Picking platforms that lower the risk of getting winnings stuck

Crypto rich, cash poor

By Anastasia Samaras

With the ongoing pandemic and the inconsistency of the economy, having access to a hefty sum of cryptocurrency could be of great help. While investors can typically deposit funds into crypto marketplaces without delay, those ready to exchange their cryptocurrency earnings into fiat may face some frustrating roadblocks.

According to a recent Telegraph article¹, some crypto millionaires’ banks are blocking investors from spending their earnings.

For example, Vincent Fraysse, an investor who turned £2,500 into $4m (£3.9m) betting on movements in markets said it took him two years to move his crypto profits into sterling and start spending it!

This is just one of many stories about digital currency traders obtaining large earnings in the crypto space just to be turned away or given trouble from traditional intermediaries.

While early crypto-adopters may be familiar with these hurdles, a new wave of buyers and sellers are entering the crypto-sphere through NFTs who don’t want to be bothered with roadblocks to cash in on their earnings.

Is it possible for traders to be able to have a seamless experience when it comes to digital currency and NFTs from start to finish? The short answer is yes; but it’s helpful to understand what the existing issues are to understand how to look out for blockchain platforms that solve for them.

First, why are banks blocking these traders’ funds in the first place?

One of the critical reasons for the difficulties involved in turning digital currency into fiat has to do with the regulations financial institutions are required to implement including Know Your Customer (KYC) and Anti-Money Laundering policies.

For example in the U.S., The Bank Secrecy Act requires financial institutions to incorporate policies and procedures that work to combat money laundering alongside the government.

It’s why users typically go through identity verification and AML checks when signing up for a bank account, brokerage account, etc.

It also means that one of the great draws of many digital currencies is also a deterrent for investors hoping to toggle between digital currency and cash.

Cryptocurrencies are decentralized meaning that they have no physical presence and are not backed by any central authority. Crypto is moved money around peer to peer without the need for an intermediary like a bank to be involved. You are also effectively anonymous. With transactions reported on the blockchain, it is a unique sequence of numbers, not names or banking information. Sending and receiving digital currency is like surfing the web incognito.

This frees investors from being beholden to institutions. On the other hand, this makes it risky for financial institutions to accept funds that may have passed through the hands of bad actors or used nefariously.

While tax authorities, regulatory agencies, and central banks all around the world are trying to adapt to the nature of digital currencies, technology is moving quicker than these longstanding entities.

Crypto regulation is also about as volatile as the crypto markets have been. Until regulators provide clear guidance which can trickle down to the policies financial institutions adopt surrounding digital currencies, we believe crypto earnings will continue to be regarded as too much of legal and financial risk to take on. This trouble results in traders continuing to hold crypto in an exchange, holding in a foreign account, or seeking banks with more crypto-friendly policies.

Incoming regulation muddying the waters more

It’s clear that regulators have cryptocurrency markets and greater blockchain space on their radar. The U.S. Department of Justice “DOJ”, Securities and Exchange Commission “SEC” and the Commodity Futures Trading Commission “CFTC” have all made announcements expressing their intent to bring more regulations and enforcement action to the crypto market.

Last week, the Biden administration announced that they’re preparing to release an executive action that will task federal agencies with regulating digital assets such as Bitcoin and other cryptocurrencies as a matter of national security.²

This puts banks on even higher alert to ensure the funds coming in are clean and not involved in money laundering, and that the customers are not bad actors. As mentioned above, while early crypto adopters may be used to these hurdles, a new wave of buyers and sellers are entering the crypto sphere through NFTs who are much more familiar with a seamless transaction experience.

The NFT market currently falls in a KYC/AML gray area, with no compliance regulations specifically required for the industry. However, NFTs are mostly associated with art and collectibles, an asset already widely considered an avenue for money laundering.

Art sellers have never been required to report large art transactions or suspicious activity to regulators. Art buyers have also been able to remain anonymous. Pair this with the anonymity Ether, Bitcoin, and other cryptocurrencies offer, and you can see how NFTs could act as a honeypot for bad actors.

