JPMorgan freezes accounts of stablecoin startups…"Concerns over money laundering and sanctions violations"

Doohyun Hwang

Summary

JPMorgan Chase reportedly carried out account freezes on stablecoin startups focusing on the South American market.
It said the reasons for the account freezes included compliance risk and potential ties to countries targeted by U.S. economic sanctions.
Although demand for stablecoins is high in South America, banks have been cautious about accepting such firms due to regulatory and potential fine risks.

*Photo=PhotoGranary02 / Shutterstock.com*

JPMorgan Chase has frozen the accounts of stablecoin startups one after another.

According to The Information on the 26th (local time), JPMorgan recently froze the accounts of the stablecoin startups 'Blindpay' and 'Kontigo', which focus on the South American market. Blindpay has been providing cross-border remittance services in places such as Venezuela using a US dollar–pegged stablecoin, and Kontigo also operated similar services.

The main reason the bank blocked the accounts is 'compliance risk.' According to sources, disputes over customer transactions related to those accounts have recently surged, and potential sanctions violation possibilities related to Venezuela, a country targeted by US economic sanctions, were detected. Accordingly, JPMorgan decided to suspend the services, citing obligations to comply with customer identification systems (KYC) and anti-money laundering (AML) protocols.

While stablecoins are emerging as an alternative in South America where demand for dollar-pegged assets is high due to economic instability, from the bank's perspective it is difficult to accept them at the risk of regulatory scrutiny and potential fines.