Earlier this week we broke the news that Mastercard is taking action to classify certain transactions as high risk and therefore provide ample time for chargebacks on the part of depositors. Today we can confirm what we suspected a couple of days ago: the effort from the card issuer is part of a well-coordinated campaign that includes several regulators and government agencies.
Thus, the likelihood that VISA will follow up with a warning of its own against CFD, forex, crypto, binary options brokers and ICOs is a virtual certainty.
In a letter from a partner bank to a payment processor that is clarifying the stance of the institution on Mastercard’s statement, the new and restricted rules for the so-called “high-risk merchants” are elaborated upon.
Contents of the Letter
The letter from the bank explains that the effort has been encouraged by authorities after multiple complaints against merchants that are involved in CFDs, forex, crypto and binary options brokerage services, as well as ICO issuers.
The card schemes (read Visa, MasterCard, UnionPay, RuPay, etc.) were asked to look into the questionable business practices of certain brokers/dealers engaged in the activities mentioned above. The companies have also been asked to ensure that laws are observed and enforced regarding illegal activity involving merchant noncompliance with local jurisdiction regulations.
High-Risk Merchants Requirements by July 1st
The high-risk MCC code 6211 will be assigned to every transaction executed with brokers and ICO issuers. The companies, classified as high-risk merchants will be required to provide a copy of their license, assuming they have one. The authorization document must be issued within Europe. This rule also applies to merchants trading Cryptocurrencies
Cryptocurrencies
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
Read this Term and ICOs.
For those merchants whose business is solely selling or buying cryptocurrencies and where there is no trading involved, the merchant must provide a legal opinion from the authorities of the merchant country, stating the legal status of the business model.
Copies of the registration of the merchant, where required under applicable law, with a licensed exchange or licensed Trading Platform
Trading Platform
In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real-time updates on quotes, charts and is the main frontend which customers are facing.Brokers either use existing trading platforms and sometimes customize them, or develop their own platform from scratch. Since the beginning of the retail FX trading business MetaQuotes and its platforms MetaTrader 4 (MT4) and MetaTrader 5 (MT5) have been the industry standard, especially when it comes to automated trading.MT4 Shows Resiliency While MT4 has long been seen as ubiquitous amongst brokers’ offerings, a targeted push by MetaQuotes themselves has led to broader adoption of MT5 in recent years. Advanced trading platforms such as MT4 or MT5 also allow access to a wide range of asset classes available for trading.The development of trading platforms over the past decade has failed to successfully dethrone MT4 or MT5, notably in the retail market. However, in institutional markets, brokerage companies and banking entities also construct and utilize proprietary currency trading platforms to help satisfy internal needs with trades executed through institutional trading channels.By far the most important parameter for many retail clients is the optionality and pairs available on trading platforms. Additionally, demand by traders has led to a greater emphasis on newer features such as advanced charting and other tools.
In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real-time updates on quotes, charts and is the main frontend which customers are facing.Brokers either use existing trading platforms and sometimes customize them, or develop their own platform from scratch. Since the beginning of the retail FX trading business MetaQuotes and its platforms MetaTrader 4 (MT4) and MetaTrader 5 (MT5) have been the industry standard, especially when it comes to automated trading.MT4 Shows Resiliency While MT4 has long been seen as ubiquitous amongst brokers’ offerings, a targeted push by MetaQuotes themselves has led to broader adoption of MT5 in recent years. Advanced trading platforms such as MT4 or MT5 also allow access to a wide range of asset classes available for trading.The development of trading platforms over the past decade has failed to successfully dethrone MT4 or MT5, notably in the retail market. However, in institutional markets, brokerage companies and banking entities also construct and utilize proprietary currency trading platforms to help satisfy internal needs with trades executed through institutional trading channels.By far the most important parameter for many retail clients is the optionality and pairs available on trading platforms. Additionally, demand by traders has led to a greater emphasis on newer features such as advanced charting and other tools.
Read this Term and a legal reference to any law applicable to the merchant that permits high-risk trading activity are all mandatory by the 1st of July.
“If the merchant is unable to obtain an updated license, we will cease processing applicable high-risk securities transactions from such merchant until provided with an updated license,” the letter states.
Legal Opinions Country by Country
As highlighted in our previous article on the matter, brokers will need to provide a legal opinion from each country in which they are operating to be able to process transactions or offer their services. The legal opinion must be drafted by a reputable law firm located in the specific country and be addressed directly to the relevant financial institution.
Within the legal opinion, all of the relevant trading laws and all other relevant laws applicable to the merchant and the cardholder must be identified. The activity of the merchants and cardholders must comply at all time with all of the laws that have been mentioned in the letter.
When it comes to the EU, by the 1st of July 2018, all merchants must provide a valid European Licence. If no license is at hand, but the company is in the process of obtaining it, the merchant must be able to provide the bank with a signed document from the relevant authorities showing the status of the application to obtain the license. This must be received by not later than 15 September 2018.
The merchant also has to provide a list of all countries where it is operating and all of the requested documentation and legal opinions as described above.
