Prasos Oy, one of the biggest Bitcoin dealers servicing the Nordic countries, is running out of banking options. The dealership focuses on converting most cryptocurrencies into euros and needs banking facilities to execute the transactions that constitute its primary preoccupation.
Banks are balking at maintaining the company’s accounts due to their interpretation of anti-money laundering legislation. Caught in limbo due to the absence in the region of clear guidelines on cryptocurrency’s acceptability and overall status, Prasos Oy has had four out of five accounts closed so far.
Cat on a hot tin roof
Regional banks fear falling foul of established anti-money legislation when enabling virtual currency dealings. Based in Finland, Prasos has already had four local banks block its transactions and freeze accounts.
CEO Henry Brade said that Prasos Oy has but a single account left to remain in business and that all transactions now flow through that facility.
In the absence of any laws that can illuminate the banks’ stance towards cryptocurrency dealers, they are erring on the side of caution by pointing to important dictates contained in existing legislation. Current laws state that a bank must have an adequate customer profile and, importantly, know where that customer derives its income.
The anonymity of digital coins – much loved by users – has been interpreted by the banks as an illegality for all intents and purposes. The Nordic region is not alone in frustrating cryptocurrency players. In other countries like South Korea and Israel, banks also range from tentative to hostile towards virtual currencies.
In the case of the Israeli company Bits of Gold’s skirmish with banks, the courts recently upheld its right to banking facilities and daily business conduct. As lawmakers the world over drag their feet making sense of cryptocurrencies, however, the formal banking sector is emerging as something of a battleground for cryptocurrency companies.
Brade pointed to a meteoric rise in transactional volume from around $24 million in 2016 to around $185 million in 2017 as having prompted banks to deem the company suspicious.
“We’ve realized that the growth in international transaction volumes started to disturb the banks,” Brade noted. “Along the way, we’ve been given very little information by the banks on what we could do to solve the problem.”
The company says that it is hoping that regulators will establish guidelines and smooth over any conflicts with existing legislation.
Prasos Oy offers wallets in which users can store their digital coins and also hosts the websites Bittiraha.fi and Coinmotion.com that allow investors to convert Bitcoin to euros.
Between the devil and the deep blue sea
December 2017 saw a European Union MoU extend anti-money laundering legislation to include cryptocurrency dealers. This motion is not yet legally binding. Nonetheless, Prasos has set up a system of client identification in order to allay banks’ fears.
We’ve created identification practices, which we have taken into use in March, and they comply fully with anti-money laundering laws and regulations,” added the company, noting that they had done so “even though authorities do not even require this from us as our business is not under regulatory obligations.”
Hanna Heiskanen, an adviser at Finland’s Financial Supervisory Authority, issued a statement that indicated the regulator will be no aid to Prasos and others. “Cryptocurrency trading places are not currently under the regulatory mandate of the Finnish FSA,” she said. “So it’s an affair between the company and the bank.”
Currently, Prasos is seeking to comply with legislation not geared towards cryptocurrencies in order to placate the banks, while state entities like the FFSA that could help the company claim it’s not their business to intervene.
Head of the European Bank Authority, Andrea Enria, has stated that the EBA will, for now, advise against allowing banks to deal with virtual currency transactions.
Unwelcome anonymous money
Brade confirmed that the OP Group, Nordea Bank AB, the mutual S-Bank and Saastopankki all closed Prasos Oy accounts during 2017. Although all four entities declined to comment directly, citing client confidentiality, two of the banks implicated responded to inquiries.
CEO of Saastopankki, Tomi Narhinen, said that “In most cases, it’s practically impossible or at least very hard to do business with cryptocurrency dealers and exchanges because it can be impossible to determine the origin of the funds.”
Laura Niemi, an OP Group corporate security manager said in an emailed response that the company is innately cautious when it comes to the anonymity of virtual currencies.
A glance at the Prasos website confirms that only the POP Bank account can still receive funds. Walking a tightrope, Brade confirmed that Prasos’ risk is that “… we’ll see our last bank account closed before we can get the next one opened. That would freeze our business.”