How many steps are required for traditional payment institutions to make a compliant transition t...

This article addresses traditional payment institutions’ anxiety about transitioning to crypto payment, clarifies that the shift is a compliant identity reconstruction rather than a simple tech upgrade. It outlines five core steps from compliance positioning, licensing judgment to system building and banking cooperation, and highlights that sequence is more critical than steps for a successful transition.

This article addresses traditional payment institutions’ anxiety about transitioning to crypto payment, clarifies that the shift is a compliant identity reconstruction rather than a simple tech upgrade.

Introduction

A few years ago, the questions people asked were:

Can we add more payment channels?

Can we lower the fees and boost transaction volumes?

Can we get a more versatile payment license?

Nowadays, an increasing number of payment institution executives are asking:

Can we accept USDT?

Our clients require on-chain settlements—can we accommodate this?

U-cards and stablecoin clearing are booming; will we be too late if we don’t pivot?

These questions may seem disparate, but they stem from a single underlying anxiety: clients have already started making payments via crypto methods, while we are still stuck in the settlement tracks of traditional payment systems. As a result, many institutions instinctively perceive “transitioning to crypto payment” as a simple task—just adding a USDT channel, integrating a system, and finding a counterparty for currency exchange.

But I want to state the conclusion upfront: for traditional payment institutions, transitioning to crypto payment is not a technological upgrade, but a reconstruction of compliant identity. You are not “adding a new business line”; rather, you are answering the same question from regulators and banks all over again:

Who exactly are you now?

What role do you play in this capital chain?

Step 1: Put Systems Aside—First, Clarify: Will You “Handle Crypto Assets” or Not?

Virtually every payment institution executive starts with a similar statement: “We don’t trade or issue crypto; we just help clients receive USDT and exchange currencies. Isn’t this still just payment?” However, the reality is that regulators never define a business based on your subjective understanding.

In the vast majority of jurisdictions, regulators only focus on one thing: whether you handle, control, determine, or influence the flow of virtual assets at any stage of the process. This may sound abstract, but in practice, it translates to very specific questions. If you answer “yes” to any of the following, you are already operating perilously close to the regulatory boundary of “virtual asset services”:

Does USDT first enter a wallet under your control?

Are the wallet private keys held by you or personnel under your direction?

Do you determine, match, or mark up the exchange rates?

Must clients go through you to complete on-chain transfers?

Do client assets coexist with your assets in the same address or ledger at any point in time?

Many payment institutions only realize a harsh truth after their systems are up and running and clients are onboarded: in the eyes of regulators, they are no longer “pure payment institutions”. Once this characterization changes, the problem immediately escalates to: do you hold the relevant crypto payment/virtual asset service license?

Step 2: The Real Starting Point of Compliant Transition Is Lawyers, Not System Providers

In the era of traditional payments, the launch sequence for most projects was:

Business Idea → System Integration → Channel Implementation → Compliance Supplement

This sequence is extremely risky in the era of crypto payments. The reason is simple:

Systems solve the question of “can it run”

Lawyers solve the question of “is what you’re running legally valid”

I have seen countless similar scenarios:

A system provider helps you build “independent merchant wallets”

Technically, each merchant has its own address

But you retain control over the private keys

The contract fails to clearly distinguish between client assets and company assets

From your perspective, this is “convenient for management”; but in the eyes of regulators and banks, a “client fund custody” arrangement has already been established. Regardless of whether you charge custody fees or harbor subjective ill intent, once this characterization is confirmed, the consequences will be cascading.

Therefore, the first step of compliant transition must be completed by lawyers, who will carry out three key tasks:

Translate your business operations into regulatory terminology

Determine whether you have triggered the obligation to hold a license

Present two options: obtain a license, or implement structural avoidance

Step 3: Should You Apply for a Crypto Payment-Related License or Not?

This is the question every executive presses for an answer to: “So do I need to get a license or not?” But the question itself is framed incorrectly. From a compliance perspective, the right question to ask is: do my current business operations mandate holding a license?

If the answer is “yes”

There is no room for “testing the waters without a license first”.

In such cases:

No license = Non-compliance

This is not a matter of risk level—it is a matter of compliance.

If the answer is “not yet”

You need to be extremely clear about:

Which actions are strictly off-limits to you

Which capabilities must be outsourced to licensed or compliant entities

Your company must restrict itself to the technology/instruction/information layer

Once these boundaries are crossed, you will unknowingly step over the licensing red line.

If a license is mandatory, choosing the “right type” matters more than “whether to get one”

In reality, many executives underestimate this point.

The scope of permissible activities varies drastically across different crypto payment-related licenses in different jurisdictions:

Some allow payment and settlement, but prohibit currency exchange

Some allow currency exchange, but bar services to retail clients

Some permit handling stablecoins, but impose stringent requirements on wallet control rights

In the eyes of banks, holding the wrong license is hardly different from holding no license at all.

Step 4: Only After Defining the Compliance Structure and Licensing Pathway Do Systems Become Truly Meaningful

System development should only proceed after clarifying the following questions:

Which actions will be performed by the licensed entity?

Which actions can only be supported technically by non-licensed entities?

Will wallet control rights affect the applicability of the license?

Do we need to reserve system interfaces for future license upgrades?

Otherwise, the system you build today will likely face a problem in six months: it works, but it does not meet the requirements of the license you are about to apply for or upgrade to. At that point, the cost of rebuilding everything from scratch will be exorbitant.

Step 5: Liquidity and Banking Partnerships Are the Ultimate Test of “Successful Compliant Transition”

Many payment institutions will discover a harsh reality:

Systems are not the biggest obstacle

Licenses are not the most painful bottleneck

What truly derails a project is banking relationships

In essence, banks and liquidity providers are evaluating the same thing: whether you are a counterparty with robust compliance safeguards in place.

They never care about whether you use blockchain technology—what they care about is:

Whether you handle virtual assets without proper authorization

Whether there is a risk of commingling client funds

In the event of an incident, whether your business falls within the scope of regulatory coverage

Many projects are not shut down by regulatory penalties—they are choked off by banks cutting off their services.

Conclusion: Compliant Transition to Crypto Payment Is Never a Matter of “Steps”—But of “Sequence”

Returning to the question posed in the title: How many steps does it take for a traditional payment institution to make a compliant transition to crypto payment? If I had to give an answer, it would be: it is not about steps, but about sequence. Almost all projects that succeed follow the same path:

Compliance Characterization → License Assessment → Structural Design → System Implementation → Liquidity & Banking Partnerships

This is not conservatism—it is realism. In the realm of crypto payment:

Licenses determine whether you can enter the market

Systems determine whether you can operate

Banking partnerships determine whether you can survive

The first step of compliant transition is never about writing code. It is about mapping out the entire path clearly—before you even lift a finger to act.

If your enterprise is looking to transition to crypto payment but doesn’t know where to start, feel free to contact Mankun Law Firm. We can provide you with a comprehensive suite of compliance solutions.

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〈How many steps are required for traditional payment institutions to make a compliant transition to crypto payment?〉這篇文章最早發佈於《CoinRank》。