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Bank issues and Bitcoin

CoinGuyCoinGuy Administrator
edited March 2017 in Business And Bitcoin
We've talked about this before, but it seems to still be happening. a user over at Reddit reports his CIBC account was shuttered due to Bitcoin trading. One still has to be vigilant unfortunately. Bitcoin is still something scary to banks...
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Comments

  • Can someone explain what a bitcoin entity is, and what boarded means? Does this just mean that bitcoin exchanges can't open a Canadian bank account, or does this also affect merchants selling socks for bitcoins?
  • CoinGuyCoinGuy Administrator
    @ytrottier I agree it is a bit confusing. I read it as anyone who does business solely in Bitcoin... maybe I can reach out to the author for clarification.
  • MATTBMATTB Member
    edited March 2014
    Hello everyone, I'm the author of the "Catch 22" article as well as a number of other articles on CoinDesk. @ytrottier, by "Bitcoin entity" I am referring to any company, however organized (i.e. corporation, partnership, etc.) that buys, sells, or deals generally in Bitcoin. "Boarded" refers to a Bitcoin company successfully opening a bank account. To answer your question, yes, it means that Bitcoin exchanges can't (as it stands now) open a bank account with any bank or credit union in Canada. The same applies to a merchant transacting in Bitcoin. For example, company X, who is in the business of selling anything, including socks, in exchange for Bitcoin, will have a lot of trouble opening a bank account (the chances are virtually impossible) because company x, in order to open a commercial bank account, will have to disclose the nature of their business during the application process. The moment the bank or credit union sees the word "Bitcoin" they will arbitrarily deny the application to open the account because of the concerns raised in my article.

    There are Bitcoin businesses such as exchanges or proprietors of pre-paid gift cards loaded with Bitcoin who currently have a bank account, but that is either because at the time of the application the bank or credit union didn't put two and two together and realize they were dealing with a Bitcoin business to begin with, or they just haven't shut down the account yet, which will inevitably occur in my opinion since this is the position all banks and credit unions are taking at this time. If you recall, BMO recently decided to shut down the account of a major Bitcoin business operating out of BC I believe.

    I am currently working on finding a bank or credit union which will agree to open an account for a Bitcoin business, and if and when that happens I'll post it as an update on the CoinDesk article and on this forum for user benefit.

    One other point to mention is that it is possible for any Bitcoin business in Canada (an exchange, a merchant selling socks for Bitcoin, etc.) to open an offshore bank account, but that creates problems as an offshore bank in the Caymans, for example, will not accept cash deposits and will generally only offer $$ wiring services. Also, the fees charged by these offshore banks are generally higher than fees charged by Canadian banks. Also, often these offshore banks will want a member of the business to actually fly out to the location to personally meet with them.

    Please feel free to ask me any other questions and I'll do my best (time permitting) to reply. Anyone can reach me directly at mburgoyne@mcleod-law.com.

    Cheers,
  • CoinGuyCoinGuy Administrator
    @MATTB‌ really great of you to come here and answer these questions with such detail. It is highly appreciated :)
  • @MATTB Thank you for the article and the great research work.
  • Sadly Mr. Burgoyne, your research is incorrect. BMO is accepting applications for Bitcoin companies that are eligible for an account, that is the official word from the BMO. The other exchange that was shut down was due to the lack of care with their AML/KYC policies and procedures. In addition, Credit Unions are open for business and would be pleased to accept your Bitcoin business.

    I will add that the media has been less than accurate when reporting on global Bitcoin related businesses and activities. They have been basically taking any negative news and plugging in the word Bitcoin to engage readers and rank higher with search engines. The only research that has any credibility is if you are an active participant within the Bitcoin community in your area. If you really want to know what's going on, attend a Bitcoin meetup and speak with developers and business people whom are pioneering the future of crypto-currencies. Sitting behind a desk googling and making a few phone calls is not research.

    Cheers!
  • MATTBMATTB Member
    edited March 2014
    @coinpro, for starters, I act for dozens of Bitcoin entities, Canadian and globally located. I regularly deal and speak with developers and Bitcoin business people because they are my clients and in some cases my friends now. They provide me with confidential info/feedback that they obtain from banks and credit unions based on our solicitor/client rules in Canada so they don't hold anything back (presumably).

