OKCoin and others suspend USD deposit services, more exchanges become victims of banks’ “de-risking” actions

After Bitfinex announced the suspension of fiat currency deposits, more Bitcoin exchanges are facing the same problem. Now some other trading platforms have also suspended US dollar wire transfers, citing bank account and "intermediary bank" issues as the reason.

Deposit problems spread to other exchanges

Bitfinex isn’t the only Bitcoin exchange to halt USD deposits. Btc-e Bitcoin exchange also announced via Twitter that they will no longer accept USD transfers until the end of the month due to bank account issues.

Chinese bitcoin exchange OKCoin is also reportedly facing the same problem. According to an OKCoin user account message posted by a Reddit user, USD deposits have been suspended since Wednesday “due to intermediary bank issues.” The notice reads:

“Please do not proceed with top-ups as your wire transfer may be rejected by your bank. We are actively looking for alternative options to restore top-ups as soon as possible.”

Several other cryptocurrency services and money service businesses are reportedly experiencing the same issues.

Third-party banks launch "de-risking" actions

Both intermediary banks and correspondent banks are third-party banks. These terms are sometimes used interchangeably. Although there are some subtle differences, they both facilitate international money transfers and transaction settlements.

When Bitfinex filed a lawsuit against Wells Fargo Bank in the United States, it was revealed that the bank was the correspondent bank for the Taiwanese bank used by Bitfinex. We all know that large banks have been "de-risking" correspondent banking relationships because these correspondent relationships are considered to be high risk for their business. This is a common problem. According to the World Bank,

“This risk aversion is often based on a certain scale, without a case-by-case assessment of the risks associated with individual clients or countries or regions, or an analysis of whether the business relationship as a whole is still profitable.”

As such, it is not uncommon for banks to cut correspondent banking relationships with Bitcoin businesses, as Wells Fargo did with Bitfinex.

Taiwan banks tighten anti-money laundering rules

Following Wells Fargo’s decision to de-risk (which only affected wire transfers), Bitfinex notified customers that all wire deposits would be “blocked and rejected” by Taiwanese banks.

According to an article by Whalecalls, Taiwanese banks did not previously have strict AML/KYC requirements, but their regulations were sufficient to comply with US regulations. However, the US recently revised these requirements. The US Financial Crimes Enforcement Network (Fincen) has begun requiring money transfer service companies to report suspicious money activity. Fincen's website states:

“When a transaction through a money services business (MSB) is suspicious or exceeds $2,000, the MSB is required to report it to Fincen.”

The agency said bitcoin exchanges are classified as money services businesses (MSBs).

Although the United States has tightened its control over money service businesses (MSBs), Taiwan itself has plans to strengthen its AML/KYC work. According to Taiwanese media reports, on March 16, the Taiwanese authorities established an office dedicated to helping create a more transparent and orderly financial environment by combating money laundering.

It was reported that in August last year, the New York Department of Financial Services (DFS) issued a $180 million fine to Taiwan's Mega Bank due to poor compliance and a large number of suspicious transactions between its New York branch and its Panama branch.

Shortly after Taiwan’s regulator set up its AML office, bitcoin exchanges began experiencing deposit problems. The situation in Taiwan looks grim as U.S. banks de-risk and Taiwan seeks to rebuild its reputation.