By The 2018 financial year has seen high volatility in crypto markets, unprecedented levels of financial crimes in the digital asset sector and great concern amongst consumers, investors and regulatory authorities on national and international levels. As a result, the move by VISA and MasterCard to group cryptocurrency and Initial Coin Offerings (ICOs) within a “high risk” category is unsurprising.
Mastercard CEO, Ajay Banga, has been outspoken in his views on cryptocurrency stating in July 2018 that digital currencies need to be issued by governments as “non-government mandated currency is junk”. With this in mind, it is understandable that the new categorization by VISA and MasterCard, classify binary options, CFDs, forex, cryptocurrency options, and ICOs as “High-Risk Securities Merchants”.
High-Risk Securities Merchants
According to the Broker Complaint Registry, Mastercard has mandated that any high-risk business that is operating without a license in a jurisdiction is automatically deemed to fall within the category of High-Risk Securities Merchants.
As a result of being classified as such, these merchants will only be permitted to execute transactions within the areas in which they are legally permitted to operate. Merchants will have to “present evidence of legal authority to operate in a given jurisdiction”. And any payment processor that is processing transactions of these merchants will be required to “demonstrate to Mastercard that adequate due diligence has been applied”.
Additionally, these merchants will be subject to increased and additional monitoring. All transactions from these merchants are also assigned a specific number as the card acceptor business code which allows clients a 540-day period to execute a chargeback on the transaction.
Global Banking Card Provider Giants
According to the news site Finance Magnates and the Broker Complaint Registry, Mastercard’s plans have been in the works from as early as May 2018 and the revised standards for high-risk securities merchants were scheduled to officially commence in October 2018.
The effect of Mastercard’s high-risk securities merchant classification is already being felt by brokers and exchanges that operate from unregulated or loosely regulated environments. As these companies will no longer be accepting credit cards, they have had to notify their customers that they will instead be accepting alternate payment options and direct bank transfers.
Visa, which already began its cryptocurrency crackdown in as early as January this year, is also reported to be working on a similar classification system that is thought will be implemented by as early as December 2018.
In January 2018, Visa terminated its partnership with debit card provider WaveCrest, which resulted in the end of its support for cryptocurrency debit cards including products from CryptoPay, Bitwala, TenX, Wirex and others. This termination was as a result of WaveCrest’s policy violations and continued non-compliance with Visa’s operating rules.
The creation and implementation of new rules and regulations in respect of cryptocurrencies and other high-risk mechanisms by these payment giants is of evident importance. Undoubtedly decisions by Visa and Mastercard are made with extreme consideration due to the financial impact such changes will have on consumers and businesses. With increasing crypto crimes and digital asset scams, high risk markets and unregulated companies, the move by Visa and Mastercard can be seen as an attempt to bring more security to these transactions.
Do you think the crypto crackdown will result in safer transactions? Or will unregulated companies and payment processors find alternative solutions? Give us your thoughts in the comments below.
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