If you are looking to open a bank account for your blockchain company or project, then keep reading on. We are going to cover all steps necessary to get it done.
Blockchain technology has captures many entrepreneurs imagination and spurred new companies and projects launching and trying to improve day to day lives of millions of people.
However, it is not so easy to open a regular bank account for these blockchain related companies and projects due to blockchain being always compared hand to hand with crypto currencies.
What Are The Most Popular Blockchain Technologies That Need Banking?
Based on our experience, we have seen several Blockchain technologies in action, that turn to grow and be relatively big companies. These companies employ staff, have partners and stakeholders therefore they need operational bank accounts to support their activities. Here are some most popular blockchain company types that we help to open bank accounts for:
Decentralized Finance (DeFi): DeFi was a major trend in 2020 and 2021, with projects aiming to create decentralized alternatives to traditional financial services like lending, borrowing, and trading. Yield farming, liquidity mining, and decentralized exchanges gained popularity. All these projects need operational bank accounts to support their internal operations and client accounts, to allow new clients enter the space especially bridge the gap between fiat and crypto.
Non-Fungible Tokens (NFTs): NFTs saw explosive growth in the last few years, especially in the art and entertainment industries. Digital assets, such as art, music, and virtual real estate, were tokenized and traded on blockchain platforms. These platforms relied heavily on banking to facilitate on chain and off chain transactions between buyers and sellers.
Blockchain in Supply Chain: the use of blockchain to enhance transparency, traceability, and efficiency in supply chain management gained traction. It was applied to track the origin and journey of products from manufacturing to the end consumer.
Enterprise Blockchain Adoption: companies and enterprises started to explore and implement blockchain solutions for various purposes as well. Some examples include close ended ecosystems and marketplaces that are using blockchain and own tokens to facilitate transactions within their own marketplaces or ecosystems. Another great example is corporations using the blockchain technology for record keeping and security.
We have noticed that once opening a bank account, banks question the rationale behind using the blockchain and if the application is not posing risk to the bank facilitating 3rd party transactions or supporting illicit activities via a proxy.
Steps Required To Open A Bank Account For A Blockchain Company
Opening a bank account for a blockchain company depends on jurisdiction, governing law, nature of flow of funds and so on. However, here are general steps you might consider:
1. Business Structure and Registration: ensure that your blockchain company is legally registered and has a recognized business structure (e.g., LLC, Corporation, etc.). Having all necessary legal documents, such as articles of incorporation, business licenses, and any other documentation required by your jurisdiction is crucial as banks will require these documents for the onboarding procedures.
2. Choose the Right Bank: research banks that are blockchain-friendly and have experience dealing with businesses in the blockchain and cryptocurrency space. If you would like to get an up to date list of blockchain and crypto friendly banks, get in touch with us and we will share it via email.
3. Provide Clear Information About Your Business: besides all the legal documentation that bank will ask, provide a clear and comprehensive business plan that outlines your company's activities, revenue model, and compliance measures. Try to explain how transactions will be conducted so that bank can assess the risk in your favour.
4. Know Your Customer (KYC) Compliance: be prepared to comply with KYC regulations. This often involves providing identification documents for the company's owners, directors, and other decision makers or company representatives.
5. Anti-Money Laundering (AML) Compliance: ensure that your company has robust AML policies in place. Banks are particularly sensitive to AML compliance in the blockchain and cryptocurrency industry.
6. Transparent Accounting Practices: maintain clear and transparent accounting practices. Having well-documented financial records will help build trust with the bank. If your business is licensed and you are serving the end clients, banks will also require a fresh external audit or within 3 months from account opening.
7. Select the Right Type of Account: choose the type of bank account that suits your business needs. Some companies may need operational accounts and some need collection accounts or safeguarding accounts to hold clients monies. You can read about different types of accounts here.
8. Analyse Regulatory Environment: stay informed about the regulatory environment related to blockchain and cryptocurrencies in your jurisdiction. This knowledge will help you navigate potential challenges and demonstrate to the bank that you are staying compliant.
9. Consider Multiple Banking Relationships: depending on the nature of your business, it might be beneficial to have accounts with multiple banks. This can provide redundancy and additional flexibility.
Conclusion
In conclusion, navigating the complexities of opening a bank account for a blockchain company demands a strategic approach. As the blockchain industry continues to drive innovation across diverse sectors, establishing strong relationships with banks requires adherences to legal frameworks, KYC and AML compliance.