While cryptocurrencies have been with us for already some time, it’s still common to read unpleasant stories about banks rejecting crypto payments or freezing accounts for digital asset-related activity.
In some cases, your transaction leaves the bank, but you are yet to receive it on your crypto exchange account after waiting several days.
When this happens, people often blame the cryptocurrency exchange first and the bank second.
However, instead of wasting time pointing fingers, it’s essential to understand how bank transfers work as banks often act as the bridge between traditional finance and the crypto industry.
By doing so, you can ensure that the transfers from your bank will reach your cryptocurrency exchange account and vice versa.
Let’s take a closer look at this matter.
What Are Bank Transfers and How Do They Work?
Bank transfer is an old financial instrument.
Despite being with us for a very long time, we rarely use bank transfers in a wider aspect in our everyday lives unlike, say, debit card transactions which we are very much used to.
With that said, people often see bank wire (same as bank transfer) as a cost-efficient way to fund their cryptocurrency exchange accounts. However, due to the lack of experience and understanding of how bank transfers work, crypto enthusiasts can easily get into situations with unnecessary headaches and frustrations.
Bank transfers can be either domestic (e.g., SEPA in the EU, FasterPayments in the UK, ACH in the US) or international (SWIFT).
It goes without saying that domestic bank transfers take much less time to arrive than international transactions.
However, what’s crucial to understand is that the sending bank rarely transfers money directly to the receiving bank. The reason is simple — your bank cannot possibly work directly with every bank in the world.
Instead, they use the services of financial institutions they know – called correspondent or intermediary banks – acting as the middleman to complete your payment and bring it to its ultimate destination. Sometimes, there are multiple intermediaries in the chain between your bank and the cryptocurrency exchange.
The more banks in the process, the more time it takes to receive your transfer. Therefore, waiting several days is perfectly normal in these cases.
But what can you do to ensure that your funds get credited on your cryptocurrency exchange account?
Lesson 1: Know the Value Date
The first step is to know when your funds are expected to arrive.
Though you should not anticipate that every transfer (even from the same bank) will take exactly the same time to arrive, you can manage your expectations with something called “value date”. Every international transfer has a value date set by the bank. It means the date in the future by which the bank will have fulfilled its obligations to send the transfer.
Imagine you’ve sent a bank transfer to deposit to a cryptocurrency exchange. You can have a situation when your bank took the funds out of your account but has not sent them out, as the value date did not come yet.
By the value date, though, your money will be sent and usually received by the recipient bank, the one where the crypto exchange has an account. This is when the exchange “sees” your transfer and can post it to your user account.
Where do you find the value date? Sometimes it is available right on the transfer receipt. Yet, a more common situation is when you need to ask your bank for a special form, MT103, which, along with the value date, provides all the information to trace the whereabouts of your payment. It’s too early to do that in the first three business days after an international bank transfer, but certainly a good idea after a week or so.
I recommend getting a good understanding of the value date as well as the correspondent banks’ model as it helps greatly in eliminating most crypto exchange wire transfer-related fears.
Lesson 2: Ensure That Your Credentials Are Correct
Typos and mistakes can cause awkward situations in our everyday lives. And they get even more distressing when you are sending a bank transfer.
If you mistype the bank credentials, you can expect the funds to leave but not reach their destination – and eventually they will be sent back.
It is best to notify your bank about a mistake as soon as possible – so they could facilitate returning the funds to your account quickly.
To avoid such complications, make sure that your bank credentials are correct before making a transfer. Please double and triple check this.
Lesson 3: Check Bank Transfer Restrictions
Submitting the correct information and waiting patiently may still result in a rejected payment. Before you start to panic, there’s a simple explanation for this.
Banks often impose restrictions for one-time transfers of a certain size to comply with anti-money laundering regulations, ensuring that you use the funds on your account for legitimate purposes.
Check your service provider’s online banking platform to see whether you have any limits on your transfers.
Lesson 4: Notify Your Bank About International Transfers
Even if you did everything right as outlined in the previous steps, your bank might still block your transaction, which is often the case with international transfers.
Banks are here to protect their customers. If normally you only make domestic payments, initiating a sudden international transaction and, in addition to this, to a crypto exchange, may ring alarm bells for the financial institution’s compliance team.To limit risks and possible fraudulent activities, the bank may block everything suspicious or unusual.
Fortunately, it’s quite easy to avoid blocks on your international transactions. All you need is to pick up your phone and call your bank to notify them about your intentions ahead of making such an unusual transaction compared to your normal daily activities.
Lesson 5: Find Out If Your Bank Is Crypto-Friendly
Banks use a risk framework to determine which kinds of transfers are safe and which are too risky to process.
To make this decision, a bank would take numerous factors into account, ranging from local regulations to internal management decisions. Due to the misunderstood nature of cryptocurrencies, banks can often consider crypto related businesses as high-risk. Furthermore, handling payments to/from cryptocurrency businesses comes with increased work and human resource load for banks. Higher costs, additional compliance procedures, and personnel education, to name just a few.
Considering all of the above, your bank may decide to restrict or outright ban payments to and from cryptocurrency exchanges and other digital asset-related services.The only solution to this would be to find a different bank and to open an account there.Your goal should be to find a bank that accepts crypto-related transactions without additional friction.To achieve this and to ensure that you get the right information, I recommend speaking with multiple representatives at the selected financial institution.
It’s Time to Take Matters Into Your Own Hands
In the crypto industry we often see customers in distress because their bank transfer is “lost”. Most of the time, the transfer is on its way, and on schedule, too – but the customer does not know about the value date. Other times, the customer did not take time to understand and check if all processes are correct on the customer’s bank side.
Bank transfer is a solid and secure financial instrument to use to deposit funds on a fiat-supporting crypto exchange. It is also a very cost-efficient instrument if you send significant amounts. Yet, to take full advantage of it, you need to take time to understand how it works. It will spare you unnecessary worries and ensure a seamless and positive experience with cryptocurrency exchanges.
Executive Director at CEX.IO. His area of responsibility includes customer relationships with institutional and VIP-clients, overseeing the creation of the company’s development strategy, new products, markets and partnerships. As a member of the board of directors, Konstantin is also responsible for corporate governance.