The market for cryptocurrency may have slowed down, but that hasn’t stopped one of the biggest names in the industry from forging important steps forward towards legitimizing the sector.

A new relationship between Coinsquare and a leading North American financial institution has been unveiled, and that institution is the Bank of Montreal (BMO). The Toronto-based Coinsquare is not allowed to reveal the name of the bank themselves due to regulations that prevent the use of relationships like these as branding or marketing opportunities. The connection was identified by Techvibes through Coinsquare’s online exchange where BMO’s institution number can be found. This was later verified with the company’s CEO, Cole Diamond.

“We’ve gone through a very lengthy process with this banking partner where they have had to get very comfortable with our business, the way we run it, and the way we manage money, all to just feel comfortable to provide us with basic commercial banking,” explains Diamond. “This is an enormous win for us and an enormous win for Canada.”

The new relationship allows users to purchase cryptocurrency by sending wire transfers to a Coinsquare-held BMO account. As wire transfer purchases are reserved for amounts between $10,000 to $300,000, they are typically reserved for Coinsquare’s biggest customers. This new relationship increases transparency and offers the legitimacy of a massive bank—one of the largest in the world—for users who are looking to purchases large amounts of cryptocurrency through Coinsquare.

“We’ve earned the right to be there,” says Diamond. “This relationship sends a very clear message to the market. Anytime you have a new industry, whether it’s online gaming, cannabis, and now cryptocurrency, banks do not have an understanding of what the risk profile is. It takes a tremendous amount of work to get comfortable with the sector and a party within it.”

A lot of the work involved in forging a relationship like this involves the second part of Coinsquare’s recent announcement. The exchange completed an organization-wide third-party consolidated financial statement audit. Completed by a national accounting firm whose identity is protected under an NDA, the audit covered the operational years of 2015, 2016 and 2017 for Coinsquare, and concluded an “unmodified opinion,” which means the financial statements from those years are “free from material misinformation.” With the results of this audit, Coinsquare was able to begin exploring deeper relationships with accredited and nationally-recognized financial institutions.

“You can’t name another cryptocurrency trading platform in the world that has successfully passed a third-party financial audit.” – Cole Diamond

This kind of relationship is extremely rare in the cryptocurrency world, and essentially non-existent in North America. One of the largest cryptocurrency exchanges in the world, San Francisco’s Coinbase, worked with the U.K. bank Barclays earlier this year to open a bank account, but trust issues surrounding the process and persisted throughout.

Diamond explains that Coinsquare was in the odd position of wanting to invite auditors in to vet the company as proof of their intense adherence to regulations and laws. Coinsquare launched a broad marketing campaign earlier this year (as seen above) with the tagline of “Do digital currency right,” but they were then unable to actually prove that point.

“We went out and said we did it right, and we knew we were doing it right, but we didn’t put anything out to the market to prove we were doing it right,” says Diamond. “That’s the whole point of this recent announcement. A major Canadian institution, as big as they come, has gone through a diligence process to say that this business is operating properly. You can’t name another cryptocurrency trading platform in the world that has successfully passed a third-party financial audit.”

For example, the aforementioned Coinbase has not completed an official audit but has opened up their 2018 year to be audited. Cryptocurrency exchanges like these have been audited before, but mostly to prove they actually possess the cryptocurrency they say they do, and not for security or money laundering purposes. For Coinbase, this new audit will be for 2018—and only that year, without a focus on any financials prior to that. Coinsquare’s audit covers the past three years.

This push towards absolute legitimacy has cost Coinsquare a lot of money along the way. Despite the fact the company raised $30 million earlier this year and has grown from 10 employees to 140 over the past 12 months, the pace of growth could have been much quicker. Typically, exchanges make the majority of their money through two methods: fees collected from the purchase of cryptocurrencies like bitcoin and ethereum, and fees collected from selling those currencies for fiat, or traditional money. Coinsquare’s strict policies have severely limited their revenue from these sources.

Diamond estimates that over 80 per cent of the sell volume offered to Coinsquare has been turned down, which is an enormous amount considering cryptocurrency is in a bear market right now, meaning the majority of transactions involve selling and not buying.

“If you can’t prove the source of your coins, the same way you would have to with any other money service or bank in Canada, we will not take your cryptocurrency, convert it to Canadian dollars, and deposit it back into the Canadian economy,” says Diamond.

Coinsquare’s process of proof is undoubtedly what led to this new relationship with BMO. The cryptocurrency exchange not only asks questions about the origin of coins but runs large transactions through a system that can track the history of coins and currencies. This system can track funds to the dark web, highlight scenarios that raise red flags, and identify wallet addresses that may be associated with fraud, terrorism or other illegal dealings. Coinsquare then turns away every transaction that raises a red flag, while also turning away customers who do not answer questions regarding the history of their cryptocurrencies and even some who provide answers that come with even a small degree of discomfort.

Beyond this, executives such as Coinsquare’s chief anti-money laundering officer Charlene Cieslik worked with auditors to develop strict policies relating to fraudulent funding, and the company’s many officers run reviews through the risk management suite World-Check, as well as know-your-customer checks through Equifax. These kinds of processes help automate transactions under $10,000, while also carefully dissecting the larger sales or purchases above that threshold.

“We are significantly more strict than any other financial institution in Canada bar none, and we have suffered greatly from a revenue perspective in order to take that approach.” – Cole Diamond

“But by solidifying those partnerships and running a clean and sustainable business, we’re building enterprise value and building value for the heavy majority of our user base,” says Diamond.

That created value may only currently be limited to $10,000-plus wire transfers, but Diamond is optimistic it will quickly lead to much more. BMO, along with the majority of the big five banks in Canada (BMO, Scotiabank, RBC, CIBC and TD), have been notoriously fickle when it comes to options for funding cryptocurrency exchange accounts. BMO actually banned the purchase of cryptocurrencies using a retail consumer Mastercard-branded credit or debit card earlier this year, but Diamond estimates this new relationship could lead to the reversal of that move. When reached for comment on this new relationship, BMO declined to provide a response, stating they “don’t have anything to share at this point.”

Beyond the removal of current purchase restrictions at BMO, Diamond thinks the other big five will follow suit as well, at least to fund Coinsquare accounts.

“If [the big five] hold back, there’s going to be some serious anti-competition issues to face,” says Diamond. “I would expect channels will open significantly for our business in the very short term.”

In the past year, Coinsquare has launched several new features to diversify the company’s offerings. They launched a licensing division to white-label their platform to new partners, which is now live already in Europe and Canada in addition to having a Japanese partner on board. Coinsquare also revealed plans to expand into Europe by the end of 2018 as well. But this relationship with BMO is the crowning achievement of a blistering year for the exchange.

“There’s nothing I’m more proud of, in everything we have done with Coinsquare, then solidifying this banking relationship and getting this audit report done,” says Diamond. “This provides us the legitimacy that we absolutely deserve by taking the approach we have in this market—others have been trying to chase the fast cash of the cryptocurrency world, and we’ve been trying to build a business that delivers real value to our customers.”

Beyond this relationship, rumours have been flying regarding a potential IPO worth over $150 million for Coinsquare as soon as this year, but right now, Diamond is content with running a tight ship and investing in security for success.