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Insights and Expertise
the financing of terrorism, the few acquirers that will
board them will still put them through extremely rig-
Legal ease: orous underwriting.
An ISO that understands the information required of
the acquirer is in a good position to increase the effi-
ciency of processing liquidity provider applications for
Four crypto merchant accounts.
Given how rare acquiring banks for liquidity provid-
opportunities for ers are, they are able to command high processing fees
for their services. Those fees are theoretically open for
payment businesses sharing with ISOs that are able to find, solicit, under-
write and close liquidity providers as merchant cus-
tomers.
By Adam Atlas Jargon for converting fiat to crypto is an "on ramp." Li-
Attorney at Law quidity providers selling crypto and using merchant
accounts are "on ramps." What about off-ramps then?
ne way to invest in cryptocurrencies, such as
Bitcoin, is to buy and sell them while trying 2. Card programs
to divine when the right moments are to take It’s old fashioned to say that card programs are the fla-
O profit. Around the crypto industry are a grow- vor of the month. It’s still worth looking at card pro-
ing variety of payment businesses that seek to profit from grams tied to crypto, as they are a staple of the industry.
the crypto industry without being invested in crypto itself.
This is the shovel and pickaxe crowd. Crypto owners still need to transact in fiat once in a
while, if only to pay for their car, gas, rent, groceries,
Having advised on many intersections between fiat pay- etc. Consequently, there is demand for card issuing
ments and crypto, I thought it might jog the imagination programs that are backed by crypto assets.
of readers to see a list of fiat-focused payments business
opportunities in the era of crypto. It’s possible to obtain a debit card that—when autho-
rized—automatically triggers the sale of some of your
crypto holdings. Suppose you have $2,000 of Bitcoin. If
1. Merchant accounts for liquidity providers you authorize a transaction for $50 with one of these
cards, $50 of Bitcoin will be sold, plus a bit more to cov-
The term ‘liquidity provider’ is jargon for a crypto er fees, and the proceeds of that sale will be used to
seller. Businesses that sell crypto to U.S. persons are fund the card transaction that was authorized.
deemed to be money services businesses under the
U.S. Bank Secrecy Act and are also deemed to be mon- There is substantial demand for cards that match more
ey transmitters or virtual currency businesses under or less this fact pattern. As with merchant accounts,
many state banking laws. card issuing banks are very skittish about crypto-re-
lated card programs. Many banks have banned crypto-
This means that liquidity providers have to be regis- related businesses altogether.
tered with the Financial Crimes Enforcement Network
(FinCEN) and need state money transmitter or virtual Assuming a payments business has technical know-
currency business licenses in some states. Obtaining how, AML and other risk management skills and tools,
those licenses and operating as a FinCEN-registered it is feasible to play a role in putting together a card
money services business is a costly, time-consuming program that supports crypto holders looking for an
and difficult process. off-ramp.
Despite all of the oversight of liquidity providers by 3. Cash advance
state and federal regulators, they find it very difficult
to get merchant accounts. If a given liquidity provider Cash advance used to be a dirty word. Now, howev-
wants to sell Bitcoin, for example, in exchange for card er, almost 20 years since David Goldin challenged the
payments, the liquidity provider will be turned away AdvanceMe patent and founded the Small Business Fi-
by most processors and acquiring banks. nance Association (with a little help from me), it is a
fully commoditized business with plenty of caselaw on
Enter the enterprising ISO. An ISO that finds a bank what on earth it is.
willing to board crypto will likely find a fair number
of liquidity providers looking for processing. Given A cash advance is jargon for providing capital to a
that liquidity providers are a business that could un- merchant in exchange for purchasing their future re-
wittingly (or willingly) facilitate money laundering or ceivables. For example, a merchant may sell $25,000 of
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