New Zealand-based bitcoin ATM operator Bitcoin Central says it has been forced to shut its doors, the result of local banks’ refusal to provide financial services.
While bitcoin businesses around the world are going to great lengths to comply with new or potential digital currency regulation, they are also discovering another layer of difficulty: getting banks to supply the account services vital to the existence of any mainstream business.
The heading on Bitcoin Central’s homepage now reads: “We are now closed. Please read below for the why.”
“It’s the banks. Unfortunately, despite complying with all the legal requirements we have been unable to secure banking facilities. Without these the Bitcoin ATM business cannot operate long term. The negativity from the banking sector to Bitcoin also threatens the ATM owner’s other businesses. For me it is prudent to shut the ATM down. If you have any interest in purchasing a second-hand bitcoin ATM with compliance documents. Please get in touch.”
Bitcoin Central had only launched its Robocoin machine at Auckland’s Ironbar Cafe on 3rd June, calling it “NZ’s first true Bitcoin ATM” thanks to the machine’s two-way exchange facility. At the time, the company claimed “it does everything we need to make sure that we comply with NZ laws on its use”.
The Robocoin machine had all its know-your-customer (KYC) and anti-money laundering (AML) functions enabled. Although all Robocoin products have the ability to scan palms and check ID documents, they are not required to be functional in some jurisdictions.
Other NZ companies feel the pain
CoinDesk spoke to Jonathan Ewing, Director of NZ digital currency multi-service business Bitto, which operates a pair of Lamassu vending machines it launched in April. Bitto moves the machines around to various conferences, events, corporate gatherings and social environments.
Bitto has had its own struggles with bank account closures. Ewing said:
“Only last week, two months after account closure, I received a personal apology from the CEO of Co-Operative Bank NZ on business disruption and their need to comply with ‘procedures’ otherwise their banking license would be in jeopardy. We have taken oral expert advice from [law firm] Buddle Findlay indicating our requirements around AML & KYC, and this has led to the unintended outcome by the bank, specific to global AML legislation.”
Ewing said as a result of this, Bitto is refocusing its efforts away from the vending machines and onto bitcoin applications, Ethereum-based smart contracts, Distributed Autonomous Organizations (DOAs) and mining upgrades.
It’s not all bad news, though, he added, there is still a large degree of professional interest across related industries.
“On the flip side we have had approaches from finance experts, brokers and lawyers seeking professional advice on how to technically up-skill and acquire bitcoin knowledge. We are empowered by our colleagues’ enthusiasm for significant system wide change and open, transparent decentralisation.”
His company remained “invigorated and empowered” to explore how bitcoin could improve even more services, like employee pay, local tax, suppliers’ invoices and debit cards. Bitto remained ready to look offshore for financial services if necessary.
Banks, not governments, stifling bitcoin innovation
“No doubt about it, the banksters are threatened and making business life difficult for young and innovative companies, to the detriment of advancing entirely new financial systems and rampant opportunity,” Ewing said.
An unnamed banker in neighboring Australia recently revealed details on why banks often refuse bitcoin-related businesses, even those that merely accept or use bitcoin for services unrelated to finance.
The banker blamed international counter-terrorism-financing (CTF) agreements as the primary reason for banks’ reluctance, especially those with partnerships or subsidiaries operating in the US. Not only must banks perform expensive due diligence on every business customer, bitcoin’s lack of legal status as money means government regulators are unable to assist in investigations.
Many banks prefer simply to throw up their hands and walk away from digital currencies altogether, with some said to have written policies that specify such action.
CoinDesk contacted Bitcoin Central for comment, but had not received a response at press time.