The news this week is that several banks in the US and UK have banned the use of credit cards to buy cryptocurrency (CC). The reasons mentioned are impossible to believe, such as trying to reduce money laundering, gambling, and protecting the retail investor from excessive risk. Curiously, banks will allow debit card purchases, making it clear that the only risks that are protected are their own.
With a credit card you can gamble in a casino, buy weapons, drugs, alcohol, pornography, anything you want, but some banks and credit card companies want to prohibit you from using their facilities to buy cryptocurrencies. There must be some credible reasons, and they are NOT the stated reasons.
One thing banks fear is how difficult it would be to seize CC holdings when the credit card holder defaults. It would be much more difficult than re-owning a house or a car. Private keys to a crypto wallet can be placed on a memory card or piece of paper and easily withdrawn from the country, with little or no trace of your whereabouts. There may be high value in some crypto wallets, and the credit card debt may never be paid off, leading to a bankruptcy filing and a significant loss to the bank. The wallet still contains the crypto currency, and the owner can later access the private keys and use a local CC Exchange in a foreign country to convert and pocket the money. A grim scenario indeed.
We’re certainly not advocating this type of illegal behavior, but the banks are aware of the possibility and some of them want to shut it down. This can’t happen with debit cards since banks never pay out of pocket: money leaves your account immediately, and only if there’s enough money there to begin with. We struggle to find any honesty in the bank’s story of reducing gambling and risk taking. It is interesting that Canadian banks are not jumping on this bandwagon, perhaps realizing that the stated reasons for doing so are bogus. The consequences of these actions are that investors and consumers now know that credit card companies and banks do indeed have the ability to restrict what you can buy with your credit card. This is not how they advertise their cards, and it is likely to come as a surprise to most users, who are quite used to deciding for themselves what they will buy, especially from CC Exchanges and all the other merchants who have established trading agreements with these. banks. The exchanges haven’t done anything wrong, and neither have you, but fear and greed in the banking industry is causing strange things to happen. This further illustrates the degree to which the banking industry feels threatened by cryptocurrencies.
At this point, there is little cooperation, trust, or understanding between the fiat money world and the CC world. The CC world does not have a central watchdog where regulations can be implemented across the board, and that leaves every country in the world trying to figure out what to do. China has decided to ban CCs, Singapore and Japan adopt them, and many other countries are still scratching their heads. What they have in common is that they want to tax CC’s investment earnings. This is not much different from the early days of digital music, with the Internet facilitating the proliferation and unrestricted distribution of unlicensed music. Digital music licensing schemes were eventually developed and accepted, as listeners agreed to pay something for their music, rather than endless piracy, and the music industry (artists, producers, record companies) agreed. agree to reasonable license fees instead of nothing. Can the future of fiat and digital currencies be compromised? As people around the world grow more and more tired of the outrageous profits of banks and the overreach of banks in their lives, there is hope that consumers will be treated with respect and not have to carry forever with high costs and unjustified restrictions.
Cryptocurrencies and Blockchain technology increase the pressure around the world for a reasonable compromise – this is a game changer.
Stay tuned!
