Currently the banks in North America are playing a very dangerous game when it comes to cryptocurrency. They are more or less trying to put up an outright ban when it comes to the acquisition of these new assets. For all of those who go on about the free markets (and I am not one of them), banks have now begun waging an out right war against it.
Recently banks, at first, stopped allowing people to purchase crypto with credit cards or tacked on ridiculous surcharges to discourage the practice. As on objective observer I actually don’t think this is unreasonable. The banks and credit issuers do not want you gambling their money in these markets and I for one can understand that. Unfortunately banks and credit issuers seldom take their own advice in every other sector of the financial world but it actually makes sense to me that every day people shouldn’t be going in to debt when making investments whether it’s crypto or not. If you don’t have the money to gamble with you can’t play the game.
Then banks began to make their big moves and began issuing debit cards that use credit card payment processing channels. At first when this happened nobody figured out how that would play out down the road. It wasn’t until it came out that they actually viewed cryptocurrency as a threat that it began to make sense. This is a big divide between how North America veiws crypto versus how Europe is handling it. So what does it mean? Well most people when they purchase crypto purchase it online. Seeing as the credit card option was pulled as Visa and Mastercard outright banned crypto purchases the only other (realistic and instant) option left was paying with your debit card from your bank account. Now comes the checkmate move. Guess what happens when you try and pay for crypto with your Visa/Mastercard issued debit card? That’s right, it’s not going to happen. To add the final nail in the coffin even if you have an older debit card the banks have now gone and pulled a full out ban on purchasing crypto in any way shape or form online. Not only that but banks are apparently even banning people from sending etransfers to known vendors (although this is only second hand information for now).
The banks, however, are very stupid. It’s completely clear that they haven’t actually thought this through. Only one of two end game scenarios makes sense to me. The first one is they are running scared and trying to just stop any exodus of money from their system into the new one. They want to destroy it completely. The second one is that they are currently making it very difficult for the average person to obtain this new asset class while they themselves purchase up large amounts while the prices are cheap so down the line they can position themselves as the gatekeepers, once again, to access these financial assets.
In the meantime I’m sure they’re clinking champagne glasses thinking they’ve put a real cap in the damn that is surely ready to burst. OK so now I can’t even use my own money to buy crypto or can I? Actually what they’ve unwittingly done is basically forced the economy into underground levels and they’ve given everyone a loophole to not even have to pay taxes on the capital gains they’ve made. So the one thing that banks can’t stop is you taking out YOUR money in cash at any number of their conveniently located machines found everywhere and walking over to (in some cases right beside) a Bitcoin ATM. So obviously, yes, you are now paying a higher rate whenever you purchase crypto but it can be done easily and also with less KYC laws able to be applied then if I’m legitimately buying crytpo from an exchange with my own bank account. Stupid. So guess what I still have all my crypto and there is no real paper trail to see where my money went. That being the case it’s going to make it more difficult for tax agencies to follow the flow and properly document any claims of profit. If you are hoping to get government involved I think this is the scenario you should present to your government official showing just how reckless these bank policies are.
Now here’s where things get really interesting. When claiming your capital gains do you know what part of your profits you don’t have to claim? Your debts. Want to know something really messed up in all of this? Credit cards will happily accept your payment in crypto (even banks will accept deposits but why do that?) and guess what the balance on your credit card is? That’s right it’s debt. So follow me for a second. The banks have essentially made it even more difficult to trace crypto purchases meaning that it’s going to be harder to accurately account for people’s profits during tax time. At the same time there’s now no longer any incentive to even bother having to pay taxes. You can essentially live off your credit card and just keep using crypto to pay it off in an endless loop that is perfectly legit and legal. Way to go banks you’ve done it again. Your governments should be proud of the financial clusterf*ck you’ve accomplished. Just when we were getting over the housing market meltdown and crisis you took a look at the cryptocurrency market and essentially said “hold my drink.”
The thing about all this is is that banks are trying to maintain their control over their market. That market just happens to be the financial assets of the world economies but that is their market none-the-less. Crypto is the decentralized digital version of the assets they aim to control. Know what this reminds me of? When music became digital in the 90’s. The music industry was pretty much the only other industry whose profits would increase astronomically year over year for decades — just like those banks have been doing. Then this thing called Napster came along and made it super simple to get digital versions of music and it was free! Better still you could access things that the industry wasn’t even selling. The music industry was becoming decentralized. People now freely and easily had access to the music that the music industry had under lock and key and full control over.
Then the whole stealing debate came about and people got mad. There were two camps, people who wanted to have this new way to access the music they loved and the people who made the music and wanted to get paid for it. In the middle you had the industry trying to retain it’s full control and refusing to budge. In the meantime record sales declined, people still “stole” music and artists were not getting paid as much as they once were or in some cases at all because record labels started imposing 360 dealsto help cover their losses on sales. For decades this went on as the industry refused to embrace or change the paradigm shift. They wanted full control and nothing else. In the end they waged a war they could not win and lost. The people did not want the artists to not get paid but because of the industries stance everyone got rekt until they finally had to acquiesce and downloading and streaming services became available and made record profits. It happened again in film, books, video games and it’s happening right now in the financial industry.
The only real question is are banks too stupid to see how this is going to end for them or are they smart enough to learn the lessons of every other industry that came before them? I’m personally betting on the former.
However banks might have one last ace up their sleeve. As this article titled Child abuse imagery found within bitcoin’s blockchainrecently came out. It seems they are preparing to try and burn everything down. While the paranoid me sees this as the biggest existential threat and could very well be the Black Swan that actually takes down, specifically, the Bitcoin protocol (that includes every fork of it ever) it doesn’t mean that the blockchain or even crypto will die. Yes they could essentially make it illegal to use Bitcoin or any other variant based on worldwide child abuse laws. This would also I’m sure have a cascading effect of people dropping out of crypto all together, people never investing and all interest being diverted from it for fear of being associated with child abuse. To be fair I am not aware of what exactly is contained in the blockchain aside from what the article states because I haven’t looked for it. So this could be FUD (update it's FUD)or it could actually be true. Either way it is well played.
Let’s assume for a minute though that it’s absolutely true and Bitcoin becomes illegal. It’s the biggest player, the brand, the face. It’s like when a politician has a scandal and their party falls with them. Worst case scenario it leaves things in ruins temporarily. However there are many other players in the sphere that do not have the same issues. I’m sure there are clean blockchains out there, but on top of that there are cryptos that don’t even have blockchains. The point is no matter what banks do they are playing a losing game. Whatever wall they put up there will always be a work around. Until they realize that the world is changing around them they will be fated to extinction otherwise, but things will undoubtedly be bumpy in between.
Disclaimer - Be sure to check with your jurisdictions tax laws before doing anything I've suggested in the article. While I've spoken to accountants and experts about this (at least where I live in accordance to the tax laws in place) it essentially states that when declaring capital gains you must declare your amount minus investment and minus any debt you paid from it. After that you are left with profits of which 50% are then taxable at your current tax rate. So in essence there is a pretty good argument for it as nothing contradicts that. Obviously everyone should be fully aware of what the tax laws are where they live. Additionally to further compound the issue you only have to pay the taxes when you cash out into fiat. So if you never cashed out into fiat you would never have to pay taxes on it either. I fully admit that I'm sure this was not the intention of the laws but as they stand I am told it's valid.