When operate a digital currency or blockchain, you are likely aware that establishing the necessary infrastructure for your company, including legal entities, banking services, payment solutions, and licenses, is not as straightforward as it is for traditional e-commerce businesses. In this article, we will discuss the reasons behind this complexity and explore the available options for obtaining bank accounts for crypto exchanges.
Important process to open bank accounts for crypto exchanges and provide a clear legal framework for their operations, currently, regulated only by a limited number of jurisdictions worldwide. For example, countries like Estonia and Lithuania have made transparent regulations that facilitate the establishment of digital currency businesses within their jurisdictions. Additionally, with the implementation of the AML 5 directive in several European countries, other jurisdictions such as the UK, Liechtenstein, Switzerland, Gibraltar, and a few others have introduced various types of crypto licenses.
Most of the financial institutions have been slow to adapt to these new regulations
Many of them hesitate to open bills for businesses associated with digital currencies, citing internal policies. In some cases, banks may initially open an account but later freeze it, giving account holders a limited window to withdraw funds. The negative media coverage surrounding digital currencies and concerns about potential money laundering actions have made traditional banker cautious about serving crypto companies, as they perceive the risks involved to outweigh the benefits. Even in crypto-friendly jurisdictions like Estonia, there is only one bank (LHV) that is somewhat open to serving crypto businesses, highlighting the slow pace of change. Despite the advancements in regulatory guidelines related to KYC/AML and the overall regulatory framework across Europe, major monetary institutions continue to lag behind in adapting to the world of digital currency.
The most challenging aspect of account opening is ensuring that all the required documents and compliance procedures are in order. Due to the increased scrutiny faced by the digital currency field from regulators, most traditional financial establishments simply refuse to open accounts for companies associated with crypto. Interestingly, a lot of crypto users already have bank account for p2p in Lithuania, which meet high KYC and AML standards.
Understanding how to navigate the high-risk sector is crucial
It is essential to have a clear understanding of your business model, operations, key personnel, funding sources, counterparties, compliance measures, and security processes, when opening crypto friendly bank accounts. This information will help you to create your account quickly and ensure smooth transactions going forward.
Several factors that can present challenges
During the bank accounts for crypto trading in Lithuania opening process, you can face with various factors that can present challenges for you:
- The jurisdiction where your company is registered and whether your business requires a crypto license. When setting up your crypto business, it is crucial to consider the jurisdiction and its impact on the service providers required to operate the business. Registering your company in the EU, especially in Estonia, is often the easiest option as AML rules are clear, and the necessary information such as Articles of Association, certificates, and license details are publicly available.
- Document translation and legalization. It is necessary to collect documents related to your business and its shareholders. It is crucial to present these documents in a format acceptable to the jurisdiction of the financial institution.
- Complexity of the structure. We understand that corporate structures can be complex, with multiple layers. To ensure a smooth onboarding experience, it is helpful to provide a clear understanding of how your business operates, including the flow of funds, sources of revenue, and any additional transactions.
- Enhanced Due Diligence (EDD) requirements. Crypto and virtual currencies are considered high-risk, requiring Enhanced Due Diligence (EDD) procedures to comply with AML regulations. This involves determining the source of funds and wealth for your company and its Ultimate Beneficial Owners (UBOs). All documents related to the source of funds for the company or its UBOs must be assembled and verified.
- Adequate compliance level. Most digital currency developers offer services similar to financial foundations and face inherent AML and fraud risks. We require our clients to maintain a certain level of compliance, including having a comprehensive AML policy and procedures, a dedicated compliance officer, software for identity verification, transaction monitoring, and blockchain analysis. Obtaining a license is a crucial step toward achieving this level of compliance.
- Clarity in responding to compliance forms and inquiries. Giving important details about your business and operations assists the account opening process. Sometimes, clients provide vague descriptions for account opening purposes or fail to clearly outline the flow of funds.
Conclusion
In conclusion, opening a fully compliant bank account for a high-risk industry like crypto requires effort and time, although it does not have to be an excessively lengthy process. Typically, an account can be opened within a few days if all the necessary documents are submitted.