Earlier this week we broke the news that Mastercard is taking action to classify certain transactions as high risk and therefore provide ample time for chargebacks on the part of depositors. Today we can confirm what we suspected a couple of days ago: the effort from the card issuer is part of a well-coordinated campaign that includes several regulators and government agencies.
Thus, the likelihood that VISA will follow up with a warning of its own against CFD, forex, crypto, binary options brokers and ICOs is a virtual certainty.
In a letter from a partner bank to a payment processor that is clarifying the stance of the institution on Mastercard’s statement, the new and restricted rules for the so-called “high-risk merchants” are elaborated upon.
Contents of the Letter
The letter from the bank explains that the effort has been encouraged by authorities after multiple complaints against merchants that are involved in CFDs, forex, crypto and binary options brokerage services, as well as ICO issuers.
The card schemes (read Visa, MasterCard, UnionPay, RuPay, etc.) were asked to look into the questionable business practices of certain brokers/dealers engaged in the activities mentioned above. The companies have also been asked to ensure that laws are observed and enforced regarding illegal activity involving merchant noncompliance with local jurisdiction regulations.
High-Risk Merchants Requirements by July 1st
The high-risk MCC code 6211 will be assigned to every transaction executed with brokers and ICO issuers. The companies, classified as high-risk merchants will be required to provide a copy of their license, assuming they have one. The authorization document must be issued within Europe. This rule also applies to merchants trading Cryptocurrencies
Cryptocurrencies
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
Read this Term and ICOs.
For those merchants whose business is solely selling or buying cryptocurrencies and where there is no trading involved, the merchant must provide a legal opinion from the authorities of the merchant country, stating the legal status of the business model.
Copies of the registration of the merchant, where required under applicable law, with a licensed exchange or licensed Trading Platform
Trading Platform
In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real-time updates on quotes, charts and is the main frontend which customers are facing.Brokers either use existing trading platforms and sometimes customize them, or develop their own platform from scratch. Since the beginning of the retail FX trading business MetaQuotes and its platforms MetaTrader 4 (MT4) and MetaTrader 5 (MT5) have been the industry standard, especially when it comes to automated trading.MT4 Shows Resiliency While MT4 has long been seen as ubiquitous amongst brokers’ offerings, a targeted push by MetaQuotes themselves has led to broader adoption of MT5 in recent years. Advanced trading platforms such as MT4 or MT5 also allow access to a wide range of asset classes available for trading.The development of trading platforms over the past decade has failed to successfully dethrone MT4 or MT5, notably in the retail market. However, in institutional markets, brokerage companies and banking entities also construct and utilize proprietary currency trading platforms to help satisfy internal needs with trades executed through institutional trading channels.By far the most important parameter for many retail clients is the optionality and pairs available on trading platforms. Additionally, demand by traders has led to a greater emphasis on newer features such as advanced charting and other tools.
In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real-time updates on quotes, charts and is the main frontend which customers are facing.Brokers either use existing trading platforms and sometimes customize them, or develop their own platform from scratch. Since the beginning of the retail FX trading business MetaQuotes and its platforms MetaTrader 4 (MT4) and MetaTrader 5 (MT5) have been the industry standard, especially when it comes to automated trading.MT4 Shows Resiliency While MT4 has long been seen as ubiquitous amongst brokers’ offerings, a targeted push by MetaQuotes themselves has led to broader adoption of MT5 in recent years. Advanced trading platforms such as MT4 or MT5 also allow access to a wide range of asset classes available for trading.The development of trading platforms over the past decade has failed to successfully dethrone MT4 or MT5, notably in the retail market. However, in institutional markets, brokerage companies and banking entities also construct and utilize proprietary currency trading platforms to help satisfy internal needs with trades executed through institutional trading channels.By far the most important parameter for many retail clients is the optionality and pairs available on trading platforms. Additionally, demand by traders has led to a greater emphasis on newer features such as advanced charting and other tools.
Read this Term and a legal reference to any law applicable to the merchant that permits high-risk trading activity are all mandatory by the 1st of July.
“If the merchant is unable to obtain an updated license, we will cease processing applicable high-risk securities transactions from such merchant until provided with an updated license,” the letter states.
Legal Opinions Country by Country
As highlighted in our previous article on the matter, brokers will need to provide a legal opinion from each country in which they are operating to be able to process transactions or offer their services. The legal opinion must be drafted by a reputable law firm located in the specific country and be addressed directly to the relevant financial institution.
Within the legal opinion, all of the relevant trading laws and all other relevant laws applicable to the merchant and the cardholder must be identified. The activity of the merchants and cardholders must comply at all time with all of the laws that have been mentioned in the letter.
When it comes to the EU, by the 1st of July 2018, all merchants must provide a valid European Licence. If no license is at hand, but the company is in the process of obtaining it, the merchant must be able to provide the bank with a signed document from the relevant authorities showing the status of the application to obtain the license. This must be received by not later than 15 September 2018.
The merchant also has to provide a list of all countries where it is operating and all of the requested documentation and legal opinions as described above.
