Over the past few days, there has been a lot of controversy surrounding the Bitfinex exchange. While they are not the only company affected by Taiwanese bank woes, it is evident this is all part of a bigger picture. It appears there is a major banking reform going on in Taiwan, which is causing problems for USD-related transactions. Unfortunately, this also affects bitcoin companies dealing with these banks.
The Taiwanese Banking System is A Mess
Very little is known about the banking system in Taiwan, mainly because it is never highlighted by foreign media all that much. However, after looking at some local sources, it appears there is quite the mess that needs cleaning up sooner rather than later. No one is surprised to find out there are multiple problems affecting the banking ecosystem today. In fact, reforms should have occurred in most countries for quite some time now, yet these changes are often met with significant delays.
It appears Taiwan falls into the same category. Going through national banking reforms is not easy, even though the country wants to be a fintech hub and world bank center. Most cryptocurrency companies dealing with funds from international clients have signed up for a Taiwanese bank account due to less strict AML and KYC procedures. At one point, this loophole seemed worthwhile, yet it is coming to bite these companies in the rear as of right now.
Since the United States recently stepped up their internal banking requirements for USD transfers, other banks dealing with USD transfers must follow suit. This also means the Taiwanese megabanks will have to go through some major changes. Until that happens, US banks are free to refuse transfers from banks not complying with the new guidelines. It appears that is the real reason why Wells Fargo bounces iFinex, Tether, Xapo, and BTC-E transfers coming from Taiwan, and does not send money to the country either.
Cryptocurrency companies affected by this Taiwanese bank debacle will have to find a solution rather quickly though. Changing banks is perhaps the easiest option on paper. Then again, most banks do not like to get involved in bitcoin activity whatsoever, which may pose a new set of problems. Removing USD transactions is another option, although that would result in a significant loss of revenue for exchanges and other service providers. Complying with these demands may result in months of work and delays regarding USD deposits and withdrawals. There is no easy solution for the time being, and it will affect quite a few prominent bitcoin companies moving forward.
In the end, it is a relief to learn the affected companies are not going through insolvency issues whatsoever. However, they most likely would have known about these reforms and when compliance deadlines expire. Some behavior – especially the one exhibited by Bitfinex – will continue to raise some questions, that much is certain. Buying bitcoin and sending it to unaffected exchanges for fiat conversion is the best option for cryptocurrency users right now.
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