The Alternative Investment Management Association (AIMA) has released a report titled "The Debanking Dilemma," which highlights significant challenges faced by crypto hedge fund firms in accessing banking services. The report, shared on December 20, reveals that 75% of surveyed firms encounter barriers in this area.

According to AIMA, despite the growth of the crypto hedge fund industry, which reached $15 billion in assets under management as of December 2023, these firms are struggling to secure essential banking services. This issue is identified as the primary area of market infrastructure needing improvement. A survey involving 160 crypto hedge funds found that 75% have difficulties accessing or expanding banking services for their funds, and 67% face similar challenges for their investment management companies. In contrast, traditional alternative investment managers reported no such problems. This disparity underscores inclusivity issues within the financial system and raises concerns about its impact on innovation and economic growth in the U.S. crypto sector.

The report indicates that over half of the surveyed crypto hedge fund firms were informed about potential or planned termination of their banking relationships, with 98% receiving no explanation for this action. For the remaining 2%, banks cited limits on crypto customers or industry exposure as reasons. Traditional alternative investment managers experienced fewer issues, with only one reporting a similar notice accompanied by a clear explanation. Banks often did not provide information or guidance to crypto firms regarding their inability to secure banking services. AIMA says these difficulties are not related to fund size or registration status but rather to the underlying asset class: crypto.

AIMA states that these widespread challenges negatively affect the crypto hedge fund industry's ability to operate efficiently, attract investment, and innovate. The lack of access to traditional banking services can lead to higher costs and reduced operational efficiency, causing hesitation among traditional investors. To address these issues, AIMA calls for a collaborative approach involving policymakers, banks, and crypto industry leaders. They emphasize the need for proportional risk management by banks based on actual risk rather than blanket policies and regulatory clarity for crypto hedge fund managers.

Critics have labeled this pattern of debanking in the crypto industry as "Operation Chokepoint 2.0," according to Forbes. Regulators like the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) are under scrutiny for their role in restricting banking access to the crypto sector. Industry leaders are advocating for reforms in the U.S. regulatory approach to cryptocurrency.

AIMA represents approximately 2,100 corporate members managing over $4 trillion in hedge fund and private credit assets globally. Its digital assets activities are overseen by its Digital Assets Working Group, which includes attorneys, custodians, and exchanges.