Getting Crypto Payments Compliance Right Requires Deep Experience

Welcome to “The Merchants Guide to Accepting Crypto: The Questions to Ask,” a new PYMNTS series aimed at helping merchants, big and small, online and in-store, who want to accept crypto payments figure out what they need to know to move ahead.

In this third of seven articles, PYMNTS’ spoke with Allison Raley, general counsel and chief compliance officer of crypto payments processor BitPay, about what you need to know to ensure that a prospective crypto payments processor partner has the experience, the licenses and the necessary compliance know-how to keep your business on track.

See also: Expertise, Experience and Focus Are Critical When Choosing a Crypto Payments Processor

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Probably the most important thing a merchant needs to do when selecting a crypto payments processor is to educate its compliance department and key people on the broad basics of the crypto industry’s compliance needs, Raley said.

In the U.S., the first step is to ask about the processor’s money transmitter licenses (MTLs), she said. And for starters, that means making sure they have MTLs anywhere they’re needed.

“This is important for a couple of reasons,” she said. “First of all, not only are you comfortable in the reach of your product, but it really shows a payment processor’s dedication to compliance.”

Additionally, MTLs are expensive, Raley said. “They’re also difficult to maintain. They require some great regulatory compliance elements internally — and also a dedicated team.”

BitPay, she noted, has more than 20 MTLs, including the extremely difficult to obtain New York BitLicense. That’s a sign, she said, that a company has “met very strenuous requirements, from a regulatory standpoint, in both the compliance and cybersecurity. It’s kind of the gold standard in the state regulatory framework.”

Another step is to be certain that the would-be partner’s compliance department “can walk you through what compliance and legal means to you as a merchant,” Raley said.

That goes back to educating yourself before you walk in the door to begin the vetting process, most notably on things like the processor’s compliance department’s strengths and its longevity in what is a very new space.

Inspiring Confidence

That applies doubly to international businesses, particularly ones looking to do business in the European Union, she said. Pointing to the new and extensive Markets in Crypto Assets (MiCA) regulations that will kick in in 2024, Raley said a company should be able to show you that it can stay up to date in a changing environment. And of course, it should be licensed in all the geographies where you plan to accept crypto payments.

“As a merchant, you’re really outsourcing that regulatory compliance element to the company that you’re partnering with. And that’s why it’s so important to look at their licensure framework,” she said. “How many states are they licensed in? Can their compliance department walk me through certain compliance elements? Can they explain to me the onboarding process of my consumers?”

As a merchant, you don’t need to be a crypto expert, Raley said. “You just need to have your eyes wide open about some of the important questions to ask.”

One example, she said, is the payments processor’s ability to provide the know-your-customer (KYC) vetting you need. That means not just the ability to provide KYC at a $3,000 purchase where the Travel Rule kicks in, but down to zero dollars.

“There are risks in accepting any new form of payment, it’s not just isolated to the blockchain space,” Raley added. “So having someone that can walk you through, make you feel comfortable, educate you, listen to your needs and alter their framework to meet where you’re at, I think, is very important.”

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