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One reason banks are hesitant: Cryptocurrencies are still in regulation purgatory.

The US government, for example, can’t decide what they are. As currencies they face very little regulation. But as securities, such as stocks and other investments, they would face a different level of scrutiny.

In December 2020, the US Securities and Exchange Commission filed a lawsuit against crypto platform Ripple and its leadership for the alleged illegal selling of unregistered securities — in form of its cryptocurrency XRP — worth $1.3 billion.

The case, which is ongoing, suggests XRP is a security and not a currency, because otherwise securities law wouldn’t apply. Ripple rejects that label.

Cases like that, paired with the huge regulatory uncertainty for other big cryptocurrencies, make it hard to get involved for banks, which are regulated to the bone.

“Undoubtedly, the Ripple action was an example of the regulatory dark cloud that could potentially hang over cryptos other than Bitcoin or…