Alright listen up! The banks and governments are at it again and this time it's a bit more subtle. But it's definitely aimed at punishing the crypto world and invading your privacy. Allow me to explain...
I was awake for the day no earlier than 4:15 a.m. today as frequently seems to happen when there's a full moon (I don't know why). I tried to go back to sleep as I usually get up around 6 a.m. and after laying there for half an hour wide awake I threw in the towel, went downstairs, and woke up the coffee maker earlier than it's used to getting up.
Then I got online and checked my email to find this nice little gem of a message from Coinbase...
"Dear Coinbase Customer
We’re writing because you have a credit card on file and want to inform you of a recent change that may increase the cost of purchasing digital currency with a credit card.
Recently, the MCC code for digital currency purchases was changed by a number of the major credit card networks. The new code will allow banks and card issuers to charge additional "cash advance" fees. These fees are not charged or collected by Coinbase. These additional fees will show up as a separate line item on your card statement.
Coinbase does not know whether or not your card issuer collects these fees, nor do we know how much they might collect. As a result, we would strongly suggest switching to a debit card or bank account as your primary payment method. You can do that on the following page: https://www.coinbase.com/settings/linked-accounts.
We apologize for any inconvenience this might cause.
Best,
The Coinbase Team"
So why is this important? Shouldn't people be more responsible and use funds they actually have rather than buy on a credit card? Maybe, but that's not my business nor is it anyone else's but the person making the purchase.
I myself used my CC to buy on CB many times so I could access my crypto to send and trade on another exchange without having to wait a damn week for my funds to clear.
I think this time period is shorter or maybe even eliminated now in the case of some exchanges, but that's why I used my CC in the past to buy crypto with fiat, plus I get cash back on that card so the overall purchase fee ended up being about the same (after the cashback reward) as it would if I'd used a bank account. But on to my point...
The card companies know that there are times when people want to buy immediately and they use a credit card to defer paying fiat for a few weeks give or take until monthly payment deadline for the card. So by upping the fees they are
- Collecting more revenue from one group of people than another (targeting crypto buyers=discrimination IMO) based on what they're buying
- Possibly discouraging would-be buyers of cryptos
- Punishing people who don't want to wait however many days for funds to clear on the crypto exchange from money they actually DO have in a bank
But there's something more ominous here
I clicked the "MCC code" link in the email from CB and was directed here to wikipedia and that last sentence at the bottom set off alarm bells in my head (I put a red box around it).
https://en.wikipedia.org/wiki/Merchant_category_code
In the United States, it can be used to determine whether or not a payment needs to be reported to the Internal Revenue Service for tax purposes.
I've never had a credit card company report a purchase I made to the IRS to my knowledge as I've never received a tax form from any credit card company showing data sent to the IRS. That doesn't mean it hasn't happened but something stinks here far worse than just higher fees.
For now this doesn't mean anything expect they (the credit card companies) aree increasing their fees. However, the IRS knows damn good and well they're gonna have a hard time tracking people's trading activity and I suspect this is an early step in banks and the IRS colluding to identify and target people who have bought a lot of cryptos.
They know many people will not report trading activity as the new and draconian crypto laws in the US (crypto is property and not currency, coin for coin trade profits / losses must be reported, etc.) make it a burden for people to do so because even a lot of tax professionals don't even know how to report crypto gains / losses on a tax return much less the average joe.
For tax year 2017, they aren't gonna do shit with this (I don't think). But I suspect in the near future the IRS will use the data as a tool to detect, target, and use it as ammo during an audit for people who leave out crypto trading activity altogether when filing their taxes.
Funny how one little fee increase can indicate so much more isn't it? I see what they're doing here and I think I know why they're doing it. It's because the banks are terrified of cryptos and the vampire branch of the US government (the IRS) wants all the resources they can have to catch people who aren't reporting gains, even though it's still unclear to many how the hell to even report gains if they wanted to (and should) do so!
My Conclusion
This is just another desperate attempt at suppressing and controlling commerce in what is supposedly a "free market economy" but is really crony capitalism and collusion between two parties (the unholy alliance of big business and big government).
They're doing everything they can to scare, discourage, and punish people who are entering the crypto market and in the end I think they're going to regret it. But that end won't come for them (the banksters) for a very long time.
For Tax year 2018, you might consider using some other method of acquiring crypto with fiat other than with a credit card. I don't know if they'll apply it to debit cards or regular old bank accounts in the future as well but I suspect that's coming soon.
This has just given me one more reason to loathe and not trust the big banks and the government. These hogs are getting way too fat, reckless, and downright tyrannical and it's far past time for a good old fashion slaughter.
Please note that much of this is speculation on my part and don't take it too too seriously, but please do make a mental note of it and consider your payment method next time you're buying crypto with fiat. I'm not advising anyone to change their buying habits or tax reporting strategy, I'm merely giving a word of warning that there is more to this fee increase than meets the eye. I plan to pay my taxes on my 2017 gains to the best of my ability and I'll leave it at that.