FX Brokers and Crypto Payments: a Passing Fad or the Way Forward?

In the first part of this review, we examine the potential shift towards crypto payments, weighing the allure of innovation against the volatility that shadows it. Subsequently, in the second part, we compile insights from leading executives and experts within the industry about the viability of integrating cryptocurrency into the array of payment options offered by FX and traditional brokers to their clientele.

The Pros of Accepting Crypto Payments:

• Faster Processing and Lower Fees:
  • Crypto payments offer faster processing times, especially for international transactions.
  • Transaction fees are lower compared to traditional methods, with a maximum fee of 1% through tools like Coingate or Bitpay, as opposed to the standard 2.9% plus 30¢ per transaction for credit cards.
  • Forex brokerages can leverage this to reduce overhead expenses.
• Blockchain Technologies:
  • The Bitcoin Lightning Network and other technologies enable efficient, low-cost transactions. For example, the Lightning Network can process up to 1 million transactions per second, with fees less than 1¢.
• Access to Liquidity:
  • Accepting cryptocurrencies attracts a growing crypto clientele, providing forex brokerages access to deeper liquidity.
• Global Accessibility and Ease of Use:
  • Cryptocurrency payments simplify international transactions, bypassing obstacles like currency conversion. Forex platforms can use cryptocurrencies to move traditional fiat currencies across borders efficiently.
• Expanding Customer Base:
  • Accepting cryptocurrency payments enables forex brokerages to reach individuals who may not have access to traditional payment methods. This expansion helps tap into the growing crypto market.
• Customer Loyalty and Competitiveness:
  • Embracing cryptocurrency payments enhances customer loyalty by offering more payment options. Forex platforms quick to adopt new payment methods gain a competitive advantage, ensuring customer satisfaction and retention.
• Stablecoins Mitigate Volatility:
  • Stablecoins pegged to traditional currencies, such as Tether and USDC, provide stability by avoiding the volatility associated with cryptocurrencies.
  • Stablecoins allow users to hold virtual dollars within the crypto universe without exposure to market fluctuations.
• Increased Security:
  • Cryptocurrencies, being decentralized, offer robust security against fraud, chargebacks, and identity theft. Advanced encryption techniques contribute to their resilience against hacking attempts.
• Faster Transaction Processing:
  • Cryptocurrency payments provide an instant solution for processing high volumes of transactions in the fast-paced forex market. This efficiency can save valuable time during market turbulence.
• Leveraging Payment Providers
  • PSPs can offer predictable exchange rates for crypto transactions at the point of purchase, usually locked in for a specified duration (e.g., 15 minutes).
  • Brokers can choose to receive settlements in fiat, ensuring a known amount regardless of crypto market fluctuations.

The Cons:

• Volatility:
  • The primary concern is the extreme volatility of cryptocurrencies. Savings on transaction fees can be overshadowed by massive currency value fluctuations.
• Stablecoin Concerns:
  • While Stablecoins emerge as a solution to the dreaded volatility, not all of them are truly stable amid accusations of lacking transparency. Tether, for instance, has faced scrutiny for potential discrepancies in claimed reserves.

Practical Considerations:

Adopting crypto payments isn’t a mere strategic choice but involves technical and compliance considerations. Therefore, choosing a crypto banking service and navigating new legal frameworks are integral steps for FX brokers.

• Choosing a Service Provider:
  • Brokers must select a wallet or crypto banking service like Nexpay, BitPay, or Worldpay to facilitate crypto payments.
• Compliance:
  • Compliance matters are crucial. Regulatory developments, like the UK’s recent promotions rules and US lawsuits against crypto giants, impact the legal framework around crypto-related activities.

Payments and Crypto: Regulatory Challenges

Different regulatory frameworks across various jurisdictions utilize distinct terminologies when referring to payment tokens. Japan and the United Kingdom, for instance, have embraced terms centered on “stablecoin” for identification purposes. Specifically, the UK government formally adopted the term “stablecoins” to categorize tokens utilized in payments. Conversely, Japan’s framework revolves around “digital-money type stablecoins.”

On the other hand, the EU, UAE, and the United States have opted to use the term “tokens” with varying specifications. For instance, US authorities refer to “dollar tokens,” while the EU co-legislators introduce the concept of “e-money tokens,” and the UAE focuses on “fiat-crypto tokens.”

Current proposals for regulating issuers of stablecoins used in payments suggest implementing licensing regimes. However, the type of license required may vary from country to country. Banks and e-money institutions typically have the authorization to issue payment tokens. In the United States, only insured depository institutions possess the authority to issue stablecoins, thereby excluding most non-banks permitted to issue e-money. In Japan, trust companies also have the allowance to issue payment tokens.

The regulatory perspective, particularly in the United States, involves the Commodity Futures Trading Commission (CFTC) overseeing cryptocurrencies as commodities. As such, Forex brokers operating in the U.S. and accepting cryptocurrency payments must comply with CFTC regulations, including registration and adherence to guidelines for cryptocurrency trading.

Choosing the Right Crypto Payment Service Provider (PSP)

Cryptocurrency payments are facilitated through crypto payment gateways, allowing businesses, including forex brokerages, to accept transactions in virtual coins like Bitcoin, Ethereum, and others.

Understanding the intricacies of the crypto realm often involves navigating through various technical terms and complexities. At its core, a cryptocurrency payment gateway acts as a conduit, enabling brokers to accept digital currencies as payment for their client deposits/withdrawals. Having the right cryptocurrency payment gateway can serve as a crucial tool for FX brokers in unlocking additional revenue channels and expanding customer reach.

