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by GBAF mag

A number of banks have said they will not accept transfers from Bitcoin exchanges. But Syed Rahman of financial crime specialists Rahman Ravelli expects many of them to change their stance in the near future.

The discussion about whether investing in cryptocurrency is a sound financial move or a high-stakes gamble seems to have come around again, sparked largely by the value of Bitcoin recently hitting an all-time high.

Yet some banks have indicated that they are not set to be part of the latest wave of enthusiasm for cryptocurrency. A number of them have refused to accept transfers from Bitcoin exchanges. HSBC will not process cryptocurrency payments, and its customers are not allowed to bank money from digital wallets. Other major banks do accept transfers from digital wallets to current accounts, and yet some have made it clear that they will not permit customers to use their credit cards to buy or sell Bitcoin.

The stance being taken by these banks is arguably more significant now, with the price of Bitcoin soaring and having tripled in value in 2020. With some people inevitably looking to cash in and place their profits in a conventional type of savings account, they may find themselves at odds with their bank’s approach to crypto. They may even face the prospect of their cryptocurrency profits having to remain on a platform until they can find a financial institution that is willing to handle them.

In fairness to the banks, their attitude is not based on ignorance regarding cryptocurrency or even a reluctance to move with the times. It is due to an awareness of the money laundering risks associated with cryptocurrency. Banks – and others involved in the financial sector – have to do everything possible to both prevent and identify money laundering. Their reluctance to fully embrace cryptocurrency is based, at least to some degree, on this obligation. It has often been said that it can be difficult to trace the origins of cryptocurrency, and there is plenty of evidence of criminals using it as a vehicle for their wrongdoing.

With this in mind, it could be argued that people should have checked their bank’s attitude to cryptocurrency before investing in it. After all, there is little point in going to great lengths in an effort to make a profit if you are then going to struggle to find a secure place to put the proceeds of your activities. But that is a point that can be made more easily now, with the benefit of hindsight. It may not have been quite so relevant when cryptocurrency was in its fledgling stage – few people could have foreseen the financial gains that some have made from it in more recent times. It should also be recognised that many exchanges have developed their processes in recent years and so it should, in theory at least, be easier now than ever before to transfer money to and from banks.

As I have mentioned earlier, the current stance of some banks means that is not the case. But that may not be a situation that remains unchanged for long. The increase in popularity of cryptoassets means that it will surely only be a matter of time before we see a change in approach from the banks that currently have a resistance to them. Those banks are likely to implement stringent anti-money laundering and KYC (know your customer) checks so that they can accept transfers from Bitcoin exchanges, safe in the knowledge that they are not facilitating crime.

This isn’t a prediction that relies on intense crystal ball gazing. It is simply recognising that banks will not stand idly by and do nothing for too long while a large and growing potential stream of finance is looking for a home. And it is important to dispel the myth that cryptocurrencies are anonymous. With the right tools and legal support, they can be tracked and traced.

Banks naturally have to be very cautious due to the responsibilities they have regarding due diligence and their need to abide by current policies and controls. But those policies can be updated to include factors such as proof of purchase of cryptoassets, receipts from the cryptoassets provider and proof of ownership, sale or performance of such investments. It would be very surprising if banks do not start introducing these checks and ushering the proceeds of crypto-related profits through their doors.

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