Multinational financial services corporations MasterCard and VISA are planning to classify transactions related to forex, binary, cryptos and ICOs as high risk, per reports on Finance Magnates.
This move is coming on the heels of a loophole which hitherto, had been exploited by unregulated forex, CFD brokers and binary options in pitching their shady “products” to unwary investors. According to Broker Complaint Registry, the public was already privy to some details of the proposed category for unlicensed high-risk businesses after the company notified various payment processors via email since May. The revised standards for high-risk securities merchants which came into effect on October 12, 2018, will also be within the radar of additional monitoring.
In line with the newly implemented changes, all transactions carried out by High-Risk Securities Merchants” were to be classified into a special group with the number 6211 as the card receptor business code. The categorization effectively serves as leverage for clients to execute a chargeback within 540 days.
Further investigations from the report revealed the actual commencement date for the new classification by MasterCard was Monday, October 15, 2018. VISA has followed suit with a recent notification to its payment processors which is expected to commence by December.
The grouping targets businesses operating from loosely regulated jurisdictions and this includes high-risk transactions to forex, binary, crypto brokers and ICOs.
In anticipation of the changes that will definitely rob adversely on operators within loosely regulated environments, Finance Magnates report efforts made by associated businesses to keep their customers abreast with recent changes that will prompt the rejection of credit cards. These changes will ultimately force brokers within the unrestricted business environments to seek solace in bank wire transfers or a host of other payment options deemed viable.
Newly Implemented Changes
In previous years, MasterCard was perceived as being bipolar in its disposition towards cryptocurrencies and blockchain technology. The latest regulations will be deemed by observers as a testament to the company’s uncompromising view about cryptocurrencies. CEO Ajay Banga described cryptocurrencies that are not mandated by the government as ‘junk’ back in 2017. He negatively remarked on the high volatility of such cryptocurrencies to operate as a medium of exchange.
With a new set of rules in place, all brokers will only have permission to execute transactions in areas where they have the legal rights to operate. They will be thus, required to tender evidence of legal approval to operate in any given jurisdiction.
Pieces of evidence may include official merchant’s operating license ratified by a Government parastatal or agency in a given country and a copy of a licensed trading platform with which the broker carries out transactions. Payment processors will be barred from engaging in the processing of high-risk securities transactions with merchants until these documents are tendered for verification.
MasterCard will also require the application of due diligence by payment processors saddled with executing the transactions of a high-risk securities merchants.
In countries where local regulatory agencies do not have statutory provisions for the authorization of such operations, the brokerage or ICO issuer will be required to obtain a legal opinion from a local company with considerable clout and goodwill. This legal opinion must stipulate the identification of all relevant trading laws and other laws binding on the brokerage. Also, the legal opinion must include all trading regulations and laws related to credit or debit cardholders permitted to carry out transactions with the broker or the ICO.
Will Nemesis Catch-up with Rogue Operators?
These recent changes have been imminent, following trends within the industry. MasterCard, VISA, Google and Facebook are among big corporations making the business unbearable for fledgling ICOs and cryptocurrency.
Google made modifications to its financial product policy in June to put a sanction on advertisements associated with cryptocurrencies. Facebook also enforced a similar policy banning advertisements related to bitcoins initial coin offerings.
VISA had always accepted Bitwala, Wirex, TenX, CrptoPay among other cryptocurrency debit cards in place of digital coins but soon stopped using them after it entered into a partnership with WaveCrest early in 2018. The partnership, however, failed the test of time after the latter was accused of non-compliance.