Over the weekend, US banks; Bank Of America, Citigroup, JP Morgan, Capital One and Discover have all banned their customers from purchase cryptocurrencies when using their credit cards. This is being heralded as another blow for crypto-traders, however it seems to be that these banks are trying to limit their exposure to the volatile currencies.
Coincidentally or now, all major cryptocurrencies are all trading down, with Bitcoin dropping a further 10% overnight, now just over the USD7,000 mark.
Public interest – or self interest?
There is a nice synchrony between pulling credit card use on the one hand to protect consumers (and banks) from the vicissitudes of Bitcoin fluctuations and on the other, the vested interests of the established banks in suppressing what threatens to be a system that could usurp their traditional role.
It was always expected that the traditional financial system incumbents would react to slow the growth of cryptocurrency. The action itself is hurting many (probably) speculators, making the action self fulfilling at worst.
Arguably there is a public interest need to protect consumers from themselves, where such volatility occurs – although credit card issuing banks have no qualms about encouraging clients to pay very high interest rates on overdue card accounts.
And their obvious “public interest” role of lobbying governments to regulate the use of cryptocurrency has just enough credibility to override the obvious benefits to business and to consumers of adopting a new system.
Where for example banks can hold on to international transfers for several days and levy high charges for what is a simple electronic transaction, the system is ripe for disruption.
The ancient system will inevitably be disrupted, but don’t expect it to happen without a lot of screaming and wriggling.
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