How to open account for crypto exchange: 5 steps

Elena Mashina

Crypto-business is developing dramatically and after registration of a crypto-company in one jurisdiction or another, founders consider where to open an account for their project. Bank account is required for paying taxes, paying employees and partners of the company. You should think about opening an account for a crypto project even at the stage of creating a business plan and registering a cryptocompany. Country for company registration and licensing depends on the possibility of opening an account. No jurisdiction won’t agree with a company that is registered in a state with no regulation of cryptocurrency and without requirement of licensing of this financial activity.

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Where to open an account for a crypto exchange?

Consider states that have several banks that support advanced virtual currency projects:

Germany is country with significant opportunities for crypto startups. VPE Bank was the first German bank to launch crypto trading for institutional investors. Fidor Bank also allows cryptocurrency trading. Recently, however, many banks have been expanding regulation on digital currency, as there are fears that crypto activities will relate to money laundering.
Estonia has one of the most digitally advanced governments in the world. LHV Bank, for example, supports and develops cryptocurrency companies, but still does not support ICO projects and cryptocurrency companies at an early stage, as they are in the red zone of their risk policy. In case they accept such companies, there is a separate price list and additional requirements that the company must comply with: payment of VAT and additional security measures for each registered user.
Malta is presented in the world as one of the best places to open a bank account for crypto-business. Not too long ago, the country introduced regulation governing the status of virtual currencies and related activities. They also include the creation of the Malta Digital Innovation Authority. There are many cases of successful account opening in Malta. For example, the well-known platform Binance opened a bank account in Malta when it moved its headquarter there.
Switzerland has been an advanced jurisdiction in terms of crypto-banking from the beginning. There are a number of reasons for this, but one that is unique to Switzerland is its "friendliness" towards clients with "sophisticated" sources of income. In other words, Swiss banks do not turn away cryptocurrency-related companies or individuals with crypto-income. Bankers and compliance officers here are better skilled and motivated to take on new clients in the crypto space as long as they are profitable for the bank. If your crypto business carries high risk, some banks may compensate for that risk by requiring you to maintain a higher minimum deposit, invest a certain amount of money, pay higher fees, or limit incoming or outgoing transfers. Of course, they may also subject you or your business to various forms of enhanced due diligence. So it's no surprise that one of the best banking jurisdictions in the world could also be home to a crypto account. Before you apply to open an account, you should pay attention to what fees you will be charged and what the costs of maintaining the account are.

Stages of opening a bank account for a crypto exchange

STEP 1: Choice of bank

So, first of all, you should decide on the jurisdiction where you plan to open an account. As we reviewed above, there are states that are favorable to clients with this source of income and promote the development of cryptocurrency activity. However, the process will not always be easy and quick. If the bank classifies you as a high-risk client, they may either refuse to provide you the service or raise the price for opening an account and related services.

STEP 2: Inquiry to the bank

Submitting a request to the bank with description of your need to open a crypto-business account. As a rule, banks can answer such questions by e-mail and give step-by-step instructions on how to fill the documents and go through AML/CTF and KYC procedures.

STEP 3: Filling out your application

Once you have determined which countries are the best for banking and understood the risks associated with your country of incorporation, the next task is to complete the application. This step can be challenging, as the application should describe your planned activities and your source of income. For some, proving their source of funds can be one of the most difficult aspects of finding the best bank account for cryptocurrency. It's a common procedure in banking, something everyone encounters when opening accounts anywhere. And depending on who you are, where you live, and what you earn from, the process can be more or less complicated. However, proving the source of funds with cryptocurrency can be much more difficult. This is due to the nature of cryptocurrency and its anonymity. Also, the lack of any paper verification of transfers, exchanges, etc. can make it more difficult to track income. These and other reasons can affect your risk profile and the scope of your due diligence process.

STEP 4: Preparing documents and going through AML/CTF, KYC procedures

Like any financial institution, a bank needs to gather documents about the company and its shareholders. What is often overlooked is that these documents should be submitted in a way acceptable to the jurisdiction of the financial institution. In Lithuania, for example, the Central Bank is the watchdog, and many documents should be translated into English and notarized.

As virtual currencies are considered high-risk assets, under anti-money laundering and anti-terrorist financing policies, banks should conduct enhanced due diligence. The purpose is to understand the source of funds for starting the company and to obtain information about its beneficiaries. All documents related to the source of funds for the company or the beneficiary should be collected and reviewed. This is a legal requirement of all European AML procedures. Part of the Due Dilligence process actually verifies how your company collects and manages client data.

In the European Union, cryptocurrency-related activities are regulated by the 5^th AML Directive, adopted by the EU in 2018, that mandates that all financial institutions should be screened for money laundering through transactions of their companies.

STEP 5: Obtaining a decision from the bank

The bank notifies the client about the account opening by phone or e-mail and further specifies the account details. If the bank decides to refuse the service, it may not indicate the reason for refusal. It depends on the country of the bank and its internal regulations.

Requirements, usually imposed by banks

To open an account, the directors of the company should personally visit the bank;
50% of the company's investors must be residents of the country of the bank;
A branch or representative of the company must be located in the country of the bank;
Local cell phone number;
Proof of income source;
Letters of recommendation from a foreign bank in which the personal account of the company owner has already been opened;
Banks usually charge a high account maintenance fee;
Minimum deposits of $1,000 to $100,000.

Documents required to open an account

Completed online/offline application form;
Organizational information about the company (place of incorporation, registration number, Articles of Incorporation, contact information, office lease agreement);
Information about the beneficiaries (identity card (ID number), country of registration, source of income, shareholders agreement);
Information on the general director (identity card, proof of residence, reference letters, information on criminal record, CV);
Business plan and business model of the company;
KYC&AML policy for the company.

Thus, opening an account for a cryptocurrency exchange will require many papers. The process is complicated, but with competent legal support you will be able to open an account for your business in a relatively short period of time.