On September 4, 2024, the Federal Reserve issued a cease and desist order against United Texas Bank, a financial institution known for its engagement with cryptocurrency clients. This action comes in the wake of a comprehensive examination by the Fed in May, which uncovered what it described as “significant deficiencies” in the bank’s risk management and compliance systems.According to the Fed’s order, the examination revealed critical shortcomings in the bank’s handling of foreign correspondent banking and virtual currency customers. Specifically, the issues pertained to the bank’s risk management practices and its adherence to anti-money laundering (AML) regulations, including the Bank Secrecy Act (BSA). The order detailed failures in the bank’s corporate governance structure, as well as oversights by its board of directors and senior management.While the cease and desist order criticized the bank’s risk management and regulatory compliance, it did not specify the exact nature of the violations related to its crypto clients. However, the Federal Reserve acknowledged that United Texas Bank had since taken steps to enhance its compliance with BSA and AML requirements. The bank’s board has committed to submitting a formal plan to improve oversight and ensure stronger adherence to these regulations.United Texas Bank, which manages approximately $1 billion in assets and employs 75 people, is the latest in a series of financial institutions facing scrutiny from regulators. In August, the Federal Reserve took similar enforcement actions against Customers Bancorp and its subsidiary Customers Bank. The Philadelphia-based bank was also found lacking in its risk management and AML practices, leading to its own cease and desist order.This recent surge in regulatory actions has sparked renewed debate about the government’s stance on cryptocurrency. Critics argue that these enforcement actions are part of a broader, coordinated effort to limit banks’ involvement with the crypto industry—a theory some have dubbed “Operation Chokepoint 2.0.”Dan Spuller, head of affairs at the Blockchain Association, a prominent crypto advocacy group, suggested that the Fed’s actions against United Texas Bank are a continuation of this alleged initiative. “The pattern is clear,” Spuller said. “The government’s efforts to stifle the growth of the crypto sector are increasingly apparent. This is an ongoing campaign to undermine the financial infrastructure supporting digital currencies.”As the regulatory landscape evolves, banks engaged with the crypto sector will likely face intensified scrutiny. United Texas Bank’s commitment to addressing the Fed’s concerns will be closely watched, as it seeks to navigate the complex intersection of traditional banking regulations and the burgeoning cryptocurrency market.
Get MENA regulation moves, RWA deals and AI-money trends in one weekly brief — plus instant alerts when the MENA Regulation Tracker changes. Free, no spam.
Vaibhavv Ali is the founder and editor of Cryptonite (cryptonite.ae), an independent digital-asset news and analysis publication with a UAE focus. He covers virtual-asset regulation — VARA, ADGM and the UAE Central Bank — alongside real-world-asset tokenization, stablecoins and agentic AI in finance. Every Cryptonite article is human-edited and its sources are linked. He is also a celebrated speaker and host.
