We recently talked with Coindesk about the challenges faced by crypto start-ups in Ireland. The main topic of conversation was the banking and regulatory landscape in Ireland – in particular the lack of banking services available to Irish crypto companies.
This is not a new story, but there have been some interesting developments in 2020, particularly with the emergence of the European Union’s fifth Anti-Money Laundering Directive (5AMLD). There are also many contradictions that emerge when you look at what the banks and government are saying publicly about blockchain and cryptocurrencies and what is happening behind the scenes.
Firstly, the contradictions.
Agencies like IDA and Enterprise Ireland are trying to encourage crypto companies to establish or move operations to Ireland. Indeed, we have availed of an Innovation voucher from the IDA to help with some of our blockchain research. You also have government ministers like Paschal Donohoe saying that the Government “fully supports the development and adoption of new technologies like blockchain, as a way to encourage digitalization and foster innovation.”
There’s a desire to position Ireland as a leading country in the space. However, no one seems to be addressing the elephant in the room – lack of banking services for these companies. The main challenge for crypto firms in Ireland is they are unable to get banking services in Ireland. Our experience is not an isolated one by any means. In fact, we don’t know any Irish based crypto company that has not had difficulties finding banking.
The Irish banks are also publicly saying one thing, but behind the scenes saying something contradictory. From an article in 2018, AIB stated that
“it [doesn’t] discriminate in relation to providing banking services to cryptocurrency companies nor [has it] been systematically exiting such companies”
In a letter from AIB, they state a number of reasons for closing the account.
“The main reason being the market for cryptocurrencies remains unregulated”
“5AMLD has not yet been implemented in Ireland”
“Cryptocurrencies are not legal tender and are not guaranteed or regulated by the CBI. We therefore as a bank are bound by the regulations of the CBI”
Now enter AML( Anti-Money Laundering) and KYC ( Know your customer). 5AMLD entered into force on 9 July 2018 and is required to be transposed by EU Member States by 10 January 2020. The Bill was approved by the Irish Government on 3 January 2019, but has not yet been transposed into law.
5AMLD basically brings “virtual currency providers” (“VCPs”) under the scope of AML/CFT. This brings with it a number of obligations and puts these crypto companies under the regulatory and supervisory framework of the Central Bank.
The regulations are a double-edged sword for crypto companies. Here’s why. Implementing the new regulations bring significant costs and operational overheads that have forced some companies to close. On the flip side, it potentially opens the door for more banks to be willing to work with crypto companies. This is the feeling we’ve got from the banks we spoke to at least.
With the COVID-19 crisis and the political deadlock since the general election in Feb, MLD5 is unlikely to be transposed until later in the year in Ireland. In addition to this, once transposed it will likely take the banks a while to have it have embedded in their operations.
This leaves crypto companies in limbo. Not able to get banking services because we’re not regulated, but unable to get regulated because the legislation is not yet in law.
Check out the full Coindesk article here.