For those companies or people dealing with Bitcoin transactions on a daily basis, or those buying BTC as an investment, finding a suitable Bitcoin bank that will hold their funds is essential. For some, owning digital assets can be considered risky enough, without the additional risk of banking complications.
BTC banking is viewed as high risk by many banks. This however does not mean there are not options for you or your company, with a regulated banking provider who have the features we expect from a bank.
As an example, some key features of current Bitcoin friendly bank accounts available mirror a lot of ‘traditional’ options:
- Regulated in the UK & EU - you do not need to look offshore for a solution.
- 100% of funds safeguarded - you can rest assured all your money is safeguarded within the EU.
- Multiple currencies - EUR, GBP, USD and more.
- Multiple payment options such as SEPA & SWIFT – giving you many options for sending and receiving payments.
In this article we seek to explore some of the issues faced, and the bank options available.
Issues with Non Bitcoin Friendly Banks
Lets get the negatives out of the way:
Some banks refuse to accept funds they know are a result of a sale of BTC (or other cryptocurrencies). Major exchanges and brokers can be known to these non-Bitcoin friendly banks, which can see funds rejected.
In some cases, bank accounts are closed outright.
Another major problem is that of delayed funds, where the bank request further documentation on source of funds. Depending where the funds come from, this can cause a lengthy delay running into weeks. You can also find yourself trying to explain a simple BTC business to a compliance department who are inexperienced.
When the source of funds is proved, the bank may still reject the payment, usually citing 'risk appetite' for crypto transactions.
Why do a lot of banks view Bitcoin as high risk?
Emerging markets frequently struggle to find adequate banking options, the reasons of which can be explained.
KYC (Know Your Client)
Proving who a person is, or the ownership structure of a company, is the same process if the people involved are involved with Bitcoin or not. This is usually conducted via automated software, many systems are the same across a variety of banks and financial institutions.
Therefore the reason banks view cryptocurrency as high risk relates to the AML aspects.
Checking Fiat vs checking BTC
Checking the source of fiat is a tried and tested method for current banks – check the sender, the amount, the country and the sending bank – all this information is provided as part of a wire transfer. Compare this to BTC transactions – who has sent it? How did they get it?
Although banks do not accept cryptocurrencies directly, the lack of transparency in the history of BTC (before it is liquidated) can be seen as too high a risk to take. There are many articles and news stories about the misuse of BTC and the anonymous aspect of it, which without proper understanding, can be misleading.
As such, knowledge gaps remain an issue in traditional banks. A lot of compliance departments simply do not have the knowledge or experience to properly assess Bitcoin businesses in the way they do regular businesses.
The Bitcoin bank remedy
Compliance checks undertaken by a team who have experience in digital asset businesses will frequently require a wider remit of questions specific to your business.
Source of coin checks, such as monitoring the blockchain for hacked or stolen coins is a powerful way to give confidence to whether the BTC is clean. If the liquidated BTC has come via a regulated broker who has conducted these checks, the concern on the history of the BTC can be mitigated. Similarly, if the fiat transaction source is a reputable exchange, confidence can be taken that thorough customer checks have been undertaken.
Couple this with proper due diligence on the client, to understand the business model and where BTC is received from, plus the KYC/AML checks the business conducts on their clients, means a wider range of bank options appear.
Bitcoin Trading Bank Account
One of the most sort after accounts is a Bitcoin Trading Bank Account – an account where the user does not need to worry about the threat of closure or delayed transactions for conducting their trading or brokerage business – plus has a fee structure that works for multiple transactions.
Trading can be purely between different virtual currencies (XRP-BTC-ETH-USDT for example), or trading between digital assets to fiat (BTC-GBP, ETH-EUR for example).
The same can be said of Bitcoin Brokers, who either collect funds in Fiat, or need to send funds in Fiat onwards when the transaction completes.
