More Bitcoin Exchanges Fall Victim to Banking Problems

More Bitcoin Exchanges Fall Victim to Banking Problems

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Following Bitfinex’s announcement to disable fiat deposits, more bitcoin exchanges are having the same issue. The other trading platforms have also disabled incoming USD wire transfers, citing bank account and “intermediary bank” problems.

Also read: Bitfinex’s Problems Pile Up: Deposits Disabled, Withdrawals Delayed

Deposit Problem Spreading to Other Exchanges

Bitfinex is not the only bitcoin exchange which has disabled fiat deposits. The bitcoin exchange Btc-e has also announced on Twitter that it is not accepting U.S. dollar wire transfers until the end of the month, citing a bank account problem.

More Bitcoin Exchanges Fall Victim to Banking ProblemsThe Chinese exchange, Okcoin, is also reportedly having the same issue. A Reddit user posted a message supposedly displayed on the user’s account stating that U.S. dollar deposits have been temporarily suspended since Wednesday “because of the issues with intermediary banks.” The announcement further reads: “Please do not make further deposit as your wires may be rejected by intermediary banks. We are now actively looking for alternatives to resume deposit as soon as possible.”

A few other cryptocurrency services and money service businesses are reportedly encountering the same problem as well.

Third Party Banks “De-Risking”

Intermediary banks and correspondent banks are third party banks. The terms are sometimes used interchangeably. Regardless of any slight differences, they both facilitate international fund transfers as well as transaction settlements.

More Bitcoin Exchanges Fall Victim to Banking ProblemsWhen Bitfinex filed a lawsuit against Wells Fargo, it was revealed that Wells Fargo was acting as a correspondent bank for the Taiwan-based banks which Bitfinex uses.

Big banks have been known to “de-risk” correspondent banking relationships that are considered high risk for their businesses. It is a common problem. According to the World Bank, “this risk avoidance would typically occur on a wholesale basis, without a case-by-case assessment of the risk associated with individual customers, or the country or region involved, or as a result of an analysis indicating that the business relationship as a whole was no longer profitable.” Therefore, it would not be uncommon for a bank such as Wells Fargo to sever its correspondent banking relationships with other Bitcoin businesses in the same way it did with Bitfinex.

Taiwan Banks Tightening AML Requirements

Following Wells Fargo’s de-risking decision which only affected outgoing wires, Bitfinex informed customers that all its incoming wires will be “blocked and refused” by its Taiwan banks.

According to an article by Whalecalls, banks in Taiwan did not previously have strict AML/KYC requirements, but they were enough to comply with U.S. regulations. However, the U.S. has recently revised these requirements. The U.S. Department of Financial Crimes Enforcement Network (Fincen) is now requiring businesses operating as a money transmitter to report any suspicious activities. “A report must be filed when a transaction that is conducted by, at or through the MSB [money service business] is both: suspicious, and $2,000 or more,” Fincen wrote on its website. Bitcoin exchanges are classified as money transmitters, according to the agency.

More Bitcoin Exchanges Fall Victim to Banking Problems
Taiwan’s Premier Lin Chuan

While the U.S. has tightened its control over activities of money transmitters, Taiwan also has its own agenda when it comes to ramping up its AML/KYC efforts. On March 16, the Taiwanese government established an office to combat money laundering to help build a more transparent and orderly financial environment, according to Focus Taiwan publication.

It also aims to beef up “money laundering prevention before the third evaluation round of the Asia/Pacific Group on Money Laundering (APG) next year,” the publication reported the country’s Premier Lin Chuan saying, adding that Taiwan is currently on the APG watch list.

In August last year, the New York State’s Department of Financial Services (DFS) fined Taiwan’s Mega Bank US$180 million “for its poor compliance practices, after identifying ‘a number of suspicious transactions’ between the bank’s New York and Panama branches,” the publication further details. The Taiwanese Deputy Justice Minister Tsai Pi-Chung then noted that this incident damaged the credibility of Taiwan’s financial activities worldwide, which should be rectified.

Bitcoin exchanges’ deposit problems started soon after the Taiwanese regulators set up the AML office. While U.S banks are de-risking and Taiwan is determined to regain its credibility, so that it is taken off the APG watch list, the situation is looking grim for any bitcoin exchanges using banks in Taiwan.

What do you think bitcoin exchanges should do? Let us know in the comments section below.


Images courtesy of Shutterstock, Wikipedia, Twitter, and the World Bank


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  • gigawatt

    Kevin Helms asked
    > What do you think bitcoin exchanges should do? Let us know in the comments section below.

    Bank in Hong Kong?

    • Robinson

      USD is an old fashioned relict which should be definitely thrown out of the international trade. US government is with the help of correspondent banks supervising each dollar used abroad. All USD transactions in any country are first going through New York. There is a long black list of all destinations. Bitcoin exchanges are labeled as terrorists financing – forbidden.
      Exchanges have to use CHF, Eur, £ or of course remimbi.
      Future world trade will be dominated by Chinese and Germans. No dollars are necessary.

      • I dont care what currency is used as long as I have a decentralized crypto world currency option.

  • Chuck Morris

    The major exchanges should just get together to form a banking charter that’s crypto friendly, ie. Finex, bitstamp, okcoin, gemini etc.

    • EliteSKT

      I dont think its going to happen ^^

  • concerndcitizen

    It should be obvious to everyone that central banks are stomping down on crypto. They are focusing on cutting off the migration of fiat outside of their system. One call from a central bank and the corresponding banks won’t send wires anymore. You’d better get whatever out of the banking system you can move NOW.

  • Disqusting Guy

    Lol banks are proving the need for crypto by trying to clamp down on it. What happened at Bitfinex? The value of Bitcoin went up, or other words USD went down. Why? Becuase Bitcoin became more useful. People didn’t need to go through the banks to send/receive it.

  • LucSr

    Mayby it is time to change convention from BTCXXX to XXXBTC so that people can still speculate on the exchange rate of the fiat XXX. And convert the BTC back to fiat in need of local fiat economy activity.

  • Margaret

    I am a Chinese reader and I read your article everyday. My friends and I very admired you. But today I noticed that in the last fourth paragraph, you used “the country” referred to Taiwan, and you used “Taiwanese” for many times in whole article. However, I think it is improper as Taiwan is not a internationally recognized country while it is just a special administrative region of China, don’t you think so? For not hurting your Chinese readers and fans’ heart, I hope you could pay attention to the word when it comes to Taiwan in the next time, and I would be very very very appreciated of it! Finally, thanks for your everyday article!

    • Doesn’t China own the world?

      • Margaret

        You could find the answer to the question on any world map:)

      • Margaret

        Am I just misunderstood this question and make it serious? You are just telling a joke, right? Sorry for not understand immediately. Because lots of foreigners said our country want to be rule the world like America, so I’m a little sensitive about it ,hahaha. Your words makes me so proud of my country~ Thanks!

  • Port Diamond

    I suggest bank in Russia !!! Russian will wellcome Crypto currencies business .

  • Manary

    Cryptocurrencies pose a clear threat to the banking business, and the banks are responding.
    The bitcoin exchanges will be eventually forced to emancipate from bank in order to survive, and then let the market decide which option is the best.