New regulations for the NFT market could prove very challenging for the burgeoning space. It is very uncommon for NFT platforms to require an identity verification process to participate. Most NFTs operate as a free-for-all. OpenSea, the largest NFT marketplace, doesn’t require KYC. Neither do many of the other NFT platforms. This means buyers and sellers don’t know who they’re transacting with which creates obvious risk.

How can users be mindful of platforms they transact on that could help mitigate the risk of funds getting stuck?

When it comes to picking platforms that you want to buy or sell NFTs on, it is important to keep in mind the structure the platform has in place and if they are actively working to combat friction points for users.

For example Upstream, a MERJ Exchange Market, is a fully regulated exchange for digital securities which means our NFT market inherently meets US-securities and bank-secrecy laws as standard practice.

Upstream verifies buyers and sellers during the onboarding process to maintain a fair community. All USD accounts are FDIC-insured up to $250,000.

Upstream also supports multiple payment types to purchase shares of IPOs, NFTs, and celebrity ventures for added flexibility.

Traders can fund their accounts using PayPal, Credit, Debit, and traditional bank payments. We also accept digital currency in the form of USDC stablecoin.

A stablecoin is a digital token backed by real-world assets. USDC is a leading stablecoin that has a 1:1 value with the US dollar which helps mitigate the volatility inherent in traditional digital currencies like Bitcoin, Ether, etc.

USDC is overseen by the Centre consortium which is made up of regulated financial institutions like Circle and Coinbase. The dollars backing USDC are held in reserve bank accounts subject to regular audits to maintain its credibility. Our advanced technology integrations make it possible for USDC traders to enjoy a streamlined USDC off-ramp.

Concluding thoughts

A new wave of investors are entering the world of DeFi, NFTs, and other blockchain-powered platforms. While traders are currently willing to accept the friction involved in onboarding, transacting, and withdrawing earnings because of the upside potential; we believe platforms that solve for these common roadblocks will be positioned to lead the digital revolution.




About Upstream

Upstream, a MERJ Exchange Market, is a fully regulated global stock exchange for digital securities. Powered by Horizon’s proprietary matching engine technology, the exchange enables investors to trade shares in IPOs, NFTs, U.S., and international dual-listed equities, and celebrity ventures directly from the app https://upstream.exchange/. Interested issuers can reach the team at hello@upstream.exchange.

About Horizon

Horizon is a fintech company that builds and powers global securities exchanges with an integrated suite of software for compliant issuance, management, and secondary trading of securities. Their in-house solutions combine Wall Street and Silicon Valley to power the next generation of securities offerings and trading in the U.S. and globally. Learn more at https://www.horizonfintex.com/.


Upstream is a MERJ Exchange market. MERJ Exchange is a licensed Securities Exchange, an affiliate of the World Federation of Exchanges and full member of ANNA. MERJ supports global issuers of traditional and digital securities through the entire asset life cycle from issuance to trading, clearing, settlement and registry. It operates a fair and transparent marketplace in line with international best practice and principles of operations of financial markets. Upstream does not endorse or recommend any public or private securities bought or sold on its app. Upstream does not offer investment advice or recommendations of any kind. All brokerage services offered by Upstream are intended for self-directed clients who make their own investment decisions without aid or assistance from Upstream. All customers are subject to the rules and regulations of their jurisdiction. By accessing the site or app, you agreed to be bound by its terms of use and privacy policy. Company and security listings on Upstream are only suitable for investors who are familiar with and willing to accept the high risk associated with speculative investments, often in early and development stage companies. There can be no assurance the valuation of any particular company’s securities is accurate or in agreement with the market or industry comparative valuations. Investors must be able to afford market volatility and afford the loss of their investment. Companies listed on Upstream are subject to significant ongoing corporate obligations including, but not limited to disclosure, filings and notification requirements, as well compliance with applicable quantitative and qualitative listing standards.

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