Bitcoin and Cryptos, the Friendly Mates Most Banks Fear
Wyoming has sparked some hope for the tainted cryptosphere with several bills that will hopefully create a friendly environment for blockchain and crypto supporters.
The legislators have been pushing for Wyoming to become a safe haven for this much needed technology. One of the most exciting aspects is introduction of “special purpose depository banks” which would open the door for crypto businesses to establish banking accounts within the state.
This requires some background. In this part we will take a look at the reasons why this is extremely important for the progress of the entire industry and could lead to the downfalls of many nations that out of fear — or reasons unmentioned — have turned their backs on the exciting and innovative crypto industry.
In a second part to follow we will cover other states and nations that have opened their doors to crypto innovation. In a third part to follow, we will discuss Wyoming’s proactive efforts established through several bills.
Like any disruptive ideology or technology, Bitcoin’s inception and adoption within our globally regulated system of governance has been met with a great deal of resistance throughout the years. Bitcoin started a journey to provide people with a choice — one never before attempted to such a degree.
Many people, companies and organisations within the cryptosphere have had their requests for a bank account denied or their existing accounts blocked — frozen or closed down.
In 2015, Sparkasse — a German bank — was found to be blocking all Bitcoin related transactions. Last year (2017) major banks in Australia were reportedly “banning Bitcoin accounts”. Coinspot — a major Australian exchange — was forced to disable new deposits as a result of such decisions:
“We assure you we are just as unhappy with the situation as you but unfortunately Australian banks have been so far unwilling to work with the digital currency industry which leads to frequent account closures and strict limits on accounts whilst they remain operational, in effect debanking our industry.” Coinspot, Facebook, 2017
In February this year (2018), Commonwealth Bank of Australia issued a notice to notify its members that:
“[Due] to the unregulated and highly volatile nature of virtual currencies, customers will no longer be able to use their CommBank credit cards to buy virtual currencies.”
In July (2018) similar events took place in the US, with JP Morgan’s Chase Bank reportedly closing down the accounts of members who had attempted to withdraw from the widely used — though centralised — Coinbase exchange. According to a member, “without warning from Chase, my bank account was shut down “without reasoning” for withdrawing funds from Coinbase.”
As a user on reddit mentioned in a very humorous way, if we were in the early days of the internet era perhaps we would be finding out that the “post office stops serving you after discovering you using email”.
Even the beloved “Crypto Valley” located in the Swiss Canton of Zug, home to some of the top blockchain unicorns including Ethereum, Bitmain, Cardano, Xapo, and over 600 other blockchain startups, has been affected by banking closures. As mentioned on Reuters in an article titled “Switzerland seeks to regain cryptocurrency crown”:
“The departures, which industry sources fear will continue, mean Switzerland is losing business to offshore rivals including Liechtenstein, Gibraltar and the Cayman Islands, where banks are more welcoming.” Reuters, 2018
The fourth largest Swiss bank, Zuercher Kantonalbank (ZKB), which paved the way for Switzerland to become an early “Cryptocurrency Hub,” has also been closing its gates on several startups in the last year. This is of great importance as “only a handful of Switzerland’s 250 banks ever allowed companies to deposit the cash equivalent of cryptocurrencies raised in ICOs”.
Why are these banks closing their doors to the crypto community? The answer, in this case, seems to be for self-preservation as they fear “some companies that carried out ICOs did not do anti-money laundering (AML) checks on their contributors”.
Since then, fearing the prospect of “losing business to offshore rivals,” the Swiss Finance Minister along with the central bank and Swiss Bankers Association (SBA) have come together to discuss ways on how they can “create conditions for the country to remain competitive but with no room for scams or financial crime.”
Following a similar path, Reserve Bank of India (RBI)- India’s Central Bank — issued a notice in April (2018):
“In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs [Virtual Currencies] or provide services for facilitating any person or entity in dealing with or settling VCs.” RBI, 2018
Interestingly — later in August (2018)— the RBI revealed its plans to “study and provide guidance on the desirability and feasibility to introduce a central bank digital currency”. This was addressed in their annual report. Their reasoning pointed to “rapid changes in the landscape of the payments industry, along with factors such as emergence of private digital tokens and the rising costs of managing fiat paper/metallic money”.
It would be fair to say that many people, due to lack of knowledge, fear of loosing control, or other personal reasons, are slowing down the progress of cryptocurrencies, blockchains and other decentralized protocols.
But, given the decentralized nature of crypto and blockchain technologies — not controlled by the state — it is up to individuals, whether on a global, national or state level, to decide how they want to handle these new technologies.
In the next article we will go over some examples of states and nations that have attempted to create a crypto friendly environment.
Image from Pixabay