Overall, selecting the right Payment Service Provider (PSP) is vital as it ensures good fluidity, conversion, and cost efficiency. Some of the standout features that distinguish the best cryptocurrency payment gateways include robust security measures, swift transaction processing times, and cost-effective fee structures.

Key Benefits of a Crypto PSP:

• Enhanced Security:
  • Crypto PSPs provide extra security measures to prevent fraud. They offer a secure channel for executing crypto transactions, reducing the risk of unauthorized activities.
• Payment Variety:
  • PSPs enable forex brokerages to accept crypto payments from various types of cards and alternative electronic payment methods, catering to the diverse needs of different brokerage companies.
• Transparency and Control:
  • Comprehensive transaction reports provided by PSPs offer transparency and better control over payment processes. This transparency is crucial for maintaining a secure and accountable payment environment.
• Technical Support:
  • Expert technical support from PSPs ensures the smooth execution of crypto payments, minimizing the chances of glitches and disruptions.
• Business Focus:
  • A reliable crypto PSP allows forex brokerages to focus on core business activities, such as customer acquisition, while ensuring efficient payment handling.
• Payment Method Variety:
  • PSPs enable brokerages to accept crypto payments via various methods, including credit and debit cards, wire transfers, and online e-wallets, consolidating all options in one place.
• Better Conversion Rates:
  • The right PSP can contribute to better conversion rates, enhancing overall commercial performance for forex brokerages.
• Smooth Transaction Processing:
  • PSPs help prevent declined transactions, ensuring a smooth flow of customer deposits and minimizing the loss of potential leads.

List of Top Forex Brokers Accepting Crypto Payments:

The review concludes with a list of crypto-friendly brokers by region, highlighting their specific offerings, fee structures, and the cryptocurrencies they accept for deposits and withdrawals. The selection of the brokers below took into account other essential factors, including the regulatory profile, the range of supported cryptocurrencies, costs, and funding options usability.

North America:

• FX Choice:
  • Supports deposits in Bitcoin Cash, Ethereum, XRP, DOGE and USDC
• ForexMart:
  • Supports several cryptocurrencies for deposit methods.

Europe:

• Exness:
  • Only fully verified users can activate their Exness bitcoin wallet. Crypto payment methods like Bitcoin are unavailable on the iOS version of the Exness Trade app. Inactive Bitcoin accounts with an amount less than USD 1 will be archived.
• RoboForex:
  • Charges a 1% deposit fee on all cryptocurrency wallets and payment gateways.
  • No withdrawal fees, but traders using cryptocurrency wallets may be subject to a blockchain fee.

Australia:

• Eightcap:
  • Accepts USDT payments.
• Axi (formerly AxiTrader):
  • Accepts crypto payments in BTC, ETH, LTC, XRP, XLM, USDT (TRC20), USDT (ERC20) .
• Fusion Markets:
  • Accepts deposits in Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), USDT, and other coins.
• FXOpen:
  • Accepts cryptocurrency payments in Bitcoin, Litecoin, and Namecoin.

Global:

• JustMarkets (formerly JustForex):
  • JustMarkets accepts deposits through the following cryptocurrencies: Bitcoin, Ethereum, USD Coin, Bitcoin Cash, BUSD, Tether, Dogecoin, Binance, Litecoin, and Ripple.
• FBS:
  • Transaction fees for cryptocurrency are based on the transaction size and network business.
  • FBS itself doesn’t charge fees for the transaction, but a commission is paid to the mining network, which varies.
• LiteFinance (formerly LiteForex):
  • You can deposit and withdraw funds from your trading accounts at LiteFinance with zero commissions using popular cryptocurrencies such as Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and Monero. The minimum amount for these transactions is $10. For Ripple’s XRP, the minimum deposit and withdrawal amount is slightly higher at $50.
• Deriv (formerly Binary.com):
  • Supports Bitcoin, Ethereum, Litecoin, USDT, and USDC.
• Vantage (formerly Vantage FX):
  • Funding accounts with cryptocurrency is possible for certain jurisdictions depending on which country you are currently residing/trading in.
• OctaFX:
  • Accepts payments through the following cryptocurrencies: Bitcoin, Ethereum, Tether, Dogecoin, and Litecoin
• FP Markets:
  • Accepts crypto payments through LetKnowPay and Finrax.
  • Charges blockchain fees for both deposits and withdrawals.
  • No handling fees for crypto deposits and withdrawals.
• InstaForex:
• Accepts cryptocurrency payments in Bitcoin, Ethereum, Tether, and Litecoin
• ThinkMarkets:
• Accepts cryptocurrency payments in Bitcoin (BTC), Ether (ETH), Tether (USDT ERC-20 & TRC-20), Bitcoin Cash (BCH), Stellar (XLM), Litecoin (LTC), EOS (EOS), DASH (DASH), USDC (USDC ERC-20), XRP (XRP), Tron (TRX), Binance Coin (BUSD (ETH only)
• BlackBull Markets:
  • Global except New Zealand and China: USDT ERC-20, USDT TRC-20, BTC, and ETH
• GrandCapital:
  • Accepts cryptocurrency payments in Bitcoin, Ethereum, Tether

Final Thoughts:

Cryptocurrency deposits can provide convenience for funding forex accounts, but it’s crucial to choose reputable brokers with proper regulations to ensure the safety of funds. The list provided is not exhaustive, and thorough research is recommended before selecting a broker that aligns with specific trading needs. Each broker’s fee structure, processing times, and supported cryptocurrencies may vary, so it’s essential to consider these factors based on individual preferences and requirements.