on this bank, significant deficiencies were detected in the risk management systems.

Customers Bank, which failed the latest inspections of the Federal Reserve Bank of Philadelphia, has begun to take various steps to correct these deficiencies. This indicates that regulatory scrutiny on crypto-friendly banks is starting to intensify.

Such enforcement actions by the Federal Reserve are considered by some crypto advocates as part of a broader government campaign against the crypto industry.

This has led to the resurgence of what is called “Operation Chokepoint 2.0”, an alleged government strategy to prevent banks from doing business with the crypto industry.

Dan Spuller, chief business officer of crypto advocacy group Blockchain Association, stated that the cease and desist order issued to United Texas Bank is a continuation of “Operation Chokepoint.” Spuller and other advocates argue that the government is making it harder for banks to operate in the crypto space with such sanctions.

These developments show that the crypto industry is coming under increasing pressure in its relations with the traditional financial world. Banks will have to pay greater attention to regulatory compliance when working with crypto customers, indicating that more banks may face similar sanctions in the future.