U.S.-based Vast Bank has officially exited the cryptocurrency sector, shutting down its crypto mobile banking application effective January 31, 2024. The decision comes in response to a consent order issued by the Office of the Comptroller of the Currency (OCC) in October 2023, which cited the bank for engaging in "unsafe or unsound practices."
Background: A Pioneer in Crypto Banking
Headquartered in Oklahoma, Vast Bank made history in 2021 as the first U.S. bank to offer customers the ability to buy, sell, and hold cryptocurrencies directly from a conventional checking account. The mobile app was developed in collaboration with German software giant SAP and crypto exchange Coinbase, allowing users to manage both fiat and digital assets seamlessly. For a time, the service was hailed as a bridge between traditional finance and the emerging digital asset economy.
However, the bank's strategic pivot away from crypto was abrupt. According to a notice on its website, "To strategically align our operations, effective Wednesday, January 31st, 2024, we will be disabling and removing the Vast Crypto Mobile Banking application from Google and Apple. This means your Vast Crypto Mobile Banking account(s), including any Digital Assets held in custody, will be liquidated and closed." Customers were instructed that they cannot transfer cryptocurrencies to other wallets or platforms; instead, they must liquidate digital assets within the app and withdraw the resulting USD funds. For those with already closed accounts, Vast Bank committed to issuing cashier's checks mailed to the address on file, and continued support for obtaining account statements.
OCC Consent Order: The Driving Force
The OCC's consent order revealed significant deficiencies at Vast Bank, including concerns over capital ratios, strategic planning, project management, liquidity, and interest rate risk management. The order required the bank to submit a revised capital and strategic plan and to establish a compliance committee to address these issues. CEO Tom Biolchini described the exit from crypto as a "strategic decision," emphasizing the need to separate the bank's cryptocurrency initiatives from its core community banking services in order to mitigate risks associated with digital asset custody and trading.
Broader Implications for Banking and Crypto
Vast Bank's departure is not an isolated event. In 2023, Silvergate Bank and Signature Bank collapsed due to crypto-related risks, leading many traditional financial institutions to reassess their exposure to digital assets. The Vast Bank case underscores the growing regulatory scrutiny that banks face when offering crypto services. The OCC's action signals that regulators are increasingly unwilling to tolerate weak risk management practices in the nascent space.
For affected customers, the forced liquidation means they lose the opportunity to benefit from potential future price appreciation and are unable to self-custody their assets. The bank's requirement to liquidate—or have the bank do it automatically—has drawn criticism from the crypto community, which views it as contrary to the principles of decentralization and self-custody.
Looking ahead, Vast Bank's exit may accelerate the trend of banks retreating from direct crypto involvement, at least until clearer regulatory frameworks are established. Whether traditional banking will eventually embrace digital assets again remains an open question, but for now, the path forward appears cautious and heavily compliance-driven.