Visa and Worldpay Take Blame for Erroneous Charges on Coinbase
In a joint statement through the Coinbase blog, payment processors Worldpay and Visa clarify the blame for erroneous charges to customers debit and credit cards. As we reported previously, Visa before fully vindicating Coinbase had pushed the blame back to the popular cryptocurrency purchasing app in a statement with CNBC.
In the joint statement, both Worldpay and Visa said transactions should be fully reversed within the next two days. The processors acknowledged fault and apologized deeply for the confusion/frustration this may have caused. Stating, “This issue was not caused by Coinbase.”
When the story broke, Coinbase released several updates about the matter through Twitter removing themselves from blame. The company Stated that the duplicate transactions were only found in Visa debit and credit card users and that they were a result of a recent change to how Visa categorized cryptocurrency transactions through MCC codes resulting in additional fees.
The joint statement from payment processors Worldpay and Visa found on the Coinbase blog can be seen below.
In recent days customers have taken to online social platforms such as Reddit, saying things like, “Coinbase has drained my bank account” and “Who is going to pay for all these overdraft fees?”
In a statement obtained by CNBC, The U.S. Commodity Futures Trading Commission (CFTC) said they are aware of the issue and looking into the complaints.
The CFTC said:
“We are aware of the reports, and expect companies to comply with all applicable laws regarding the treatment of consumers’ funds. Consumers who find unauthorized charges in their bank account or credit card should contact their financial institution immediately.”
The Visa, Worldpay, Coinbase debit and credit card issue comes just days after major card companies decide to block future purchases of digital assets such as Bitcoin (BTC) and other cryptocurrencies. Forcing Coinbase to re-evaluate and ultimately disable new credit card use for U.S. based customers.
U.S. Takes Crypto Crime Seriously with Anti-Money Laundering Reforms
The United States passed into law its Anti-Money Laundering Act of 2020, which takes effect on January 1, 2021. This brings digital currency exchange companies and other digital-asset-related businesses under the scope of regulations of the Bank Secrecy Act (BSA), which requires financial institutions “to actively detect, monitor and report potential money laundering activity.”
“I’m pleased that our anti-money laundering legislation was included as a part of this year’s [National Defense Authorization Act]. This bipartisan legislation protects Americans by depriving criminals and terrorists of the tools they use to finance illicit activity. It is the first serious overhaul of our anti-money laundering system in decades, and it makes sense to include it in the biggest, most important national defense legislation Congress passes each year,” South Dakota Sen. Mike Rounds said in a press release.
The massive anti-money laundering reforms are targeting businesses dealing with digital currencies and assets by clearly specifying the definition of a “financial institution” to “‘a business engaged in the exchange of currency, funds, or value that substitutes for currency or funds” and “a licensed sender of money or any other person who engages as a business in the transmission of funds or value that substitutes for currency.”
The reforms further define a “money transmitting business” to include those who deal with “currency, funds, or value that substitutes for currency.” Now, there are no longer loopholes that digital asset companies can use when dealing with the Financial Crimes Enforcement Network (FinCEN), the agency that enforces the BSA.
Stricter Penalties Enforced
Aside from updating definitions to ensure that digital currency exchange firms and others dealing in digital assets are clearly within the scope of the AML Act of 2020 and the BSA, stricter penalties are now being enforced for crypto criminals.
Now, those who have been found guilty of violating the AML Act of 2020 and/or BSA are faced with fines amounting to profits earned while committing the violation and possible jail time. Those guilty of an “egregious” breach are also going to be banned from taking a board member position of any financial institution in the country for 10 years. Furthermore, employees of financial institutions who commit these crimes will be obligated to return to their employer all bonuses received during the time the act was committed.
FinCEN is being given additional resources, like increasing its manpower, to ensure the enforcement of these reforms. This will further safeguard investors against crypto crimes and nail down digital currency exchange firms and other digital-asset-related businesses that do not comply with BSA regulations.
