The news this week is that several US and UK banks have banned the use of credit cards to buy cryptocurrencies (CC’s). The reasons given are impossible to believe, such as trying to reduce money laundering, gambling and protecting the retail investor from excessive risk. Interestingly, banks will allow the purchase of debit cards, making it clear that the only protection risks are their own.
With a credit card you can play at a casino, buy weapons, drugs, alcohol, pornography, anything you want, but do some banks and credit card companies want to ban you from using their facilities to buy cryptocurrencies? There must be some plausible reasons and they are NOT the reasons set out.
One thing they fear from banks is how difficult it would be to confiscate CC holdings when the credit card holder defaults on payment. It would be much harder than owning a house or a car again. Private keys in a cryptographic wallet can be placed on a memory stick or piece of paper and easily removed from the country, with little or no trace of their whereabouts. There may be a high value in some cryptocurrencies and credit card debt may never be paid, leading to a bankruptcy and a significant loss to the bank. The wallet still contains the cryptocurrency, and then the owner can access private keys and use a local CC Exchange from a foreign country to convert and pocket the money. A disastrous scenario indeed.
We certainly do not advocate this type of illegal behavior, but banks are aware of the possibility and some of them want to close it. This can’t happen with debit cards, as banks never have your pocket: the money comes out of your account immediately and only if there is enough money there to get started. We strive to find any honesty in the bank’s history about reducing bets and taking risks. Interestingly, Canadian banks are not jumping on this bandwagon, perhaps realizing that the reasons given for doing so are false. The consequences of these actions are that investors and consumers are now aware that credit card companies and banks actually have the ability to restrict what can be purchased with their credit card. This is not how they advertise their cards and it is likely to come as a surprise to most users, who are very used to deciding for themselves what to buy, especially at CC Exchanges and other merchants who have established business deals with these banks. The exchanges have done nothing wrong (neither have you), but the fear and greed of the banking industry is making strange things happen. This further illustrates the degree to which the banking industry feels threatened by Crypto Currencies.
Right now there is little cooperation, trust, or understanding between the world of trust money and the world of CC. The CC world has no central control body where general regulations can be applied, and this leaves every country in the world trying to figure out what to do. China has decided to ban CCs, Singapore and Japan host them and many other countries are still scratching their heads. What they have in common is that they want to collect taxes on the benefits of investing in CC. This is not too similar to the early days of digital music, as the Internet facilitated the unrestricted proliferation and distribution of unlicensed music. Digital music licensing programs ended up being developed and accepted, as listeners were well paying a little for their music, rather than endless piracy, and the music industry (artists, producers, record companies) was well on their way. of reasonable license more than anything. Can there be compromise in the future of fiat and digital currencies? As people around the world are fed up with outrageous banking benefits and their extent, there is hope that consumers will be treated with respect and will not forever be burdened with high costs and unwarranted restrictions.
Cryptocurrencies and Blockchain technology increase pressure around the world to make a reasonable compromise: this is a game changer.