This week’s news is that several banks in the USA (and the UK) have stopped using credit cards to buy crypto currencies (CC). These reasons, which are hard to believe, include trying to curb money laundering and gambling and protecting retail investors from excessive risk. The banks are open to debit card purchases. This is a clear indication that they will protect their customers from all risks.
You can use your credit card to gamble, purchase drugs, alcohol, guns, pornography, and everything else you want. However, some banks and credit cards companies would like to ban you from purchasing crypto currencies. They must have some plausible reasons.
Banks are worried about how difficult it will be to seize CC holdings if a credit card holder defaults in payment. It would be more complicated than re-possessing an apartment or car. The private keys to a crypto wallet can be stored on a piece or memory stick and removed easily from the country. There is little or no trace of whereabouts. Some crypto wallets can have a high price, which could lead to bankruptcy or a loss of significant value for the bank. The crypto currency can still be found in the wallet. The owner can access the private keys to convert the money and then use a local CC Exchange abroad. A nefarious scenario indeed.
This is not illegal behavior we advocate. However, the banks know about the possibility and want to stop it. With debit cards, the banks are never out of pocket – money is taken from your account immediately if you have enough money. The bank’s claims about limiting gambling and risk-taking are not truthful. It is interesting to see that Canadian banks have not joined the bandwagon, possibly realizing that their stated reasons are false. These actions have led to investors and consumers becoming more aware of the fact that banks and credit card companies can restrict what you can buy with your credit card. This is not the way they advertise their cards and is likely to surprise most users who are used to deciding what they will buy, especially from CC Exchanges or all other merchants that have entered into Merchant Agreements with these banks. Although the Exchanges have not done anything wrong, neither have you. But fear and greed within the banking industry are causing strange events. This is a further indication of the extent to which Crypto Currencies are threatening the banking industry.
There is very little trust and cooperation between the fiat money and CC worlds at this stage. Each country is left trying to decide what to do because the CC world doesn’t have a central control body that can implement regulations across the board. China has banned CC’s while Singapore and Japan have accepted them. Many other countries are still trying to figure out what to do. They all want to collect taxes from CC investment profits. This is similar to the early days digital music. The internet allowed for the free distribution and proliferation of unlicensed music. As listeners and producers were comfortable paying a small amount for their music rather than endless pirating it, digital music licensing was eventually established and accepted. The music industry (artists and record companies) was also more open to reasonable licensing fees than none. Is there a way to compromise the future of digital and fiat currencies? There is hope that people will start to see the value in a compromise for fiat and digital currencies as they become more tired of bank profits and overreach.