The news this week is that several banks in the United States and the United Kingdom have banned the use of credit cards to purchase cryptocurrencies (CC). These reasons can not be believed – as an attempt to limit money laundering, gambling and protect the retail investor from excessive risk. Interestingly, 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 at a casino, buy guns, drugs, alcohol, pornography, anything and everything you want, but some banks and credit card companies want to ban you from using their facilities to buy cryptocurrencies? There must be some valid reasons, and they are NOT the reasons given.
One thing banks fear is how difficult it would be to confiscate CC holdings if the credit card holder fails to make the payment. It would be much harder than re-owning a house or car. The private keys of the crypto wallet can be placed on a memory or sheet of paper and can be easily removed from the country, with little or no trace of its location. There may be high value in some crypto portfolios and credit card debt may never be repaid, leading to bankruptcy and significant loss to the bank. The wallet still contains the cryptocurrency 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 really awful scenario.
We certainly do not advocate such illegal behavior, but banks are aware of the possibility and some of them want to close it. This cannot happen with debit cards, as banks are never without pockets – the money comes out of your account immediately and only if there is enough money to start. We are struggling to find some honesty in the bank’s history of limiting gambling and risk-taking. Interestingly, Canadian banks did not intervene, probably realizing that the reasons given were false. The result of these actions is that investors and consumers are already aware that credit card companies and banks really have the ability to limit what you can buy with their credit card. They do not advertise their cards in this way and this is probably a surprise for most consumers who are used to deciding what to buy, especially from CC Exchanges and all other merchants who have concluded trade agreements with these banks. The stock market has done nothing wrong – neither have you – but fear and greed in the banking industry are causing strange things to happen. This further illustrates the extent to which the banking industry feels threatened by cryptocurrencies.
At this point, there is little cooperation, trust or understanding between the world of fiat money and the world of CC. The CC world does not have a central control body where regulations can be applied anywhere, and this leaves every country in the world trying to figure out what to do. China has decided to ban the CC, 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 the profits from investing in CC. This is not much different from the early days of digital music, as the Internet facilitates the unrestricted distribution and distribution of unlicensed music. Digital music licensing schemes were eventually developed and adopted because listeners were OK to pay little for their music instead of endless piracy, and the music industry (performers, producers, record companies) was along with reasonable licensing fees, not with nothing. Can there be a compromise in the future of fiat and digital currencies? As people around the world enjoy more than the incredible bank profits and excessive banks in their lives, it is hoped that consumers will be treated with respect and will not be forever burdened with high costs and unjustified restrictions.
Cryptocurrencies and blockchain technology are increasing the pressure around the world to reach a reasonable compromise – this is changing the game.
Stay on the line!