    Very recently, I, along with one other Toronto based lawyer tried to board Bitcoin clients with BMO. BMO agreed to entertain the application in each case. It doesn't matter what their "official statement" is, the reality, which I and the other lawyer encountered, is that BMO will entertain opening accounts but this is just their standard line. In our case, they gave our Bitcoin clients a three month review period and in each case denied the account half way through the review period; this is because, as they explicitly told us, the clients were ultimately involved in Bitcoin. These clients had rock solid, FINTRAC equivalent AML and KYC policies and procedures which they produced to BMO. I have clients who have scoured every single credit union in Canada (Vancity, etc., even the more 'progressive' ones) and no one is taking on Bitcoin clients. If you have the name of a credit union who you know for a fact (not hearsay at some Bitcoin meetup) is accepting clients, please share the name of that institution with me.

    With the greatest and utmost respect @coinpro, taking part in Bitcoin meetups is not going to get you 'in the know', it's actively being engaged in multiple Bitcoin businesses across Canada (and by engaged I mean acting for them in some professional capacity, or being a director or officer of their corporation, being a developer, or someone on the frontline like the Bitcoin Alliance of Canada, which you should join if you have not already). I can proudly say I am part of the 'team' at several active Bitcoin companies in Canada, I follow the law on a daily basis, talking to banks and credit unions in the process, trying my butt off to get banking arrangements for my clients Canada wide and actually seeing results (i.e. I stand by my conclusion that almost 0% of banks and credit unions are banking bitcoin entities for the reasons I referred to in my article). It's about getting facts and not gossip.

    I am definitely an 'active' participant in the Bitcoin community and an advocate for Bitcoin Canada. I was invited to speak and am speaking at the next Inside Bitcoins conference in NYC on April 7, 2014 on the topic of Bitcoin Canadian law and I update myself with Bitcoin news via CoinDesk, case law and other credible sources daily. With the greatest respect, I did a hell of a lot more than make a few phone calls and google searches; I actually attended the offices of VP's of RBC in Toronto and spoke on the phone directly with the president of the largest credit union in Alberta. I based my conclusions on facts coming from my actual experiences with Bitcoin businesses, I didn't reach conclusions based on 'he said she said" dialogue exchanged at these Bitcoin Meetups. Not to say that the knowledge gained there is not valuable, it's just that I'm on the front lines of this stuff as I deal with it on a daily basis. Perhaps I should be attending these Bitcoin meetups to share my knowledge gained.

    @coinpro, feel free to contact me any time and I appreciate your comments and feedback. I understand there is misinformation in the general area of Bitcoin in the mainstream media and like I said in my article this is most unfortunate.

    Cheers and again, if you know for a FACT that someone has a commercial services banking account at a Canadian institution and they are in the Bitcoin space would you be so kind as to share the name of that institution with me.

    Cheers and I apologize in advance for the long response!!

    Matt
  • BitcoinCooperativeBitcoinCooperative Member Plus
    edited March 2014
    @MATTB, I personally know people who own Bitcoin businesses with bank accounts in Canada, but if you are correct that the banks are ignorant about that fact, I should probably not name them. :P You can actually learn a lot of fascinating things by organizing Bitcoin Meet Ups, especially one as notable as Vancouver's.

    We have been actively trying but not yet succeeded to court a credit union. Having chosen a cooperative model and succeeded in attracting publicity, we now have friends in the co-op space, which credit unions are members of. My understanding was that cooperatives are obligated to work with and support other cooperatives, and that their policies can be influenced democratically.

    Your assistance would be very welcome.
  • BruceWayneBruceWayne Member Plus
    I do believe @MattB and what he is saying because I happened to work with his firm in the past in a different matter while employed in the securities industry. I also don't doubt what he is saying just because I had my bank account frozen for over a month during December (yes, during Christmas) as well as being a banned user for email Interac. Even I'm a bit surprised at how far they went to ensure I can't do anything related to Bitcoin, but, it goes with the territory.
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