As Bitcoin usage grows worldwide and attracts the attention of more governments and regulators, the complexities of ensuring compliance across different jurisdictions become greater and greater. Many quickly growing Bitcoin startups struggle with this issue and lack the knowledge base to ensure that compliance is sufficient.
Taking it a step further, even if local regulations in an area are relatively lax, operating a financial services business without a bank account can prove tremendously difficult. And due to the fact that Bitcoin businesses are considered high risk and banks operate very conservatively, obtaining a local banking partner can be very difficult.
“If we look at what’s going on the U.K., the country is very laissez-faire with regulation, but the banks won’t work with the Bitcoin companies because their risk levels are much lower,” one NY-based Bitcoin executive said in an interview with Bitcoin Magazine.
Vogogo is a risk-management and payment processing specialist that has taken the approach of integrating their technology to the back-end of bitcoin companies technology, enabling the Bitcoin companies to operate with a level of risk management and compliance that the banks find appropriate. By gaining access to the banks through Vogogo, Bitcoin companies can then offer their users around the world better options to conveniently and quickly convert fiat money into digital currencies and back again.
The San Francisco-based exchange Kraken announced that it would be entering Canadian borders in a partnership with Vogogo.
“We see a lot of opportunity for Kraken in Canada and we’re counting on Vogogo’s expertise in risk management and payment processing to make it possible for Canadians to move their dollars safely and efficiently to and from Kraken,” CEO Jesse Powell said in a prepared statement.
In addition to Kraken, Bitstamp also partnered with Vogogo to help it expand into both Canada and the United States.
“Bitstamp has partnered with the risk management and payment processing specialist Vogogo to support its expansion into the U.S. and Canadian markets. This will allow our customers to explore a revolutionary new technology in a safe and compliant manner,” said the Bitstamp team in an announcement on their blog.
Vogogo Speeds Up Market Penetration
The value for both Kraken and Bitstamp: Vogogo already has the technology, the team, the know-how and the necessary partnerships with traditionally risk-adverse banks. To attempt to develop these requirements on their own would have taken Kraken or Bitstamp a significant amount of time and resources with no guarantee that they would have ever has found success. Consider how long it has taken any bitcoin exchange to get a bank behind it.
“We’re excited, but perhaps more importantly, we are focused on working with Kraken and playing our part in enabling and accelerating their growth. We will continue to provide secure, effective and compliant access to global banking and payment networks allowing Kraken to look forward and focus on being the very best at their business,” said Vogogo CEO Geoff Gordon in a statement announcing the Kraken partnership.
It is very hard to run a business without a bank. By partnering with Vogogo, Bitcoin companies that are going to increasingly come under the auspices of regulators will be able to more rapidly get their operation rolling due to the relationships Vogogo has. Further, they’ll be able to get funds into their exchanges much more simply.
“We’re looking forward to providing fast settlement and liquidity that will enable the Canadian market for bitcoin and Bitcoin businesses to flourish,” said Kraken’s Powell in a statement. Faster market penetration allows for that.
Jacob is a product manager working in the industrial news space as well as a freelance writer covering finance. He found bitcoin randomly, fell in love with its potential, and has been addicted to it ever since. He runs a weekly newsletter about bitcoin at CryptoBrief.com