Opening a merchant account for a crypto-exchange

Clients of cryptocurrency exchanges, as a rule, are interested in the ease of use of the platform, where it will be possible to purchase any virtual currency for fiat or purchase crypto for crypto. The main need of customers is to buy cryptocurrency using credit and debit cards. Therefore, each owner of the crypto platform should provide for the need to connect acquiring on the platform and open a merchant account. In the article, we will explain what a merchant account is, why banks in most cases refuse to open a merchant account and how to comply with all the requirements for it to be connected by a non-bank organization.


What is a merchant account?

Even after virtual currencies have become so popular, they are still regarded as high-risk assets by traditional banking institutions. Cryptocurrency exchanges are not considered for banking and acquiring solutions as usual. Business owners managing crypto exchanges and other crypto platforms are denied opening bank accounts and merchant accounts, even if a license is issued. Accepting fiat funds for receiving cryptocurrencies or accepting cryptocurrencies as a means of payment on an online trading platform is notoriously challenging.

To begin with, we will define what a merchant account is and for what purposes it isopened. A merchant account is a certain trading account, which owner (in our case, the owner of a crypto exchange) can accept funds for payment from electronic wallets, from various payment cards (Master Card / VISA and others) and accept payments from clients' bank accounts. The convenience of such a system lies in the fact that it provides services for accepting funds around the clock, regardless of the hours of operation of the payment service (payment aggregator) or the owner of the platform: whenever a client decides to buy a cryptocurrency or, conversely, sell it, he transfers fiat or crypts to the platform's merchant account and the platform at the expense of its own liquidity accepts these assets and transfers them to the client who has a demand for these assets. 

Why does a merchant account for a crypto project have a high level of risk?

As we mentioned in the annotation, the trading account of a crypto exchange agency is considered high-risk. Here are a few arguments:

  1. Lack of legislative regulation.

Today, not many states have sufficiently regulated the status of cryptocurrency and have not established a strict legal framework for the cryptocurrency business, so that banks and other financial institutions would regard such activities as completely safe and legal. Of course, there is cryptocurrency regulation in Estonia, Switzerland, Japan and other jurisdictions, but still, most European banks regard crypto activities as carrying a high risk. Thus, many banks avoid cooperation with crypto companies.

  1.   Due to the lack of legislative regulation, stability depends entirely on the human factor. To be clear, if the bitcoin rate falls, all other cryptocurrencies will follow. This leads to uncertainty and vulnerability. Banks are wary of companies that could suddenly go bankrupt.
  2. Illegal use. Cryptocurrency organizations are often used for money laundering, buying / selling drugs, financing terrorism, so such activities are classified as a red risk zone. And in order to prevent money laundering and terrorist financing, the platform undergoes AML / CTF, KYC verification procedures in the process of registration and obtaining a crypto license.

However, some banks still provide such a service to their clients, but they have rather serious requirements. Let's consider the common ones:

  1. The company must have a current account, which will receive money from the merchant account. Merchant is an account for carrying out operations (exchange, for example) with currency; it is not intended for storing assets. It should also be borne in mind that money from the merchant does not go to the current account immediately, but after a certain period of time: such a system is provided so that the client can return the money if he made a transfer by mistake;
  2. The platform must provide a package of documents for the company, which will be discussed below;
  3. Be sure to indicate the type of activity of the company: banks are reluctant to work with online casinos, alcohol and tobacco shops, since the sale of such goods (or services) carries risks (licenses and special permits are required to work in such a segment); 
  4. In some cases, banks request the credit history of the organization in order to make sure that the company has no debt obligations;
  5. The company is obliged to disclose to the bank information about its geolocation, the amount of income and the estimated amount of one payment;
  6. The personal data of the owners are also subject to disclosure;
  7. The address of the site through which payments will be accepted must also be specified. Moreover, the availability of the site is small, it is necessary to place a detailed description, as will be exchanged Fiat - crypto and crypto - crypto. A very important clarification is that the pages from which customers will pay for purchases must be located on a secure page of the processing site, and not on the website of the seller;
  8. It is necessary to provide a detailed description of the refund policy to customers.


Documents for opening a merchant account

  • Certificate of registration;
  • Payment processing history / credit history;
  • Local documents according to the jurisdiction of the company, which reflect the directors and owners of the company;
  • License to carry out cryptocurrency activities;
  • Utility bill / bank statement / Lease agreement under the corporate name confirming the location of the company;
  • Valid copies of IDs for all directors and owners of the company.

Requirements for a crypto platform website for opening a merchant account

In order to open a crypto exchange merchant account, you must make sure that your site contains the following documentation:

  1. Privacy Policy;
  2. Terms and conditions of use of the site;
  3. Company name in the footer;
  4. "Contact us" button with an e-mail and phone number;
  5. Refund policy to clients;
  6. Visa and Mastercard logos, etc. (in case you offer them as payment methods). 

Thus, as we see, the opening of a merchant account is accompanied by a procedure for checking the crypto exchange for compliance with the requirements of the payment system / bank, as well as checking your business for good faith. You will need to provide the incorporation documents of the company and information on the movement of funds, prepare an AML / CTF policy and disclose the personal data of the owners of the company. Our company A4 Law Firm is ready to provide acquiring services for cryptocurrency projects in loyal payment systems.


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