The news this week is that several banks in the US and UK have banned the use of credit cards to buy cryptocurrencies (CC). The stated reasons are unbelievable, 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 being protected are their own.
With a credit card you can play in a casino, buy guns, drugs, alcohol, porn, everything and anything you want, but some banks and credit card companies want to ban you from using their facilities to buy cryptocurrencies ? There must be some believable 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 harder than owning a house or a car again. The private keys of a crypto wallet can be placed on a memory stick or piece of paper and can easily be taken out of the country with little or no trace of their whereabouts. There may be a 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 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. An ominous scenario, indeed.
We certainly don’t advocate this kind of illegal behavior, but banks are aware of the possibility and some want to shut it down. This can’t happen with debit cards, as the banks never leave your pocket: the money leaves your account immediately, and only if there’s enough money to begin with. We find it hard to find honesty in the bank’s story about reducing gambling and taking risks. It is interesting that the Canadian banks did not jump on this bandwagon, perhaps realizing that the reasons given for doing so are false. The consequence of these actions is that investors and consumers are now aware that credit card companies and banks actually have the ability to restrict what you can buy with your credit card. That’s not how they advertise their cards, and it’s likely to come as a surprise to most users, who are pretty used to deciding for themselves what to buy, especially at CC Exchanges and all the other merchants that have established business deals. with these banks. The Exchanges haven’t done anything wrong, 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 sector 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 has no central control body where regulations can be implemented globally, and this leaves every country in the world trying to figure out what to do. China has decided to ban CCs, Singapore and Japan accept 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 profits. This is not unlike the early days of digital music, with the Internet facilitating the unlimited proliferation and distribution of unlicensed music. Digital music licensing schemes were eventually developed and accepted as listeners agreed to pay a little for their music, rather than endless piracy, and the music industry (artists, producers, record labels) was fine with 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 outrageous bank profits and the overreach of banks in their lives, there is hope that consumers will be treated with respect and not burden forever with high costs and unjustified restrictions.
Cryptocurrencies and Blockchain technology are increasing the pressure around the world to achieve reasonable compromise – this is a game changer.