Crypto exchanges such as Independent Reserve, BTC Markets and, until recently, Binance Australia, have used Zepto and Monoova to allow customers to move Australian dollars from one bank to the crypto exchange’s bank account.
But last week, Zepto asked its crypto exchange customers to declare that they have appropriate controls in place to protect the users of their services from fraud, a direct request from its banking partner Cuscal, and noted it could no longer provide services to exchanges if they didn’t comply.
“The purpose of the survey is to enable us to understand how merchants are positioned to comply with new obligations that are being imposed by Cuscal,” a Zepto spokesperson said.
“We are committed to working with our [crypto exchange] customers to understand the extent (if any) of gaps between existing systems, processes and controls and the new requirements to help develop a reasonable transition plan.”
Cuscal’s restrictions are now very similar to the major banks’, which include a 24-hour transaction hold for customers wanting to transfer money to any crypto exchanges, as well as a $10,000 monthly limit.
“We understand that Cuscal doesn’t have a picture of the customer, so they’re trying to monitor fraud at the network level,” said Dan Rutter, chief executive officer of Digital Surge, a Brisbane-based crypto exchange.
“But I’m not sure how much fraud protection there will be asking us to hold customer money for 24 hours, even after we’ve done all the identity checks. We’ll have to see how it goes.”
Identifying crypto recipients
One of the toughest compliance requirements is to ensure the exchanges can identify the owner of recipient wallets. Most exchanges in Australia only allow individuals to transfer cryptocurrencies to other wallets belonging to themselves.
But identifying hardware wallets – otherwise known as cold wallets – is difficult as there are rarely names associated with these devices.
One industry insider likened it to asking an ATM to verify whether the person withdrawing the cash would be the person keeping the cash in their wallet.
“It’s a bit cumbersome, but that’s what we’re required to do in Singapore,” said Adrian Przelozny, chief executive of Independent Reserve, the first crypto exchange to receive a licence from the Monetary Authority of Singapore.
“Scams remain a very small part of our overall volume, and we call people up straight away, especially older people, if they look like they’re making transfers that could be a scam.”
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