Banking Crisis Fines: Will Traditional Finance Giants Embrace Crypto Amid Increased Scrutiny?

Gloomy financial district, towering banks shrouded in shadow, colorful crypto coins emerging from the darkness, an intensifying spotlight on traditional finance giants, vibrant central bank digital currencies contrasting with fading paper money, tense mood, baroque art style, chiaroscuro lighting.

In the midst of an ongoing banking crisis in the United States, financial regulators are increasingly scrutinizing traditional finance giants like HSBC and Scotiabank. As a recent development, the Securities and Exchange Commission (SEC) has fined both HSBC Securities (HSI) and Scotia Capital over recordkeeping violations. HSI is set to pay $15 million, while Scotia Capital will cough up $7.5 million. Furthermore, Scotia has had to pay an additional $15 million in settlement charges to the U.S. Commodity Futures Trading Commission.

Announced on May 11, the U.S. SEC stated that these banks have failed to uphold the recordkeeping standards required from dealers registered with U.S. market regulators. This debacle surfaced upon the discovery that employees of HSBC and Scotiabank, including senior staff members, were using unauthorized communication channels such as text messages and WhatsApp.

The SEC emphasized that this lapse in managing directors and senior supervisors who were in charge of overseeing junior employees led to the firms’ inability to maintain and preserve the majority of such communications, causing a violation of federal securities laws. HSI’s failure to implement policies prohibiting such communications is the root cause of its inability to accurately supervise its employees under Section 15(b)(4)(E) of the Exchange Act.

The penalties imposed on HSBC and Scotiabank serve as just the latest chapter in a string of fines resulting from employees at Wall Street firms using personal devices and messaging apps for communication. In September 2022 alone, U.S regulators bagged nearly $2 billion in fines due to such cases. By 2021, there was already a broad probe launched into the use of personal messaging platforms like WhatsApp across various financial institutions.

It is noteworthy that neither HSBC nor Scotiabank are considered crypto-friendly banks. In March 2023, HSBC Holdings banned retail customers from making crypto purchases through credit cards, joining a slew of other banks tightening restrictions on digital assets. Moreover, in 2021, HSBC Group CEO Noel Quinn opposed crypto and stablecoins in an article, while expressing support for central bank digital currencies.

Scotiabank, on the other hand, has shown some leniency, allowing transactions from crypto exchanges, but is well-known for banning users from purchasing cryptocurrencies. In July 2022, numerous users reported difficulties in depositing or withdrawing Bitcoin using their Scotia accounts.

The recent penalties against HSBC and Scotiabank and their restrained approach toward cryptocurrencies highlight the ongoing tension between traditional finance and emerging digital assets. As increasing scrutiny falls upon established financial institutions, will their approach to digital assets change in the future, or will they continue with caution? The crypto community eagerly awaits the answer to this question, as it will likely shape the potential of digital assets in the years to come.

Source: Cointelegraph

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