In both these situations, one of the major pre-requisites for a bank account is a provider that has a risk appetite that allows its clients to frequently send payments in and out to a range of sources, such as exchanges, OTC desks and Escrow.
These accounts have special emphasis on fees, as will any Bitcoin bank. As the brokerage and trading world becomes more and more competitive, holding an account that charges a large fee per transaction can have a major impact on the traders profits when they buy or sell Bitcoin.
Buy Bitcoin via Bank Transfer
The first point in which you’d combine your bank and crypto together is a purchase of Bitcoin, if you make the purchase via bank transfer.
Naturally, if you trade Ethereum for Bitcoin then this is not a transaction the bank are part of, therefore not a banking concern for you.
Using your bank to buy Bitcoin can be problematic. Many banks have blocked all purchases of all crypto via Debit and Credit cards, leading some exchanges to require funds to be sent internationally to make a purchase, or brokers being required to purchase at an increased cost.
Over the past year or so, buying Bitcoin with a bank transfer has been getting easier, as regulated providers are introduced to the market, and checks on source of funds improve. However, the underlying skepticism of cryptocurrency from the vast majority of banks remains and has lead to many challenger Bitcoin banks to emerge.
When it comes to bank transfers to cryptocurrency exchanges and brokers, it’s important to know whether this transaction will be allowed or rejected by your bank. In some cases people or businesses are unable to ask their bank about the transaction and simply need to gamble that the transfer will be processed.
In other cases however, if a bank or financial institution allows buying Bitcoin via bank transfer, then the worry around funds being received at the intended destination is no longer a concern.
Withdraw Bitcoin to Bank Account
As we all know, banks won't accept crypto itself (they don't view BTC as a currency), therefore Bitcoin Traders and Investors have to liquidate their BTC via a Broker or Exchange prior to moving the proceeds to a bank willing to accept cryptocurrency related funds.
The process of liquidating the BTC is reasonably straightforward. The cryptocurrency market is highly liquid (lots of buyers and sellers).
The complication arises when you attempt to deposit the fiat for the Bitcoin you have sold.
Bitcoin that is converted to fiat needs to be withdrawn to a bank. Most BTC enthusiasts do not wish to leave cash balances on an exchange once it has been traded for fiat. The majority of people simply wish for their money to be in their own bank account, irrespective of the security concerns around certain exchanges.
As with purchasing BTC, knowing your bank will accept the fiat once you sell your BTC is very important. In this regard, certain banks are aware of the big exchanges and place blocks on accepting funds from accounts in the exchanges name.
Withdrawing to a Bitcoin bank, where the account provider stipulates acceptable exchanges in advance, can save you a lot of time and worry.
Payment from Bitcoin Exchanges
It is worth noting that not all Exchanges are considered equal in the world of Bitcoin banking.
If you have a Bitcoin friendly account, this will certainly help when you receive funds from an exchange. If your exchange of choice is established and reputable, then the payment will be received with no problems.
However, if you remember the AML/KYC points discussed earlier, these do not disappear with Bitcoin friendly banks. They still need to be sure the funds are legitimate.
Therefore, if you sell your BTC on an offshore, unregulated exchange who conduct no checks on their customers, this payment is likely to be rejected.
The most important consideration is that you know your business, the partners you are using and that sufficient checks are conducted. Some Bitcoin banks will share a whitelist of acceptable exchanges to their customers.
Some crypto banks or financial institutions have a minimum balance you need to hold with them, for a certain amount of time. Others have minimum payment transaction volume you need to do per month.
The history of this type of requirement (and one that is rare in traditional banking for most businesses or individuals) is the slight monopoly certain account providers had over the industry.
Currently, here in 2020, you should not need to agree to minimum balances or terms to get an account. There are a few options for a Bitcoin bank, where you have total freedom over your own money.
Onboarding & Ongoing Fees
As mentioned earlier in this article, the KYC and due diligence conducted on a person or company that interacts with crypto is generally more in-depth and refined to that of fiat-only compliance checks.
