The cryptocurrency market is a rapidly growing and changing market with new currencies introduced practically every week. Its dynamic nature makes it difficult to pinpoint how big the market is. From bitcoin to ether and ripple, a wide range of cryptocurrencies serves different design goals.
With the market expected to grow to $1.4 billion by 2028, the market shows no signs of slowing down. Despite its growth, though, people still have trouble opening bank accounts. By knowing what you should do beforehand, you can simplify the entire process for your transactions.
Typically, you’ll opt for a traditional bank account that accepts crypto transactions, regardless of whether they’re for businesses and individuals. The bank should also allow crypto transfers to and from exchanges and, if possible, allow conversion from crypto to fiat.
This article serves as a guide for opening a bank account for your cryptocurrency transactions. Here’s what you should look out for:
The Importance of a Bank Account for Cryptocurrency
In some way or the other, cryptocurrency defies traditional banking and fiat. Despite this, though, it’s a good idea for entrepreneurs, investors, and anyone who wants to execute crypto transactions to opt for traditional bank accounts.
Opting for a crypto-friendly bank account can help you cover any expenses, pay employees, support your business operations, and perform any transaction required to be paid through cryptocurrency.
However, opting for a traditional bank account still doesn’t mean you can opt for any financial institution. These banks can support various transactions, including crypto lending, crypto-tailored products and services, direct investments, supporting crypto-based startups, and providing trading platforms.
Hence, it would be best if you opted for a cryptocurrency bank account that supports different crypto-related functions. At the least, this bank account should be able to do the following:
- Support conversions between fiat and cryptocurrency
- Set up accounts for cryptocurrency investors
- Set up accounts for crypto businesses
- Support transfers from and to cryptocurrency exchanges
- Accepts cryptocurrency as a source of income and wealth
While you may not necessarily require all of these features, a bank that provides them is typically well-versed in the crypto business. These financial institutions will usually understand the technicalities involved in crypto transactions, which will reduce the likelihood of them shutting down your account.
Issues with Opening a Crypto Bank Account
Regardless of whether you’re setting up your account for business or individual transactions, the process can still be challenging. However, by making preparations in advance, you can simplify the process for yourself as much as possible.
Typically, you’re likely to face three kinds of issues when you’re in the process of looking for and setting up a crypto bank account. If you can overcome these issues, you can guarantee a seamless process for yourself.
This particular problem is related to where you reside and the incorporation origin of your company. It doesn’t matter where you execute your transactions; where you or your business file taxes can help you figure out the best bank account for your crypto transactions.
Your country of residence is crucial, regardless of whether you’re using the account for crypto transactions or not. It can potentially affect whether the bank considers your profile as low-risk or high-risk, regardless of your registered income.
Additionally, your country’s incorporation origin matters because it communicates to the bank the different regulations and laws it needs to follow, what licenses you need to have, and which bank is in charge of your account.
Of course, the bank also cares about whether your business is legally allowed to conduct its operations, has a good standing, and abides by relevant regulations. Hence, you need to have a comprehensive understanding of every relevant law, requirements, and regulations in your country before you set up an account in another area.
Bank regulation problems
One of the biggest obstacles you’ll have to overcome is determining which country you want to bank in, its banking regulations and whether its banks accept crypto clients. Different countries have varying regulations about cryptocurrencies. While some countries, such as Switzerland, are incredibly supportive, others are still falling behind.
Hence, to build a fruitful banking relationship, you need to ensure the bank in question works in a regulatory environment that’s either understanding or friendly towards crypto-related transactions.
Apart from this, the bank and its allocated banker’s experience with its crypto customers also play a huge role. Both of these need to have a background in cryptocurrency since a lack of knowledge in this area can create future issues. Lastly, before committing to a bank, it’s important to conduct research and understand the country’s perspective on crypto activities.
Evidence of source of funds
You need to provide a source of funds, which can be incredibly challenging for cryptocurrencies. While this isn’t typically an obstacle, and you have to complete this step whenever you’re setting up a bank account, it can be challenging to prove the source through cryptocurrency.
This issue occurs because of the anonymity and nature of cryptocurrency transactions since there is usually a lack of audit financials and paper trail. While this is something every individual will need to resolve, it can differ from bank to bank. Your risk profile and situation will impact the extent of the due diligence process you need to complete.
Knowing what problems you’re likely to face can help simplify the process of opening a bank account for your crypto-related activities. By preparing everything beforehand and conducting extensive research in advance, you can ensure you’re facing minimal hurdles in the future.