discussion Why Banks Keep Blocking Cryptocurrency-Related Transactions

[kyoukage01 3181]

Banks have been regularly being portrayed as one of those institutions that reject cryptocurrencies. This has been mentioned oftentimes in some discussions on this forum as well, but few of those gave details on why it does. In this topic, we will discuss about an aspect that banks oftentimes find fault in crypto: transactions.

 

Perhaps there may have been something to do with the volatility of most crypto, but stablecoins might offer an alternative for less volatility. Still we don't see and hear much about banks readily adopting stablecoins, if volatility is really an issue. Why?

 

If anonymity is an issue, there is already KYC, and I am getting the feeling that the crypto community as a whole, over the years, concede that KYC can be accepted as a compromise for preventing and apprehending crime-related transactions. There are other features beside KYC too. But there is still no dice for most banks trying to be more 'friendly' to crypto. Why?

 

There is an article posted recently that gave some insight into this issue. The link is here:

https://cointelegraph.com/news/why-banks-keep-blocking-cryptocurrency-related-transactions

Spoiler

Why Banks Keep Blocking Cryptocurrency-Related Transactions

The close interaction between traditional finance and regulators is the key element in the development of the cryptocurrency industry.

Alex Axelrod

 

The COVID-19 crisis has brought many new users to the world of cryptocurrencies. One of the main concerns for users, however, is whether their bank cards may be blocked due to the purchase of a cryptocurrency, or when withdrawing funds from a crypto account. Can this risk be prevented?

 

Since the COVID-19 outbreak and people’s subsequent desire to protect their savings, interest in cryptocurrency has continued to grow. A June 2020 survey conducted by The Tokenist found that 45% of respondents from 17 countries now prefer to invest in Bitcoin (BTC) rather than stocks, real estate or gold. For comparison’s sake, only 13% gave such an answer back in 2017.

 

But there is a nuance to which clearly not enough attention is paid: The growth of Bitcoin’s audience is due to people who are quite unfamiliar with the crypto world. Judging by the nature of questions we have received in recent months, we realized that it is precisely the fears associated with banks blocking transactions that often stop people from active crypto investments.

State interests

In our experience, there are two main categories of reasons that can lead to blocking cryptocurrency transactions. These are restrictions based on either the regulator or the acquirer.

 

A state may impose limits and/or prohibitions on crypto operations, conversion of local currencies, and settlements or purchases in foreign currency. The most striking example of banks blocking crypto operations due to regulatory restrictions is in Argentina. In the fall of 2019, local authorities first lowered the limit on the purchase of foreign currency from $10,000 to $200 United States dollars per month.

 

The Argentinian government then imposed a ban on the purchase of crypto with bank cards, followed by a 30% tax on purchases in foreign currency. As a result, there was no formal ban on the purchase of cryptocurrency, but local banks have been blocking such transactions.

 

We tried to contact Argentinean banks, in particular Brubank, to find a solution for our users but received no response. In such a situation, for regulated crypto services, the only option is alternative payment systems available in the local market. Therefore, the cryptocurrency purchase transaction will be divided into two phases: a top-up of the local electronic wallet with a bank card, and then the subsequent cryptocurrency purchase from the wallet balance. Yes, such a transaction becomes more expensive, but it still ensures a safe cryptocurrency purchase. 

 

In other situations, when blocking is caused only by restrictions on settlements and purchases in a foreign currency, there is a way out: You can use a service that has configured transactions for purchasing cryptocurrencies in national currency.

A caution about intermediaries

If the regulator, who introduces restrictions, usually thinks about the big picture of the country’s economy, then acquirers, as representatives of business, take care of their own benefits. These financial institutions try to prevent operations that are likely to be challenged as unlawful write-offs.

 

Therefore, acquirers don’t like card transactions without 3D Secure (transaction confirmation via SMS or push notification with a one-time code). In this case, acquirers increase the cost of services and make transactions financially unprofitable, or completely transfer the responsibility for the transactions to the cryptocurrency seller. This sometimes leads to situations when, for the sake of more favorable conditions, the bank tells the acquirer that its cards support 3D Secure, when in fact, they don’t.

 

Operations with such cards will also be blocked, like what happened recently with several banks in Mexico, reportedly mentioned by our customers. Acquirers can also restrict operations on anonymous and prepaid cards. For example, in Russia, cryptocurrency transactions from cards that do not have a holder’s name on Yandex.Money or QIWI can be blocked.

 

As you can see, the development of the crypto industry is impossible without a close interaction between the world of traditional finance and regulators. Banks in this system resemble employees from visa centers who give the right to cross the border: Some find errors in everything, while others welcome crypto users cordially. I hope that in the near future, more banks will follow the example in South Korea and become crypto-friendly.

To simplify things, I will try to summarize the reasons why crypto transactions are blocked or restricted, which is already given in the article:

• The regulators - Banks will try to block crypto transactions due to their policies, either existing ones or recently passed/amended, that is aimed at regulating their own national currencies, among other things.
• The acquirers - Other institutions tied to banks like credit card companies, online money delivery services, etc., have doubts about the safety and security of crypto coins and transactions.

 

What more do the global banking system wants for crypto to do before it allow legitimate crypto transactions in its system in its entirety? There are already some prominent countries whose banks are becoming more open to the notion of cryptocurrencies, why are there still others that steadfastly refuse even until now?

 

Do you have answers or comments on this issue? Please share to us here. Further questions are also most welcome.

 

Edited July 14, 2020 by kyoukage01

[Ridam 7455]

In mine opinion one of the reason is banks are unable to track the fund deposited via Crypto and so to make sure it's clean or not.

And another thing is Crypto is emerging technology and public trust hasn't been developed over it in most parts. As for non techy person it's too difficult even to understand the concept so for a services to available public it would matters.

And thirdly banks are afraid of lossing their position if huge number of people adopted Crypto and use wallets for funds sending instead of the banks traditional transaction which is happening and happening under the regulation of government. So they raise blames like terrorism and clean money problems to the Crypto to affect the mass adoption to be happened easily. It's mine opinion as the fact may be different for different banks and countries.

[Moaz 7239]

I think that the most important reason some countries oppose to crypto is that cryptocurrencies are decentralized and uncontrollable, banks want to know the identity of cryptocurrency users in order to impose taxes on them and this is not available in the crypto world

[Mehar446 280]

Volatality & anonymity are not the reasons. The banks are a part of FIAT system that is competitor of Blockchain & cryptocurrency. Soo they are just blocking the Competitor's way.

[BTC Future 3946]

Banks are nowhere near understanding how decentralized systems provide financial freedom. They probably don't even understand what decentralization is and what we mean by financial freedom. Bankers would think of financial freedom as probably having too much fiat money to do whatever you want. 

Since they don't get it after 11 years there is no need to convince them about anything. They are the ones that Bitcoin is making obsolete anyway.

Edited July 15, 2020 by BTC Future

[Honny143 13612]

On 7/14/2020 at 8:50 AM, Ridam said:

banks are afraid of lossing their position if huge number of people adopted Crypto and use wallets for funds sending instead of the banks traditional transaction

@Ridam You're are right mate now banks and government  afraid crypto currency, because now so many users add in crypto and crypto runs parallel financial system like banks  runs, and crypto users doing everything but without paying any extra fees, that's why banks always tries create issues against crypto.

[Syedbesharat 5423]

If we consider the banks prospective about rejecting crypto currency then we think that the bank needed their strong hold on system like fiat which is under their control.Where they made new laws and amendments for customers.They know all about their clients and their mostly assets are under their supervision.The crypto is decentralise system which is not under control and volatility is basic element of this system.It is not a stable system where coins and tokens value does not drop .But the few of banks making some changes to adopt crypto to move forward with this advancement to hold good position for future.

[Yomose 3704]

On 7/15/2020 at 10:02 AM, Mahim00 said:

Perhaps there may have been something to do with the volatility of most crypto

The volatility is the reason why people like such cryptocurrencies. 

15 hours ago, estee369 said:

I also thing its volatility is the main factor. Bank doesn't want to take any assets that is so volatile that its value can reduced to half in a matter of minutes. May be stable coin is the best alternative options.

No, they fear not to lose fiat to crypto, and wish is not possible. Bank fiats are even more volatile in nature and regulated by governments. 

 

[rvherrera 137]

The first known position on the part of banks was to forcefully reject cryptocurrencies, why? simply because they take away your business. As time went by, there was a certain change of interest in some personalities linked to banks, such as JP Morgan and others. Now it is known who wants to promote their own cryptocurrencies or invest in some projects. Or I ask, Ripple to what type of project corresponds to this topic? I leave the analysis open. Thank you for your contribution, it is very valuable, good luck, success and profit !!!

[TimopheyKa 3900]

In fact, this is a fairly common situation when banks act in this way, that is , in this way, when they block any account in the cryptocurrency suspicion. The fact is that probably many people are afraid of some kind of fraud, or simply, cryptocurrency is prohibited in this country, and this is very frightening!

[percare 3192]

I've read about many banks doing that all over the world, no matter if crypto is legal or allowed. I've read about US banks and French banks stopping deposits and blocking many accounts out of fears of money laundering operations. In some countries crypto is outlawed so there they have the law to consider but in others it is not and the laundering excuses may only be to force the idea that you can't use crypto and banks. But this can change when banks offer crypto services maybe from next year.

[Captain Karim 0]

I do not think that the agreement between banks and cryptocurrencies will come someday, all of this can be summed up in centralization and decentralization. Banks control all the money deposited with them and do with them as they like without supervision, and the opposite happens in cryptocurrencies when anyone owns the private keys to his wallet, Therefore, I do not see that we will be able to find a solution between banks and Crypto.