As a result, Bitcoin friendly accounts tend to charge an onboarding fee to cover the costs of opening the account, from a legal and compliance perspective.
The fees do vary hugely per client and per account. Some banks or financial institutions have low onboarding fees, but higher monthly fees. Some have very low onboarding fees but a minimum balance requirement, as explained earlier. Others charge for compliance investigations into payments (for example payments to or from high risk countries), which can increase one off charges to your account.
Generally, it won’t come as a surprise to hear the higher the risk, the more expensive the fees will be.
Best Bank Account for Bitcoin
It’s hard to say who the 'best' are in an emerging banking market. However, a few Bitcoin friendly account options to start with are; Xace.io, based in the UK/EU but providing accounts internationally, Silvergate in the US, and Turicum in Gibraltar.
Countries and Regulation
Bitcoin banks are located in a variety of countries, with different regulations that govern them.
Banks in Europe have access to the SEPA payment system, with EU law implementing certain payment regulation for EU countries, plus local authorities implementing their own regulation. Examples of these are the FCA in the UK or MFSA in Malta. Companies and individuals can be based in one European country and hold funds with a bank in another European country with very few issues.
Banks for Bitcoin in the USA are built on different banking rail to that of Europe. This means an account with a USA bank for an exchange based in Estonia may not be practical, due to the timing to send payment from the USA to Europe.
Bitcoin Bank UK
Bitcoin friendly banks in the UK are very popular. This is due to access to the Faster Payment System. The FPS means a pretty much instant payment, much like SEPA, but for UK account with Sort Codes, rather than IBAN’s.
The FPS is very popular with UK-UK businesses due to the speed in which they can settle transactions, especially Bitcoin brokers who have clients in the UK.
The UK Financial Service Compensation Scheme each person’s accounts up to £85,000. This is also for people who hold funds in Bitcoin friendly banks in the UK.
Bitcoin Friendly Bank options do exist!
Overall, Bitcoin Friendly Bank options for individuals and companies are limited, but not non-existent.
Some banks and financial institutions are happy to accept funds derived from crypto transactions. This depends on your circumstances. For example, bank account options can vary based on if you trade or invest, deposit large or small sums, have an existing relationship and the people or companies you buy or sell with.
At Harvex, we believe we have the best options for Bitcoin friendly banks and financial institutions. Over the years we have built strong relationships with our trusted providers helping clients to apply for an account and bringing only the leading solutions.
Ask An Expert
Here are some of the main FAQ’s (Frequently Asked Questions):
Do you need a bank account for Bitcoin?
No, you can hold crypto in your own BTC wallet. Only when you want to sell the Bitcoin for fiat will you require a bank account to receive the payment.
How to transfer BTC to a Bitcoin bank account?
This can be done via a broker or exchange. To help with a Bitcoin bank – we advise using a reputable and established provider to liquidate the BTC.
How quickly can I open an account?
For personal accounts, this can be as quick as 1 day providing all information is provided. For companies, this can be as quick as 3 days, again providing all information is provided. The speedy nature is due to the compliance teams having indepth knowledge of the industry and business models they are reviewing.
My old bank closed my account, will this prevent me getting another one?
A large amount of Harvex clients have had their accounts shut due to Bitcoin transactions. This will not prevent you getting another account elsewhere, providing the transactions are legitimate.
What should I provide for a personal account?
A clear copy of your passport, a utility bill dated within the last 3 months, plus some information about how the account will be used, for example receiving salary payments, sending money to an exchange.
What should I provide for a business account?
A clear copy of each passport and utility bill dated within the last 3 months for Directors and Shareholders (usually above 10% or 25% depending on which bank). Plus, some information about how the account will be used and business activity, source of funds, AML/KYC polices as required, depending on your business.
Can I accept payments from exchanges?
Yes, with a ‘proper’ Bitcoin friendly account you will be able to accept payments from reputable exchanges.