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The news this week is that many banks in the United States and the United Kingdom have banned the use of credit cards to buy cryptocurrencies (CC). The stated reasons are impossible to believe – such as money laundering, gambling, and trying to protect the retail investor from excessive risk. Interestingly, banks will allow debit card purchases, making it clear that the risk being secured is only their own.
With a credit card you can gamble in casinos, buy guns, drugs, alcohol, pornography, everything and anything you want, but some banks and credit card companies allow you to use their facilities to buy crypto currencies. Want to stop using? There must be some credible reason, and they are not stated reasons.
One thing banks fear is how difficult it would be to confiscate the CC holdings if the credit card holder defaults on the payment. This will be much more difficult than repossessing a house or a car. The private keys of a crypto wallet can be kept on a memory stick or piece of paper and easily removed from the country, with little or no trace of its whereabouts. Some crypto wallets may have a high value, and credit card debt may never be repaid, leading to a bankruptcy declaration and a significant loss for the bank. The wallet still holds the cryptocurrency, and the owner can later use the private keys and local CC exchange in a foreign country to convert and pocket the money. A nefarious scenario indeed.
We’re certainly not advocating illegal behavior like this, but banks are aware of its potential and some of them want to stop it. This can’t happen with debit cards because banks are never out-of-pocket – the money is taken out of your account immediately, and only if you have enough money to begin with. We struggle to find any sincerity in the bank’s story about reducing gambling and risk-taking. It is interesting that Canadian banks are not jumping on this bandwagon, perhaps realizing that the reasons cited for doing so are bogus. The result of these actions is that investors and consumers are now aware that credit card companies and banks have the ability to restrict exactly what you can buy with their credit cards. That’s not how they advertise their cards, and it’s probably a surprise to most users who are used to deciding for themselves, especially from CC Exchanges and all the other merchants that have done business with these banks. Agreements have been established. The exchanges haven’t done anything wrong – neither have you – but fear and greed are causing strange things to happen in the banking industry. This further shows the extent to which the banking industry feels threatened by cryptocurrencies.
There is little cooperation, trust or understanding between the fiat money world and the CC world at this point. There is no central controlling body in the CC world where rules can be enforced across the board, and it is up to each country around the world trying to figure out what to do. China has decided to ban CCs, Singapore and Japan have embraced them, and many other countries are still scratching their heads. What they have in common is that they want to collect tax on CC investment gains. This is not unlike the early days of digital music, with the Internet facilitating unlimited dissemination and distribution of unlicensed music. Digital music licensing schemes were eventually developed and accepted, as listeners were okay with paying a little for their music rather than endless pirating, and the music industry (artists, producers, record companies) a reasonable licensing fee rather than nothing. were fine with Could there be a compromise in the future of fiat and digital currencies? As people around the world are fed up with wild bank profits and the dominance of banks in their lives, there is hope that consumers will be treated with respect and not saddled with high costs and unfair restrictions forever.
Cryptocurrencies and blockchain technology increase pressure around the world to come up with a fair settlement – – it’s a game changer.
stay tuned!
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