News on Banks Banning Cryptocurrency
Bank of America, JPMorgan Chase, and other banks have blocked users from buying cryptocurrencies with credit cards. Some have blocked other crypto related purchases.
For example, Bank of America seemed to have blocked all Coinbase related transactions at some point and did indeed block all Bitcoin related investments via Merrill Lynch (to update this, Bank of America doesn’t seem to have implemented a full ban on Coinbase, perhaps it was temporary).
Meanwhile, Citigroup, JP Morgan, Capital One, Discover, some U.K.-based banks, and more have all put some form of restrictions on crypto purchases (mostly banning credit card purchases).
Meanwhile, on the other end of the spectrum, Coinbase (the most popular U.S.-based crypto broker) has stopped allowing credit card purchases as well.
Insight and Opinion on Banks Banning Cryptocurrency
Almost all of this happened when Bitcoin was in a correction, thus customers couldn’t on one hand make bad bets (buying on the way down), but on the other hand couldn’t lower their average price or contribute buying power as sellers overwhelmed buyers thus crashing the price of Bitcoin (and as a domino effect, the price of other cryptocurrencies).
Here I’m not implying this caused the correction, I’m only stating that logically it didn’t help.
After-all, many U.S. and U.K.-based citizens suddenly couldn’t buy Bitcoin and couldn’t buy Bitcoin related stocks, and thus the buying power that was supporting the price of crypto assets was suddenly gone right in the middle of a correction (leading, one has to assume, to further correction).
The timing of this at the very least is thus unfortunate and frustrating and it leaves us having to rationalize why the ban was started in the middle of a correction.
Was it to protect customers from taking out credit and thus to protect banks from non-payments? That is reasonable of course.
Or, is it more like an attempt to teach the commoners a lesson for investing in a non-fiat currency, a way to ensure that interest on debt would pile up, a way to ensure that short futures contracts would pay off, a way to lower the price of cryptocurrency for institutional investors, was it a worry that people would move from stocks to crypto if the market went into a correction, and/or was it a way to offset the growth of crypto for a moment?
Or, is it simple stupid. That banks have been a little tardy on getting their crypto brokerage services and storage solutions running and didn’t want client money going to the competition in the meantime (see: Bank of America may be looking into cryptocurrency exchange services for its corporate clients; although, remember, this is “for corporate clients” not “for the average client”).
Some of those reasons are rational, some are villainous, some are vanilla, some are just a little condescending (that sort of condescending attitude that says, just ignore the 2008 financial crisis and the bailout and believe us when we tell you we understand risk and are prepared for it and you don’t and aren’t;” to that the response would be, “well, how could we prepare for the crash when you have blocked our buying power?!… what you are trying to save us from literally just happened and you banned purchases in that time. Gah!”)
The problem is, we are left to do little more than speculate and be a little pissy, as banks haven’t done a great job of being crystal clear on what types of purchases are being blocked, why, and what we can do about it.
Instead, they have at best offered generic answers like “risk,” “fraud,” and “sorry.”
It is unclear if this will be a passing phase or not, but in the meantime users who want to obtain cryptocurrencies or invest in cryptocurrency related products are left with no choice but to switch banks and brokers in some cases.
One would assume that when the amount of money pouring out of bank accounts exceeds the threat of crypto (in terms of its use and its volatility) to banks, they will consider reversing course.
NOTE: This story has been whitewashed a bit by other sources (for example, Coindesk.com) who downplay the extent to which some banks have blocked cryptocurrency transactions (I’m sure this is a result of us all taking press releases at their word rather than digging). However, the reality is Bank of America for example pretty much did a flat out ban on crypto at one point (although this seems to only be a partial ban in practice as of mid February 2018). The point being, although “banning credit card purchases” is the main headline, in some cases the ban goes well beyond that.
TIP: If you can’t buy crypto and don’t want to change your bank, try using Square’s Cash App for Bitcoin purchases. I am fairly certain no banks have blocked that. You can’t make purchases on credit, but should be able to make them via a bank account using the app. For investing, try E*trade and TD Ameritrade. I’ll try to look into what banks are currently embracing crypto and graciously allowing their customers to choose how they spend their own money. Remember though, who allows what is all subject to change.