![]() ![]() This means that merchants using self-custodied wallets to accept crypto from customers who also use self-custodied wallets operate within a regulatory loophole where sanctions evasion transactions could occur. That responsibility falls on the payment processor, whether it is a bank, a credit card company or a firm like BitPay. businesses to transact financially with someone on OFAC’s sanctions list, most retail businesses are not obligated to do any sort of sanctions compliance. So, in a peer-to-peer digital payment method, the sanctions screening process is absent. Most online merchants are not in the habit of verifying customer identification documents before making a sale. However, they are less user friendly and more cumbersome, requiring users to secure an alphanumeric private key, which, if lost or stolen, could make the funds irretrievable. Self-custodied wallets can be downloaded, managed and operated without a regulated financial institution. ![]() But if a merchant owns a self-custodied crypto wallet to accept payments, there would be no third party involved to screen customers. If merchants use payment processors to accept cryptocurrency payments, they can depend on those third-party money transmitter businesses to validate customers. And there are certain types of online merchants that are increasingly likely to prefer crypto payments, which may exacerbate these loopholes. Systems and processes to block IP addresses from sanctioned jurisdictions and verify customer identification have been standard in conventional payment processing for decades, and they are easily applicable to crypto processors.īut the bad news is that there are aspects of cryptocurrency technology that offer loopholes to these sanctions compliance systems, which illicit actors are likely to exploit. The good regulatory news story here is that integrating sanctions compliance measures should not be technically difficult for cryptocurrency payment processors. OFAC pursued a settlement instead of a civil prosecution for these violations, acknowledging that BitPay agreed to implement multiple measures to properly screen buyers before processing their crypto payments. Thus, it enabled customers in these locations to evade sanctions and transact with U.S. merchants via BitPay’s crypto payment platform. sanctions list or operating in sanctioned countries, the company for five years did not prevent individuals in sanctioned locations such as Crimea, Cuba, Iran, North Korea, Sudan and Syria from purchasing from U.S. While BitPay screened its merchant clients to ensure they were not on the U.S. law and obligates it to follow all AML/CFT and sanctions regulations.Īccording to OFAC, BitPay failed in sanctions compliance. This financial activity makes the payment processor a money transmitter under U.S. The processor company then sends those converted funds to the merchant, minus a commission. The payment processor owns the software wallets with which customers pay using Bitcoin or some other cryptocurrency, and then the processor converts those funds into regular fiat currency. The merchants do not need to handle cryptocurrencies directly. These companies provide software allowing retail merchants to accept cryptocurrencies as payment online or in brick-and-mortar establishments. The business model for cryptocurrency payment processors like BitPay is straightforward. law enforcement and national security personnel may find that illicit financial activity increasingly involves crypto payments. As people’s lives become more digital and businesses become more open to cryptocurrencies, U.S. The BitPay settlement also points to how illicit actors might adjust their strategies to circumvent anti-money laundering, combatting the financing of terrorism (AML/CFT) and sanctions compliance requirements. Much of this steady rush into retail crypto activity is occurring without a check of the regulatory blindspots ahead. This announcement got scant public attention, even among cryptocurrency industry watchers, but it is a glimpse into thorny regulatory challenges ahead as large, mainstream corporations are jumping into the crypto space and pushing for more people to use digital assets in commerce. OFAC had been investigating BitPay for allegedly processing payments to merchants from customers in sanctioned jurisdictions. sanctions, announced it had reached a half a million dollar settlement with cryptocurrency payment processor firm BitPay, a U.S. Department of the Treasury’s Office of Foreign Asset Control (OFAC), the agency that enforces U.S. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |