Texas orders the shutdown of first “decentralized bank”

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Everything’s bigger in Texas, right? Big hats, big land, big attitudes and big money all play an oversized role in the lone star state. While many abroad and, even in the United States, may stereotype Texas a desert populated by oil fields and cowboys, the state is home to many high tech businesses in cities like Austin, Dallas and Houston.

The state of Texas has a big problem with a particular cryptocurrency entity known as Arise.

As it turns out, maybe big money and high tech aren’t always meant to combine out in Texas. A juicy bit of blockchain news out of the state may hurt the future of blockchain stocks and cryptocurrency in Texas. Or will it actually help protect legitimate blockchain platforms and cryptocurrency exchanges?

The seemingly controversial story involves Arise Bank, supposedly a “decentralized cryptocurrency bank” offering financial management services, debit cards, and an Initial Coin Offering (ICO).  Arise also had associations with the Bitshares community and seemed to be endorsed by well-known developer Stan Larimer seemed to endorse the project via his article in Steemit.

If it sounds too good to be true, that’s usually the case and Arise Bank proves no exception to this rule.

Accusations against the so-called decentralized cryptocurrency bank, Arise, derive from blockchain investors at all levels. 

For some time, many people have not only questioned the legitimacy of the “decentralized cryptocurrency bank,” but many have called it an outright scam, both informally in blogs and forums as well as professionally in popular journalistic outlets. The startup’s founder, Jared Rise, and other representatives have snapped back claiming they are “victims of libel and slander;” however, Rice already has a history of running scams. Now, Arise Bank has lost all credibility – not due to online articles, comments or even a disgruntled customer but, rather, due to the founder’s uncovered background history.

Texas Banking Commissioner, Charles Cooper, issued a “Cease & Desist Order” based on finding the cryptocurrency bank, Arise, violated Texas Finance Code Chapter 31.

This violation relates to using the term “bank” in its name and marketing materials “to imply that it is in the business of banking in this state — The order requires Arise Bank to cease and desist from implying that they engage in the business of banking in Texas. Arise Bank is further required to clearly disclose that they do not offer their services to consumers in Texas.” Harsh blow for Arise Bank’s reputation and future, right?

Well, not if founder Jared Rice has it his way.

Rice confronted the regulation against him with a cavalier attitude stating “the software cannot be erased nor does the State of Texas have any sort of regulation that prevent any of our Texas-based users from storing cryptocurrency on their computers or cellular devices using the Arise Bank platform.” Rice also says he refuses to comply with removing the word “bank” from the company name. Further, Rice claims that the SEC and FBI special agents raided his office with guns though no one else has substantiated this.

The state of Texas insists the Arise founder remove the word “bank” from its cryptocurrency service; Rice continues to fight the regulation.

The deputy commissioner of the Texas Department of Banking, Bob Bacon, responded back in American Banker that Arise Bank is prohibited from using the word “bank” in its name unless it’s approved by the state. Additionally, Bacon further alleges Texas Department of Banking has tried to visit Arise Bank’s offices in Dallas, but, found the physical locations are non-existent.

There’s more trouble ahead for this particular would-be cryptocurrency con.

The U.S. Securities and Exchange Commission (SEC) is taking Arise Bank to court, according to the SEC’s recently filed reports. The U.S. regulatory agency says Arise Bank’s operations are a “fraudulent offering” and none of Arise’s businesses have ever registered with the SEC. The public document details that the ‘decentralized bank’s’ promises were misleading to retail investors. Keep up with blockchain news to see how Arise Bank ultimately fares throughout 2018.

(To learn more about the decentralized nature of cryptocurrency, read Decentralized Cryptocurrency: What You Need to Know.)

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