The news this week is that several banks in the US and the UK have banned the use of credit cards to purchase cryptocurrencies (CC). The reasons mentioned are impossible to believe, such as trying to reduce money laundering, gambling and protecting 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 in a casino, buy weapons, drugs, alcohol, pornography, whatever 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 on payment. It would be much more difficult than owning a house or a car again. The private keys of a crypto wallet can be placed on a memory card or a piece of paper and can be easily removed from the country, with little or no trace of their whereabouts. There may be high value in some crypto wallets, and credit card debt may never be paid off, leading to bankruptcy 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 dire scenario indeed.
We are certainly not advocating this kind 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 as banks never pay out of pocket: the money comes out of your account immediately, and only if there’s enough money in there to start with. We struggled to find any honesty in the bank’s story of curtailing gambling and taking risk. Interestingly, 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 really do 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 DC world does not have a central watchdog where regulations can be enforced 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 collect taxes on CC 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 pirate endlessly, 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 increasingly tired of banks’ outrageous profits and banks overreaching their lives, there is hope that consumers will be treated with respect and not burdened forever. with high costs and unjustified restrictions.
Cryptocurrencies and Blockchain technology are increasing the pressure around the world for a reasonable compromise – this is a game changer.
Stay tuned!