In a recent LinkedIn post, Lissele Pratt highlights a critical, often overlooked, hurdle that cryptocurrency exchanges face when seeking USD banking services: the misconception that it involves a single approval process. Pratt explains that the reality typically involves two distinct gates, with the second being the primary point of failure for many digital asset firms.
Pratt begins by outlining the fundamental challenge:
“One of the biggest mistakes I see crypto exchanges make with USD banking is thinking it is one approval process. It isn’t. It is usually two.”
According to Pratt, the first gate involves the Electronic Money Institution (EMI) assessing whether they want the exchange’s business. However, the more significant barrier, she argues, is the second gate. This stage requires the EMI’s own USD correspondent bank to be comfortable with the EMI having a business like the exchange on its books. This correspondent banking relationship is where many crypto exchanges encounter difficulties.
Understanding the Correspondent Banking Bottleneck
Pratt elaborates on why this second gate is particularly problematic for crypto businesses. While EUR and GBP banking infrastructure is described as more “native,” USD clearing often relies on correspondent relationships with US banks. These banks, she notes, are often the quickest to show apprehension regarding the cryptocurrency sector.
This dynamic can lead to a precarious situation for exchanges. As Lissele Pratt points out:
“So an EMI can sound crypto friendly, price well, and onboard you happily, then lose its appetite overnight. Not because you did anything wrong. Because its correspondent decided the overall crypto exposure on that book had become too uncomfortable.”
This means that an exchange can be onboarded by an EMI that appears supportive, only to have that relationship terminated abruptly due to the risk appetite of the underlying US correspondent bank. The EMI’s decision is not based on the exchange’s conduct but on the aggregate risk perceived by its banking partner.
Due Diligence Beyond ‘Crypto Friendly’
Given this complex reality, Pratt emphasizes the need for a more thorough due diligence process than simply inquiring if an institution is “crypto friendly.” She advocates for a deeper dive into the banking structure.
Pratt’s recommended approach includes understanding:
- Who the specific USD correspondent bank is.
- The proportion of the EMI’s portfolio that resembles the exchange’s business.
- Whether the EMI has a genuinely independent backup banking partner.
She cautions against the false sense of security that a second EMI account might provide if both institutions share the same underlying USD risk exposure. Pratt states:
“A second EMI account is not real redundancy if both sit on the same underlying USD risk.”
This highlights the importance of true diversification and understanding the full scope of the banking chain, not just the immediate provider.
Ensuring Resilient USD Rails
The ultimate goal, according to Pratt, is to establish “stable rails” that are not susceptible to sudden disruptions. She poses a critical question for businesses to consider:
“If your USD rails were disrupted tomorrow, would your backup actually hold?”
This question underscores the need for proactive risk assessment and strategic planning to ensure business continuity. Pratt’s insights serve as a vital reminder for crypto exchanges to look beyond surface-level banking relationships and to meticulously vet the entire chain of correspondent banking to secure robust and reliable USD services.
📝 About This Content
This article is based on insights shared by Lissele Pratt on LinkedIn.
📅 Originally posted on July 15, 2026 | View original post on LinkedIn →