Why your crypto business benefits from having a named account with an IBAN

The ideal money management solution for most companies is to have a regular business bank account with its own IBAN (International Bank Account Number) in the company’s name.

Xace
Marketing
Jun 23, 2020
5 mins

Picture the scenario. You’re successfully growing your business trading in cryptocurrencies, when all of a sudden you receive a notification from your bank telling you that your account has been frozen. You can’t access your funds, receive deposits or provide payments to your customers. It's a dreaded situation many within Bitcoin and crypto are facing on a daily basis, damaging relationships, harming reputations and ultimately putting businesses like yours at risk.

Bitcoin IBAN accounts

The ideal money management solution for most companies is to have a regular business bank account with its own named IBAN (International Bank Account Number) in the company’s name. For instance, a company called ‘Acme Crypto’ would have its own account and Bitcoin IBAN, where it can receive deposits and make payments in the businesses name, even to and from exchanges or Bitcoin brokers - appearing on statements, transactions and notifications as a result. 

However, despite the rapid growth of cryptocurrencies over the last decade, many banks are still suspicious of individuals and companies operating in the space. Even large crypto businesses struggle when it comes to proving to banks that their activities are legitimate - and there are countless stories of individual traders, small exchanges and other operators being stung by banks while conducting perfectly legitimate business. 

To avoid having their funds frozen, many crypto businesses have adopted unorthodox workarounds to keep trading. These strategies have several limitations however, which could damage your company’s reputation - and even get you in legal trouble. 

Why do crypto businesses struggle with regular banks?

There are several reasons why crypto companies struggle when it comes to using regular bank accounts. Whether you’re an established firm with employees or simply a casual trader who likes to dabble in Bitcoin, traditional banks often become suspicious when they see lots of activity between your bank account and crypto-related sources:

Many banks have a limited understanding of crypto

Outside of R&D departments, many bank staff have relatively little understanding of Bitcoin and Altcoins like ETH and XRP and may be suspicious of unusual activity. 

Fraud and fraud detection

Most banks have automatic fraud alerts for suspicious activity. You may be innocently trading on legitimate crypto exchanges like Coinbase or Binance, yet your bank may freeze your account out of fear that some kind of fraudulent activity is happening – just as they do with any other ‘suspicious’ purchase. But cryptocurrency exchange payments come with a red warning to banks.

Crime and money laundering

Many banks have legitimate concerns about crime and cryptocurrencies. Some crypto businesses are involved in money laundering and illegal activity. Therefore banks choose to close down all accounts involved in crypto because of the ‘bad apples’. 

These limitations can make it challenging to smoothly run your cryptocurrency business – customers will want to pay money into your account, but that won’t be possible if your bank keeps on closing it or even if it doesn't have a named IBAN - sending money to a random account name will look risky and often is. 

In response, many crypto businesses have tried implementing ‘workarounds’. 

Alternatives to crypto bank accounts & IBANs

If you cannot get a standard bank account in your crypto company’s name, you may have tried one of the following ‘workarounds’:

  • Ask other people to open an account for you: If your business account keeps getting frozen, you could ask friends or relatives to open an account in their name through which you can receive your customers’ money and keep trading. 

Drawbacks: This approach may work to start with - until your friend or relative’s account is flagged by the bank and get frozen too! This is doubling the scale of your problem, so avoid this route.

  • Sub account of another business: You could run the trading through a sub account of another company (such as a well-established crypto firm) which might give you more freedom to trade.

Drawbacks: For customers, it’s going to look strange that your business bank account is named as running through another firm. This raises the chances of being considered a scam or looking fraudulent to customers, whereas a dedicated Bitcoin friendly IBAN account will be the most suitable solution for businesses in this instance.

  • Run the business through your own personal bank account: Rather than having a business account that is named after your company, some crypto traders use personal bank accounts in their own names. 

Drawbacks: This is a short-term solution but there is still the risk that the bank will flag the crypto trading, especially if it’s in high volumes. There are also many problems with using a personal bank account. It doesn’t keep your business and personal cash separate and it looks significantly less professional to your customers - not to mention increasing your cryptocurrency accounting fees significantly.

  • Misinform the bank about your business activity: Some crypto companies have become so desperate that they choose to misinform the bank about the true nature of their activities – claiming to be an import/export outfit, for instance, rather than a crypto-trader. 

Drawback: This would leave you operating in a real grey area and potentially illegally, while your account will be immediately frozen and closed down once discovered. 

Ultimately, all these workarounds create unnecessary headaches and still don’t protect you from the risk that your bank will become suspicious of your activities and close your account. What’s more, they simply don’t look good to customers and service providers. You're hopefully operating a perfectly legitimate and successful business, but for new or wary customers, paying money into a third-party account is always going to feel questionable. 

Benefits of a named IBAN for Crypto

Having a business account with its own Bitcoin IBAN is by far the simplest, safest and most straightforward way of managing your crypto business’s money. A named IBAN account means:

Your business looks professional

For both suppliers and customers, having an IBAN in your business’s name looks professional and trustworthy. To put it crudely, would you rather deposit significant sums of money with an account belonging to Joe Bloggs or one belonging to Acme Ltd? 

Makes working with brokers and exchanges much easier

Many crypto brokers and exchanges will refuse to accept or send money to your account if your business’s name and IBAN account name do not match up. If you are calling your business ‘Acme Crypto’ but your IBAN is registered to ‘Jane Doe’, the crypto broker or exchange may refuse to work with you. 

Bank statements are required for AML/KYC checks

Crypto exchanges, as well as casinos and other websites which accept crypto payments, may ask to see your bank statements as part of their anti-money laundering checks. However, if your bank statements are in someone else’s name, this will immediately raise red flags. 

Besides these factors, having a Bitcoin bank account with an IBAN makes sense for other reasons. IBANs are used by all European countries, not to mention several Middle Eastern and Caribbean nations – this will make it much easier to work with customers as well as crypto exchanges/brokers in those countries. 

How to get a Bitcoin account with IBAN

At Xace, we know how challenging it can be to trade with crypto through a regular bank account. And that’s why we designed our crypto-friendly accounts with their own IBAN. A Xace crypto account gives you access to all the usual features you’d expect - such as an IBAN in your business name and a virtual debit card you can use to make purchases on all major crypto exchanges. 

And that means you can make and receive as many crypto-related payments as you wish, all while giving your customers confidence that you are a reputable company.

Learn more about our crypto-friendly accounts with an IBAN or apply for one here

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