Litecoin Foundation & TokenPay strike a strategic partnership
TokenPay, The self-proclaimed “Bitcoin on steroids” has entered a partnership with the Litecoin Foundation for a 9.9% stake in the WEG Bank in Germany. In May 2018 TokenPay acquired just under 10% of WEG Bank with the option to purchase up to 90% if approved by the regulatory commission of Germany. In a move to leverage Litecoins marketing and technology service TokenPay has handed the 9.9% over to Litecoin in hopes that it will put TokenPay on the map as a major player in the cryptocurrency market.
TokenPay CEO Derek Capo said in a recent statement “We are building an entire ecosystem that includes merchant services, banking, escrow, gaming, e-sports, employment services, etc., where we have entire control of the vertical integration needed to lower costs, but also control our destiny. Litecoin is a top-five blockchain in the world, and boasts more than one million followers worldwide, which helps increase the chances of TokenPay’s ecosystem to succeed.”
What does this mean for TokenPay & Litecoin?
This partnership will provide TPAY access to LTC’s massive user base and will give the users the opportunity to buy, sell & trade as well as gain access to the company’s debit card service. In turn, Litecoin will benefit by having exclusive access to TokenPay’s long-standing bank connections to hopefully integrate the LTC blockchain network into a wide range of monetary associations.
Charlie Lee, CEO of the Litecoin Foundation responded to the partnership by saying “This partnership is a huge win-win for both Litecoin and TokenPay. I’m looking forward to integrating Litecoin with the WEG Bank AG and all the various services it has to offer, to make it simple for anyone to buy and use Litecoin.”
Each company will play a crucial roll in the partnership by focusing on TPAY crypto and its accompanying blockchain as well as the TokenPay multisignature transaction engine, which should accelerate payment and transaction speeds tremendously for both companies.
There is no word yet on exactly when the technology side will be implemented but TokenPay is geared up to make some major moves that include partnering with multiple other financial establishments.
Challenges Await Banks Looking to Expand Into Crypto
In a recent weeks, a widening range of Wall Street titans from Goldman Sachs to the New York Stock Exchange have signaled they are interested in expanding their footprints in the booming cryptocurrency universe in various forms.
While many market observers believe the entry of established Wall Street banks and exchange operators is a positive for the alt-coin space, some analysts believe there are hurdles facing banks looking to expand their presence in the crypto space.
“Centrally cleared cryptocurrency derivatives could be a real-world test of clearinghouses’ margining and default procedures, particularly if derivative notional volumes increase and cryptocurrencies exhibit heightened price volatility,” said Fitch Ratings in a recent note.
Crytpo-related derivatives currently available in the U.S. are mostly confined to Bitcoin futures, which debuted in December on the Cboe and CME. Nasdaq is also considering launching bitcoin futures at some point.
Some big names on Wall Street are embracing digital assets. For example, Goldman Sachs recently made its first cryptocurrency hire and said it plans to use its own capital to trade bitcoin futures for clients. However, Fitch sees challenges for banks looking to venture into digital currency derivatives.
“A dramatic increase in financial institutions’ exposure to cryptocurrency derivatives could challenge clearinghouses and large financial institution clearing members in ways beyond those typically associated with the introduction of new market products,” said the ratings agency. “Cryptocurrencies are prone to extreme price volatility, which has been exacerbated by a nascent, unregulated underlying market with a limited price history and without generally accepted fundamental valuation principles. These factors complicate margin calculations, particularly related to short positions, for which losses cannot be capped.”
Bitcoin futures, which are cash settled, still have light volume relative to other well-known contracts in the futures market.
“As of May 9, 2018, open interests in XBT and BTC were modest at 6,287 and 2,479 contracts, respectively, worth approximately $59 million and $116 million, respectively. However, if challenges associated with trading the cryptocurrency are addressed, including uncertainty over regulatory, tax and legal frameworks, cryptocurrency derivative volumes could grow,” according to Fitch.
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