The Caution Over Crypto

Key Takeaways

  • There is still a lot of fear, uncertainty, and doubt for payment processors accepting crypto as a form of payment.
  • Cryptocurrency exchanges are considered legal in the U.S., EU and UK.
  • The future is heading towards crypto and when the time is right, the team at Segpay will answer.

People have a lot of opinions when it comes to cryptocurrency. It’s a big topic in boardrooms, on the news and is frequently asked question if this is something Segpay will ultimately want to support? Payment processors are often pressed on why or why not? Each time the question is asked to me, I cringe a little as my Head of Risk and Compliance freaks out when I bring the topic up and the conversations seems to end there. I’ve reached out to many other processors in our space and they feel the same: At this time there are too many unknowns for it to be integrated as a payment solution. 

Why don’t more processors move forward and accept crypto as a form of payment? One answer I received that makes the most sense is FUD, which stands for fear, uncertainty and doubt. Our compliance team says there are several reasons for FUD. For example, the fear of the unknown, the amount of time and resources needed to thoroughly vet a provider, and the need to develop proper KYC and transaction monitoring solutions.

Merchants are the ones who don’t seem to have an issue adding crypto as a direct payment solution and many large players in our space have added crypto as a payment option. This made me think – maybe we should dig into the mystery behind the coin and really look deeper into why some are moving forward and some are not. For example, major card brands have put crypto solutions in place as part of their strategic plans. Both Visa and MasterCard have crypto cards allowing consumers to be able to convert their crypto funds to fiat on a branded card to spend them. PayPal also allows consumers in the U.S. to buy and sell crypto through its wallet and U.S. consumers can buy and sell Bitcoin, Litecoin, and Bitcoin Cash via PayPal. One thing a consumer can’t do is move the coin out of their PayPal wallet.

Six Roadblocks Slowing Crypto Currencies from Becoming Mainstream

  1. Anti-Money Laundering (AML) Risk – With transactions being anonymous, how would they validate the source of the funds to be sure they have not been earned in a shady way or through criminal activity.
  2. Financial Fluctuations – Companies would not want to hold on to crypto funds due to the fluctuations in valuation.
  3. Sufficient Volume– Would there be enough processing volume drive by crypto to be worth it? So far crypto has been an investment tool and not really a payment tool for low dollar purchases.
  4. No Recourse –  So far there is no way for a customer to request a refund on a transaction leaving no recourse if there is an issue.
  5. High Risk – There is both cyber and fraud risk using crypto because of the open and unregulated nature of crypto. This leaves things susceptible to hackers that can go into exchanges and place malware on computers to drain crypto wallets. 
  6. Illegal Activity – Crypto has been used to support illegal activities on the dark web for things like Child Sexual Abuse Materials (CSAM), guns and more.

The Good News

There has been headway in making crypto transactions more secure and regulated. Cryptocurrency exchanges are considered legal in the U.S., EU, and UK. In the U.S. crypto exchanges fall under the regulatory scope of the Bank Secrecy Act (BSA). This means that the cryptocurrency exchange supervisors must register with FinCEN and with the Counter Financing of Terrorism (CFT) program, implement an AML, maintain appropriate records and submit reports to the authorities. In the EU,  although crypto transactions are legal, each member state has its own regulations regarding the transfer of funds and certain crypto assets to protect EU citizens and the financial system from money laundering and terrorist financing.

The Future of Crypto at Segpay

Adding crypto as an additional payment option for consumers is a little way off for us, but I feel strongly that there is ultimately a need to have it as a settlement option for merchants and content creators. The number one challenge we see for adult merchants and content creators is the ability to open a bank account to receive their processed funds. Part of our onboarding process of due diligence requirements for merchants is the need for a merchant to have a settlement account in the authority (U.S., EU, UK) that they are processing in. Currently our US acquirers are saying no but they suggest that the future was heading towards crypto and this is something they are looking to build a strategy around, especially since card brands are now dabbling in crypto. It may happen abroad first as one of our EU/UK acquirers is seriously looking at adding crypto – specifically stable coin as an alternative payment. They see the benefits of settling in crypto and using it to fund content creators. One thing is for sure, the call to use crypto will continue to build and when the time is right, the team here at Segpay will answer.

Want to learn more about your cryptocurrency payment processing options?

Contact us today, we’d love to chat with you about annual vs monthly subscription payments and which is best for you. It’s another way we are here for our merchants All the Way to Paid ™. Reach out to us with your questions at [email protected] 

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