Challenges for FX Brokers looking to accept Bitcoin

We accept bitcoins.

We accept bitcoins.

Recently we have seen more and more Forex Brokers beginning to offer to trade on Bitcoin within their trading platforms. Over the past couple of years, bitcoin has a wild ride going from a high 995 to a low of 167. Recently BTCUSD has settled in 220 range. All of this volatility is one of the first issues that faces Forex Brokers as this can impact clients’ accounts value as BTC changes so to would the BTC denominated accounts.

For those Forex Brokers that are regulated as the biggest obstacle facing the acceptance of Bitcoin is regulatory and AML or Anti Money Laundering related. Regulated FX Brokers are required to verify where their clients’ deposits come from, and that is the reason that these brokers have requirements like clients having to provide bank statements and proof of address. Having a traditional bank account lets the broker and regulators know that the client has cleared banking requirements which are stricter than those of a broker. Many brokers also require a utility bill to verify residency and prevent any attempt at a third party deposit. Another tool many Forex Brokers have been using is World-Check. This allows the broker to validate the identity of the client and see if there are any criminal hits on the individual.

Bitcoin presents itself with many AML and compliance challenges. First of all, there is no central government oversight of bitcoin so no central bank. In many cases, the identity of the bitcoin holder is masked or limited. Holders of bitcoins are also not required to have bank accounts. This is one of the reasons that bitcoins have become popular in places like Greece and Argentina were moving money out of the country can be challenging. There may be solutions on the horizon as Banks are looking to offer bitcoin transfers within a compliant system. Bank of America is one that is exploring ways to do this. If bitcoins and a bitcoin payment system can become bank compliant then it there should be no reason that Forex Brokers could then begin to accept bitcoin as a deposit method.

This all might be months from being possible, but as bitcoin becomes more and more popular, market pressure may bring FX Brokers to making this happen sooner than later.