Bitcoin Dealer Plays Cat and Mouse With Banks Closing Accounts
(Bloomberg) -- One of the Nordic region’s biggest Bitcoin dealers, Prasos Oy, has one lifeline left.
The company exchanges cryptocurrencies into euros, and relies on banks to help it with those transactions. But banks are increasingly saying no to Prasos and firms like it, for fear of getting into trouble with anti-money laundering rules. Prasos says it’s now waiting and hoping regulators will set clear guidelines that allow it to continue doing business.
Four banks in Finland, where Prasos is based, have already blocked its transactions, Chief Executive Officer Henry Brade said. The company can still access one bank account and now uses that for all its client money flows.
There’s no law telling banks in the Nordic nation how to treat cryptocurrency dealers. But there are anti-money laundering rules that stipulate lenders must know their customers and the origins of the funds they handle. One of the selling points of cryptocurrencies has long been the anonymity they offer, which is a red flag for banks.
Prasos says the sudden growth of its transaction volumes to about 150 million euros ($185 million) last year, almost ten times the volume a year earlier, is something banks treat with suspicion.
“We’ve realized that the growth in international transaction volumes started to disturb the banks,” Brade said. “Along the way, we’ve been given very little information by the banks on what we could do to solve the problem.”
Prasos runs websites such as Coinmotion.com and Bittiraha.fi, through which retail investors can exchange Bitcoins into euros. The company also hosts wallets for customers to store virtual currency.
In December, a political agreement was reached in the European Union to extend rules on preventing money laundering to entities dealing with virtual currencies, though that’s not legally binding yet. Meanwhile, Prasos has sought to improve client identification and clear up misgivings about the origins of the funds.
“We’ve created identification practices, which we have taken into use in March, and they comply fully with anti-money laundering laws and regulations, even though authorities do not even require this from us as our business in not under regulatory obligations.”
Andrea Enria, the head of the European Bank Authority, signaled on Friday that the regulator would probably advise against letting banks touch cryptocurrency transactions for now. And Finland’s Financial Supervisory Authority isn’t about to step in and help Prasos.
“Cryptocurrency trading places are not currently under the regulatory mandate of the Finnish FSA,” said Hanna Heiskanen, senior adviser at the regulator in Helsinki. “So it’s an affair between the company and the bank.”
Brade says the cooperative S-Bank, the OP Group, Saastopankki and Nordea Bank AB closed the company’s accounts last year. Representatives from the four banks declined to comment on an individual customer relationship.
OP Group takes a cautious stance toward the kind of anonymous activity associated with virtual currencies, Laura Niemi, a manager in the corporate security department at OP, said in an emailed response to questions. Tomi Narhinen, CEO of Saastopankki, says “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.”
Prasos’ website shows the company can still receive funds in its account at POP Bank.
“The risk is that we’ll see our last bank account closed before we can get the next one opened,” Brade said. “That would freeze our business.”
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