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Opening Bank Account For Crypto Exchange In 7 Steps


 

In the rapidly evolving world of cryptocurrencies, starting a crypto exchange has become an attractive business venture for many. However, one critical step in establishing a successful crypto exchange is opening a bank account that can handle fiat-to-crypto transactions. This article provides a detailed guide on how to navigate this complex process, ensuring your crypto exchange operates smoothly and complies with legal requirements.

 

 

Understanding The Challenge

 

Before diving into the steps of opening a bank account for your crypto exchange, it's essential to understand the challenges you might face.

 

Banks are traditionally cautious about dealing with cryptocurrency-related businesses due to concerns over regulatory compliance, the potential for fraud, and money laundering risks.

 

Moreover, it is hard for banks to track source of funds when crypto is received as deposit, exchanged to fiat and then settled. Not many banks have appropriate systems and risk acceptance policies to uptake crypto exchange as a customer.

 

Therefore, preparing thoroughly and understanding the regulatory landscape is key to overcoming these hurdles.

 

 

Step 1: Compliance First

 

The first step in opening a bank account for your crypto exchange is ensuring your business is in full compliance with all relevant laws and regulations.

 

This includes registering your business, obtaining any necessary licenses (VASP license for example), and implementing robust anti-money laundering (AML) and know your customer (KYC) policies. In addition, if you can secure a legal opinion or external audit, proving that your internal controls are robust, that might increase chances of signing a reliable and well-known banking partner.

 

Demonstrating that your exchange operates legally and ethically is crucial to gaining the trust of potential banking partners.

 

 

Step 2: Research Potential Banking Partners

 

Not all banks are open to working with crypto-related businesses, so it's important to conduct thorough research to identify those that are.

 

Look for banks that have a history of dealing with the cryptocurrency sector or those that have explicitly stated their openness to such businesses. Consider both local banks and those in jurisdictions more favorable to cryptocurrencies.

 

In the similar vein, Neo-Banks are good option for crypto exchanges as they are more flexible in adjusting their policies and allowing crypto clients onboard. Moreover, there are specialized Neo-Banks popping up with a mission to democratize banking for crypto businesses. However, you should carefully check those before engaging, as some of them are unable to offer multi-currency solutions, do not have robust API’s for payment automation and might still be a strict as traditional banks when it come to onboarding or operating.

 

If you would like us to send you an up to date list of crypto exchange friendly banks that we have already engaged and onboarded clients with, fill our contact form and we will send it to you by email.

 

 

Step 3: Prepare Your Business Plan

 

A comprehensive business plan is essential when approaching banks. This plan should detail your business model, target market, currencies that are you planning to serve clients in, revenue streams, and, importantly, how you intend to manage risks associated with cryptocurrency transactions. Even more, you should have payment volume projections ready, so that a potential banking partner can evaluate the business potential and prepare adequate commercial offer.

 

A well-thought-out business plan not only demonstrates your seriousness but also shows the bank how you plan to ensure your business's and their clients' security.

 

 

Step 4: Highlight Your Compliance Measures

 

When you're ready to approach a bank, make sure to highlight the compliance measures you've put in place. This includes your AML and KYC procedures, any regulatory licenses you've obtained or are in process of getting (this is very important as more licenses you are trying to land, banks will assess this as positive), and how you monitor transactions for suspicious activity and what are your counter measures to prevent or remediate it. Banks need to see that you're committed to operating a safe and compliant exchange.

 

 

Step 5: Be Prepared For Due Diligence

 

Banks will conduct thorough due diligence on your business before opening an account. This process can be lengthy and will likely involve a detailed review of your business operations, financial projections, compliance measures, and the backgrounds of your team members. Be prepared to provide extensive documentation and to answer any questions the bank may have.

If you fail to answer due diligence questions in time or detail, you might completely jeopardize your application. We have witnessed clients that were reluctant to disclose sensitive information that bank wanted to analyze and that cost them an application all together.

 

 

Step 6: Negotiate Your Banking Charges

 

Once a bank has agreed to take on your business, it's time to negotiate the services you'll need. This includes discussing flat and variable payment fees, foreign exchange or on-ramp off-ramp charges, withdrawal and deposit limits from your clients, monthly fees or commitments, and any other services crucial for your exchange's operations.

 

Make sure you clearly understand the terms of service and any potential costs involved.

 

 

Step 7: Continuous Compliance And Communication

 

After successfully opening a bank account, maintaining a strong relationship with your bank is key. This means ensuring ongoing compliance with all regulatory requirements and keeping the bank informed of any significant changes in your business. For example, any fines from regulator or adverse media should be reported to the bank with a remediation plan, which will might save your account. Regular communication can also help prevent any misunderstandings and ensure a long-term partnership.

 

 

Conclusion

 

Opening a bank account for your crypto exchange involves navigating a complex landscape of regulatory compliance and banking skepticism. However, with thorough preparation, a strong emphasis on compliance, and effective communication, it is possible to establish a banking relationship that supports your exchange's growth and success.



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