Banks and Cryptocurrency: Is a Peaceful Coexistence Possible?
We can see an acute confrontation brewing between traditional financial institutions and cryptocurrencies. The most influential world banks now emphasize the importance of blockchain technology. They remind of its capabilities but simultaneously criticize bitcoin for its volatility, anonymity, and high risks. A new battle called Bitcoin vs. Banks has already begun. The first months of 2018 showed banks beginning to take more active measures than just words and statements. Crypto-exchanges began to experience issues with banking services; many investors cannot buy digital currency using payment cards. In different countries, banks and cryptocurrency have their own unique relationships. But each financial institution focuses now on increasing the protection level against the risks associated with cryptocurrencies. We’ve gathered the main arguments seen amongst banks in various countries that somehow do not want to see cryptocurrency as their hard-bitten competitor.
It seems that Bank of America and bitcoin are two completely disparate things. Thus, in February 2018, US financial holdings Bank of America and JPMorgan Chase began to reject payments for cryptocurrencies using credit cards. Bank of America said this is the result of fears associated with cryptocurrency risks, as well as with the potential opportunity to convert funds from stolen credit cards to cryptos.
The financial “heavyweight” was also concerned that customers would buy more cryptocurrency than they can afford. Moreover, according to Bloomberg, other US banks are going to raise (or have already raised) the fee for the purchase of digital assets. Toronto-Dominion Bank, one of the largest Canadian banks, has already banned the purchase of cryptocurrencies for loan money. It was done in order to protect clients and the bank itself. Royal Bank of Canada, however, allowed customers to buy cryptos using payment cards. But this bank warned customers of high risks and volatility of the cryptocurrency market.
Banks and Cryptocurrency in Europe
Following their North American сolleagues, the British financial conglomerate Lloyds prohibited the purchase of cryptocurrencies using their credit cards. The bank management expressed their concern saying that customers will start buying up cryptos massively using borrowed funds.
Shortly thereafter, CEO of Bank of England, Mark Carney, said it’s time to put an end to the “cryptocurrency anarchy” and to bring this ecosystem to the standards of the traditional financial market. In his speech, Carney criticized the extreme volatility of cryptocurrencies but praised the useful properties of blockchain technology. So we see that Bank of England and cryptocurrencies do not seem to be together in the near future. In the meantime, the British Parliament continues to seek the advantages and risks of the cryptocurrency market.
“People are becoming increasingly aware of cryptocurrencies such as Bitcoin, but they may not be aware that they are currently unregulated in the U.K.,” said Nicky Morgan, a Conservative lawmaker, and the committee’s chairwoman.
Authoritative cryptocurrency companies have ceased their servicing of European customers because of the new Visa policy. The list of such companies includes BitPay, TenX, Wirex, Bitwala, as well as WaveCrest Holdings Limited, with which the majority of payment blockchain-startups work.
Banks and Cryptocurrency in Asia
In late 2017 and early 2018, South Korea showed the whole world its attitude toward cryptocurrencies. Shinhan Bank and KB Kookmin Bank announced the complete cessation of any operations with bitcoin, which caused serious panic in the market. And the Korean government announced “extraordinary measures” to regulate digital money and started a close check of the country’s largest cryptoexchanges.
In early 2018, South Korean financial regulators began inspections in a number of commercial banks that provide accounts for cryptocurrency trading. The persevering authorities needed a few days only to ban anonymous cryptocurrency trading in the whole country. Immediately thereafter, they began an active discussion of the licensing of trading platforms. Many experts proceeded to, however, putting a ban on cryptotrading and ICOs in doubt.
Thus, the governance of South Korea is concerned not with the financial stability of crypto-companies and their clients, but with the risks of using cryptocurrency for laundering illegal proceeds.
At the beginning of the year, Indian cryptoexchanges Koinex and Coindelta began to experience problems with banking services. According to some experts, the Reserve Bank of India could informally ask commercial banks to stay away from cryptoexchanges.
However, according to the leaders of the three leading bitcoin exchanges of India, Unocoin, ZebPay and Coinsecure, information about the prohibition of cryptocurrency is not true. Nevertheless, Citibank India management sent out email notifying customers about the prohibition of buying cryptocurrency using debit and credit cards.
Also noteworthy, the Indian government has repeatedly reminded its people that bitcoin and other digital money are not a legal currency. And the local Ministry of Finance even referred to cryptocurrencies as a bubble and does not allow cooperation between banks and cryptocurrency in India.
Chinese authorities intend to tighten the policy on platforms that allow citizens to cryptotrade at foreign platforms. Regulators intend to conduct an audit of accounts in Chinese banks and payment systems that belong to individuals and legal entities suspected of organizing trades on foreign crypto-exchanges. The assets of these accounts can be blocked at any moment.
Who is Loyal to Cryptocurrencies?
It may feel like the whole world has gone to war against the nascent industry. And yet, there are a large number of companies that are trying to keep up with innovations, considering cryptocurrency as an opportunity, not a threat. There are a lot of banks that accept bitcoin and use cryptocurrencies to provide a better service.
Banks that Accept Bitcoin:
- Bitstamp – customers in 57 countries have the opportunity to buy bitcoins using Visa and MasterCard.
- The situation with Hong Kong companies is gradually improving. One of the most popular exchanges, Bitfinex, opened an account with the Dutch bank ING.
- One of the largest Indians providers of payment solutions, SBI Cards & Payments Services Pvt. Ltd permits the purchase of cryptocurrencies using credit cards.
- The largest Japanese crypto-exchange, BitFlyer provides users with the opportunity to use prepaid Visa cards.
- At the end of 2017, the online banking platform Wirex entered into a partnership with the financial group SBI Holdings. Based on the new SBI Wirex Asia enterprise, a new VISA cryptocurrency payment card will be available for clients soon.
- The Dutch Rabobank criticized bitcoin for a long time. However, bank’s representatives concluded that it is necessary to introduce financial innovations and respond to the customers’ demand adequately. And now this financial institution is going to create its own cryptocurrency Rabobit, which will work “in a safe banking environment.”
- In many countries, it is still possible to pay for goods and services by debit bitcoin-cards like BitPay.
- Among European countries, Switzerland has traditionally been the most loyal to cryptos; banks and bitcoin coexist peacefully there. Hence, last summer, a large online bank, Swissquote, launched a service for bitcoin trading.
- It can be argued that banks and cryptocurrency stand together in Germany. This country recognized bitcoin as official currency, transactions with which are not taxed on value added. And the decree states that cryptocurrencies become the equivalent of legal means of payment because they are used by transaction participants as an alternative contractual and immediate method of payment.
Banks vs. Cryptocurrency: The Verdict
Apparently, the market development in such an unregulated and uncontrolled form is simply unprofitable for governments and banks. It is perceived by them as some kind of “wild west” and mainly in a negative way. In fact, this is a normal reaction from financial institutions. After all, cryptocurrencies were initially created to liquidate the banking system as an intermediary. Thence, the binding between banks and cryptocurrencies cannot be stable by default.
Nevertheless, the capitalization of the cryptocurrency market is growing year by year. There are more and more banks that support bitcoin and other cryptos. States and society as a whole will consistently pass through all stages of humility before the inevitable happens, and they realize that it is impossible to stop the free exchange of goods. Despite the uncertain state of things, we are sure that there will be only one winner in the battle between banks and cryptocurrency. And sooner or later, we will know it. Subscribe to our newsletter to get updates and reporting!
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