Another Blow For Cryptos, But The Silver Line In Fine Prints
Another blow for the crypto-traders, a sizeable number of banks have disagreed to allow their customers to use their credit cards to buy cryptocurrencies. This had been triggered over the weekend when the US banks; Bank Of America, Citigroup (NYSE:C), JPMorgan Chase & Co (NYSE:JPM), Capital One Financial Corporation (NYSE:COF) and Discover Financial Services (NYSE:DFS) have banned their customers to purchase cryptocurrencies. But, take this declaration with a pinch of salt, could there be something bigger coming? We know that Jp Morgan, Berkshire Hathaway (NYSE:BRKa) and Amazon (NASDAQ:AMZN) teamed up to form an independent health care company. Nothing can be factored out, but let’s stay on the subject on hand.
Back in January, Visa ended it's relationship with a renowned cryptocurrency currency card provider and thousands of people suffered as a result of that. Although, it was a one-off case under which Wave Crest did not comply with the Visa’s rules and as a result, the company pulled the plug. Nonetheless, the news created enough bad press and gave traders a view that perhaps cryptocurrencies would not be that easily transferred to fiat or readily spendable.
In the UK, the first announcement came from the Lloyds (LON:LLOY) banking group. The ban expands to MBNA, Halifax, Bank of Scotland customers. Cryptoexchanges, such as Coinbase allow users to fund their crypto accounts by using credit cards. However, there was a limit (which can be adjusted) by the exchange which has a daily limit. This limit does not allow users to fund their account more than £500 per day (if you are funding your account in a pound, similar limits for other account holders).
Nonetheless, traders and investors should not only look at the big coins and their market cap but look at the ecosystem and the firm is trying to resolve. For instance, R_Block is trying to resolve the issue which the recruitment firms have on day in and day out basis- authenticate the references. Using blockchain technology, the reference is saved on the blockchain and is available on request and referees get rewarded for their effort. Looking into the ecosystem and vertical partnership which the firm has would make more sense.
We know Bank’s have been against the concept of the cryptocurrency and only now they are catching up with the concept of the blockchain technology. Remember, Bitcoin brought the Blockchain technology on everyone’s radar. Banks have used excuses such as higher volatility and money laundering to play down the concept of cryptocurrency, particularly, Bitcoin. In the UK, some institutions have already made headlines by not approving mortgages for those customers who have made their capital gain by investing in Bitcoin and other Alt-coin. For me, the message from the banks was that they are using this as a cover by saying that the source of funds can’t be verified when in-fact they have no clue how to factor that into their accounts.
Remember that the cryptomania is driven by retail investors and these retail clients do use their credit cards and debit cards to fund their account at various different exchanges. Speculations that a credit gives you more secutiry in terms of fraud protection and hence clients use these more instead of a debit card, which doesn’t have much merit. Visa has it's protection and it does not make much difference if you spend that under a credit card label or a debit card. Perhaps, what the banks are trying is limiting their exposure to Bitcoin and letting clients use their funds to gamble. Lloyds banking group’s initiative in the UK on Monday could only be a start and other major banks could also be looking to adopt the same path. The ban so far is only limited to eight million credit card customers. But here is a big question, which is.. should these banks be allowed to control one’s transaction when they already have approved their account?