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Major Chinese Bitcoin Exchange Suspends Deposits Due to Bank Disputes

Major Chinese Bitcoin Exchange Suspends Deposits Due to Bank Disputes

Major Chinese Bitcoin Exchange Suspends Deposits Due to Bank Disputes

​Following Bitfinex’ controversial temporary suspension of wire deposits, major Chinese bitcoin exchange OKCoin temporarily disabled USD deposits to its trading platforms due to conflicts with its intermediary and partner banks.

In a statement, the OKCoin team announced:

“Starting from today (April 18th, 2017), OKCoin would temporarily suspend USD deposit because of the issues with intermediary banks. Please do not make further deposit as your wires may be rejected by intermediary banks. We are now actively looking for alternatives to resume deposit as soon as possible. Your current account balance remains unaffected. We are sorry for any inconvenience caused.”

Just yesterday, on April 18, Bitconnect reported that Bitfinex officially disabled fiat deposits as a result of an ongoing conflict between its parent comany iFinex and four Taiwanese banks. In a lawsuit that has been withdrawn by the iFinex legal team, Bitfinex accused Wells Fargo, a US bank, for deliberately terminating banking services to Bitfinex and its customers.

However, the court ruled in favor of Wells Fargo, stating that the bank has the freedom to deny services to certain businesses or individuals.

The termination of banking services for Bitcoin exchanges that rely on fiat transfers to process trades and payments is an urgent issue that needs to be addressed in the short-term. Without an intermediary bank or a financial service provider, users and traders of an exchange such as OKCoin are not able to purchase or sell bitcoin.

Currently, a large number of exchanges and bitcoin service providers are not able to process trades as a result of the termination of banking services by intermediary banks and service providers. Companies including Bitfinex, OKCoin, BTCE and Xapo have stated that at least 30 days will be required to secure new relationships with alternative intermediaries.

Some analysts have noted that bitcoin exchanges could potentially move away from dealing with USD, due to complex anti-money laundering (AML) and know your customer (KYC) policies. According to an analyst by the name of Whale Calls, there exists 13 intermediary and clearing banks for the USD. In order to meet AML and KYC requirements of these intermediaries, an exchange or a service provider must undergo a multi-month process of auditing and system overhaul, which is extremely costly and inefficient. Also, OKCoin just completed its new AML and KYC systems to meet the strict requirements of the Chinese government. Thus, it would be an impractical decision to overhaul its systems again to comply with USD clearing banks and intermediaries.

The analyst further noted that exchanges could simply end support for the USD and enable deposits using other currencies such as the Hong Kong dollar (HKD) and Swiss Franc (CHF). At the moment, Bitfinex is working closely with Hong Kong banks to enable HKD deposits. Two customers of Bitfinex confirmed that HKD deposits are enabled and support for CHF is set to come in the near future.

Author : Joseph Young

Joseph Young is a finance and tech journalist based in Hong Kong. He has worked with leading media and news agencies in the technology and finance industries, offering exclusive content, interviews, insights and analysis of cryptocurrencies, innovative and futuristic technologies.

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