Visa’s New Rules Aim to Tackle Crypto Chargeback Fraud
Visa has introduced new regulations for fiat-to-crypto transactions to curb the rising problem of friendly fraud in the crypto industry. The rules emphasize transaction monitoring, risk management, and chargeback liability for exchanges.
Crypto adoption has surged, with 580 million people worldwide now owning digital currencies. This rapid growth also attracts fraudsters, leading to increased friendly fraud—where transactions are reversed fraudulently after receiving crypto, effectively giving fraudsters untraceable cash.
Friendly fraud is costly for exchanges, causing financial losses and straining consumer relationships. Many exchanges face high-risk monitoring due to skewed chargeback ratios, which can result in penalties and loss of card processing privileges. The FTX collapse has also heightened regulatory scrutiny on exchanges.
Visa’s new rules require exchanges to provide transparent transaction details, process digital assets separately from non-crypto products, and follow updated merchant category codes. These changes add operational complexity but aim to reduce fraud.
To combat chargebacks, exchanges need clear communication, responsive customer support, and transparent policies. AI and machine learning can play a crucial role in both fraud prevention and dispute management, optimizing evidence for chargebacks and identifying fraud patterns in real-time.
Mitigating friendly fraud and adapting to regulatory changes are essential for building trust in the crypto industry. By investing in robust systems, exchanges can protect themselves and contribute to a more secure ecosystem.
