Bitcoin & Banks: The Forbidden Rommance
Bitcoin & Banks: The Forbidden Rommance

Blockchain era tried to introduce new concepts on the very traditional and conservative banking industry, but has faced strong resistance. What’s the reason behind these prohibitions and what can be done against it?

When Satoshi Nakamoto published Bitcoin white-paper, in the Halloween of 2008 [ref], not every reader was able to understand how disruptive and powerful the subject on Nakamoto’s email was.[ref]

Years later, Bitcoin got people and media’s attention, but the idea that crypto-currencies would overtake the entire financial system quickly found itself full of resistance. Several countries’ restrictions provided Bitcoin an illegal feel. Quickly, people started associating it to criminals or even some Ponzi scheme. Time never stops and, recently, DEA admitted that illegal activity is no longer the majority of Bitcoin transactions. [ref].

Things have changed in the dynamic but recent crypto-currencies environment after 9 years of existence. The number of individuals who knows Bitcoin as a currency rather than some complicated technology meant to be used by computers-related people has increased, it’s possible to find Bitcoin ATM machines and also restaurants that accept Bitcoin, depending on where you are. Bitcoin prepaid cards have also been issued, although in most of the world, it suffered strong prohibitions originated from the fight between banking institutions and crypto-currencies’ users.

Huge payments processing players such as Visa, MasterCard and Discover have publicly shared their views about crypto-currencies, against the technology as a payment method. Finding a prepaid card that worked world-wide and could be used to spend crypto-currencies was once an easy task. Known card issuers have been forbidden to continue their operations in most of the world, leaving many crypto-enthusiasts with no option for spending their coins in daily costs. [ref]

While payments processing institutions show no support to crypto-currencies, banking companies in several countries follow the same path. