If you want to trade in cryptocurrencies as a business, you need a way to process payments made by your customers. While cryptocurrency is still a new technology, the basic requirements for running a crypto business are the same as for any other e-commerce activity: you need a merchant account, or, in your case, a cryptocurrency merchant account.
What Does Cryptocurrency Merchant Account do?A high-risk merchant account is a type of commercial account, meaning that unlike your personal checking account it’s meant for business transactions. Other than that, it’s actually mostly the same. It’s not the merchant account that does something different; it’s the bank or processing company that has given you this account that makes a difference.
When you’re processing payments between a customer and your business, you need an intermediary to actually do the processing. This is not necessary if you only deal in cash, but you can’t do without it when you start accepting payments with debit and credit cards. The provider of your merchant account will be doing things like authenticating the card that is used for payment, requesting confirmation from the customer’s bank that the funds are there, and issuing a transfer of money from the customer’s account into your merchant account.
Why can’t I get a cryptocurrency merchant account at my bank?If you are already using any kind of banking service, be it in your personal life or for your business, it’s natural to start looking for a solution there. If they have already provided you with other types of accounts, why can’t they also open a cryptocurrency merchant account for you, right? Unfortunately, buying and selling cryptocurrency is considered a high-risk business. There are multiple reasons for this.
New industryThe “crypto industry” is still very new, especially from a bank’s perspective. Financial institutions are very conservative when it comes to anything new because there is no telling what is going to happen with this “industry” in the next 5, 10, or 20 years.
It’s unregulatedThis is a consequence of the industry is so new. The governments worldwide simply haven’t had the time to decide what stance to take on crypto. You can look at the partially legalized CBD industry for another example of this. While CBD can be a cash cow, it’s a risky one because any day new regulations can be introduced that can wipe out the existing businesses and lose business owners and banks millions of dollars.
High volatilityCrypto is also volatile and is even from a strict trading perspective considered a high-risk asset. Such volatility adds more risk to any business that chooses to deal with cryptocurrency, regardless of whether they make it their main business or simply use cryptocurrency as payment for other goods and services sold by them.
Associations with illegal activityDue to the anonymity it provides, cryptocurrency is often used as payment in the exchange of illegal goods and services. This includes drugs, illegal arms trade, and selling of stolen goods.
Further, there is fear that cryptocurrency will be used to assist in money laundering activities by organized crime syndicates. While you can’t really blame a bitcoin for the fact that it might be used to buy illegal substances, the banks are very careful not to get involved in anything that can drag them into courts.
All of these reasons mean that it’s nearly impossible to get a cryptocurrency merchant account with any regular bank. The same applies if you go to a mainstream provider of merchant services like PayPal. They typically follow the same guidelines as banks, and even if you do manage to use their service as a cryptocurrency merchant account, they are very likely to shut it down with no warning. That is not just a major inconvenience that can cut off your revenue overnight – they can also freeze your funds indefinitely.