[George10 9932]

On 7/14/2020 at 5:20 AM, Ridam said:

In mine opinion one of the reason is banks are unable to track the fund deposited via Crypto and so to make sure it's clean or not.

And another thing is Crypto is emerging technology and public trust hasn't been developed over it in most parts. As for non techy person it's too difficult even to understand the concept so for a services to available public it would matters.

And thirdly banks are afraid of lossing their position if huge number of people adopted Crypto and use wallets for funds sending instead of the banks traditional transaction which is happening and happening under the regulation of government. So they raise blames like terrorism and clean money problems to the Crypto to affect the mass adoption to be happened easily. It's mine opinion as the fact may be different for different banks and countries.

You are right mate and I also think that banks are always not comfortable dealing with cryptocurrence based transactions because of to much scandals of hacks and malicious activities going on in the crypto currency world and mostly that's the reason I don't like it to purchase some crypto with my Visa bank card or use it in crypto related websites for exchanging services.

[tienda 8776]

This is logic Banks they can't accept cryptocurrency transaction because is not yet regularized, so they are respecting the laws, however they will be sanctioned. I m sure that Banks are very interested in adoption of cryptocurrency, because it is the opposite of Fiat money, they are losing a lot costumers because of cryptocurrencies.

[Brushless4500KV 4214]

This is not true. Although some banks in a few countries are trying to go against crypto, many banks (including some banks in Germany and Sweden) are implementing crypto into their services and claim to offer this service to their customers. Apart from this, XRP is one of the most famous coins which is working with banks for making payments faster and easier from one country to another. This information reveals the fact that banks are welcoming crypto and in the future we will see more relationship between crypto technology and monetary systems.

[gourav789 2834]

@Brushless4500KV right mate , mostly country try to blocked crypto in their region ( some countries also try to accept Crypto as well ) .

thus is hard to makes control on bitcoin price movements , this is main reason behind that bitcoin is still unacceptable .

[Matias1209 84]

It is clear that this system does not serve the economy of the banks, they work with our money, generating large profits, while the interest they pay us in exchange is ridiculous, cryptocurrencies are a danger to them, but to many and to the has led to investing in anonymous cryptocurrencies.

[Shaza Ahmad 1682]

Politics and money, wherever you go in this world, you find them accompanying. Politics is governing that is set in order to obtain money and money is spent with the aim of directing policy, an interlocking relationship, so when politicians and legislators see that the interest from cryptocurrencies is more than the power of banks, the regulations and legislation will change.

[fatimateta 175]

Simply they are two opposing systems  and thier goals are completely different .Banks are insitutions governed by governments and economic  trends that intervene and control them banks aim to control financial movements and spending but cryptocurrencies aiming to financial freedom 

[smithk 149]

I think banks block cryptocurrency transactions because of anonymity of the transactions.

Some crypto platforms do not undertake KYC on their clients hence banks may not be sure about their identities.

Banks are always tasked with helping to control money laundering and some to extent funding of illegal groups around the world

 

[SuperCrypto 7193]

Banks have a long history and are among the long-standing financial institutions, some of these banks see cryptocurrencies as a threat to it and because it is possible for these alternative digital currencies to destroy the banking system and all third parties.

[Cryptomint 433]

So what it is not a big issue like we are thinking. If the banks are not coming in so don't worry cryptocurrencies are making its own way.

[Onden 2098]

I think banks are afraid cryptocurrency will be accepted and used by many people. Because putting money in cryptocurrency has an advantage when compared to putting money in a bank. Imagine if everyone puts money in crypto then the bank has no reserve of money in its safe and that is dangerous for the survival of the bank. Therefore the bank continues to block crypto-related transactions.

[huesca123 946]

@kyoukage01 Im glad that somebody here has addressed this problem, with banks blocking these types of transactions. I live in Spain & my bank has always blocked me buying BTC online. I would have to go to a BTC ATM machine, about a 1.5 hrs drive away, to but BTC in cash. I had talked to my bank about this but they would still block it. I finally found that I could buy BTC at Binance Exchange, so thats what I do now, buy BTC at Binance. Even thou Binance has a rather high transaction fee to transfer the BTC to my private wallet.

 

Banks think that out money is theirs. They can tell us how to spend our money.

[BrolySSJ 7899]

To be honest i think that there are many reasons that crypto is not accepted by banks, even those that are considered to be stable coins. The first reason, in my opinion, is an issue of legality as there are many countries that are already opposed to the idea of crypto usage within their country and therefore as a result the banks within that country will also be unable to make use of that currency. The second issue i think stems with the uncontrolled nature of crypto and the fact that it is anonymous. Whilst there is kyc verification, this can prove to be ineffective and many may opt for exchanges that do not have it and therefore the currency as a whole will not be regulated within the country and this will not be fair on the bank. Lastly, and this is pure speculation, it could have to do with competition between the crypto world and fiat currency and therefore banks are trying to rather promote their fiat currencies over that of crypto.