Bates Research | 01-11-23
What Banks Should Consider When Accepting Crypto Customers
Banks are quickly realizing that it’s time to embrace crypto customers. With the rise of digital banking, more people are choosing to store their funds in cryptocurrencies, and banks need to be able to accept these customers as part of their services. However, there are some important considerations that banks should make as they begin to accept cryptocurrency customers.
Knowledge of the Regulatory Landscape
The regulatory landscape surrounding cryptocurrencies is constantly changing. Banks need to stay abreast of all changes in order to remain compliant with regulations and protect themselves from potential fines or other penalties. Knowing what regulations apply, how they affect the bank’s operations, and how they could potentially change in the future will help banks ensure that they are operating within legal boundaries when dealing with crypto customers. Knowing, for instance, which cryptocurrency companies are required to be registered as money services businesses and/or money transmitters, is crucial to complying with current regulations.
Various regulatory guidance is already in place, such as the Financial Crimes Enforcement Network (FinCEN)’s 2013 guidance and the 2019 FinCEN advisory on illicit convertible virtual currencies (CVC).
Risk Management Strategies
Banks need to have a thorough understanding of the risks associated with crypto customers and develop strategies for managing them effectively. This includes understanding the customer’s risk profile and developing policies for onboarding crypto customers that take into account their individual needs and goals. Banks should also create procedures for monitoring customer accounts in order to mitigate risk related to money laundering, fraud, or other suspicious activity.
As cryptocurrencies gain more traction with the public, banks need to provide education on how cryptocurrencies work so that customers can make informed decisions about their investments and transactions. This includes educating customers on topics such as wallet security and storage options, transaction fees, trading platforms, and potential risks associated with investing in cryptocurrencies. Providing this type of education can help banks establish trust and credibility with their crypto customers while also helping them navigate the complex world of digital currencies safely and securely.
As banks continue to accept crypto customers into their services, it’s essential that they consider all aspects of managing this new clientele , including knowledge of the relevant regulatory landscape, risk management strategies, and customer education initiatives. Taking these steps will help banks ensure compliance with applicable regulations while providing a secure environment for conducting business with cryptocurrency holders. Ultimately, this will help build trust between banks and their crypto clients so that everyone can benefit from this new type of banking relationship.
How Bates Helps:
Bates works with banks and crypto companies to provide Anti-Money Laundering (AML) and compliance solutions in the banking and cryptocurrency space. Our consultants have a wealth of experience in the cryptocurrency industry and assist crypto companies in navigating the complex world of obtaining and maintaining banking relationships. We will work with you to develop a tailored solution that meets your specific needs and helps you obtain and maintain the banking relationship you need to succeed.
Contact Bates today to learn more about how we can support your banking and crypto firm needs.