This week’s news is that several banks in the US and UK have banned the use of credit cards to purchase cryptocurrencies (CCs). The stated reasons are unbelievable – like money laundering, trying to curtail gambling and protecting retail investors from excessive risk. Interestingly, banks will allow debit card purchases, making it clear that the only risks covered are their own.
With a credit card you can play in a casino, buy guns, drugs, alcohol, pornography, everything and anything you want, but banks and credit card companies want to ban you from their facilities to buy crypto currency? There must be some compelling reasons, and these are NOT stated reasons.
One thing banks fear is how difficult it would be to confiscate CC shares when the credit card holder defaults on payment. It would be much more difficult than repossessing a house or a car. The private keys of a crypto-wallet can be stored on a memory stick or paper and easily removed from the country, with or without a trace of its whereabouts. Some crypto-wallets can hold a lot of value, and the credit card debt will never be paid off, leading to a bankruptcy declaration and a significant loss to the bank. The wallet still contains the cryptocurrency, and the owner can then access the private keys and use a local CC Exchange in a foreign country to convert and pocket the money. A nasty scenario indeed.
We certainly do not advocate such illegal behavior, but banks are aware of this possibility and want to shut some of them down. This can’t happen with debit cards, as the banks never take it out of pocket – the money comes straight out of your account, and only if you have enough money to begin with. We struggle to find honesty in the bank’s story about downsizing and taking risks. Interestingly, Canadian banks are not jumping on this bandwagon, perhaps realizing that their stated reasons for doing so are false. The result of these actions is that investors and consumers are now aware that credit card companies and banks have the ability to limit what you can buy with their credit card. This is not the case with the cards they advertise, and it is likely to be a surprise to most users, who are quite used to deciding what to buy themselves, especially for CC Exchanges and all other merchants who have established Commercial Agreements with these banks. The exchanges haven’t done anything wrong – neither have you – but fear and greed in the banking sector are causing strange things. This further shows the degree to which the banking industry feels threatened by Crypto Currencies.
There is currently little cooperation, trust or understanding between the fiat money world and the CC world. The CC world has no central control body where rules can be set across the board, which leaves each country around the world trying to figure out what to do. China has decided to ban CCs, Singapore and Japan are embracing them, and many other countries are still scratching their heads. What they have in common is that they want to collect taxes on CC investment gains. This is not so different from the early days of digital music, as the Internet has made the dissemination and distribution of unlicensed music essential. Eventually, digital music licensing schemes were developed and accepted because listeners were willing to pay a little something for their music, rather than endless piracy, and the music industry (artists, producers, record companies) accepted reasonable licensing fees rather than nothing. Could there be compromise in the future of fiat and digital currencies? As people around the world grow weary of the exorbitant bank profits and the banks overrunning their lives, there is hope that consumers will be treated with respect and not stuck with forever high costs and unreasonable cuts.
Crypto Currencies and Blockchain technology increase worldwide pressure for fair compromise to happen – this is a game changer.
Stay tuned!