First Republic, a major US lender, is apparently shutting off services to blockchain startup Civil next month, according to documents obtained by Decrypt.
The San Francisco-based bank will be terminating its services to Civil on June 6 “because we are a crypto-related company,” Naima Jinnah, Civil’s COO, explained in an email sent to colleagues May 24.
She added that Civil, which is based in Delaware, will struggle to find a new bank, because it has not yet obtained a “foreign certificate”—essentially a way for a company to register in a different jurisdiction—in the State of New York. To obtain a certificate it will have to file its 2017 tax returns, which it plans to do in the next few months.
The email noted that Civil has asked bankers at Chase, Bank of America and Silvergate to handle its banking services, to no avail.
First Republic and Civil declined to comment.
Civil, which seeks to offer a new business model for online journalism, provides a platform for several online newsrooms—among them Sludge and the Tom Scocca-led Hmmdaily—and is intended to fund public-interest reporting, as well as provide a way for readers to vet stories for accuracy.
A source at the Brooklyn-based incubator, ConsenSys, which was an early backer of Civil and is the backer of Decrypt, described Civil's banking situation as typical, saying that banks frequently stiff startups when they learn that they are involved with cryptocurrency.
“And before you know it, the account is shut down,” he said.
The source added that startups make little effort to publicize their struggles with US banks, fearing that doing so would spark further recriminations. “It’s swept under the carpet to a certain extent because everyone is struggling to hold an account down, and doesn’t want to lose the one they have,” the source said.
The wariness of traditional banks to fund otherwise legitimate crypto-backed startups is one reason sketchy middlemen, such as payment processor Crypto Capital Corps, have stepped in to fill the breach.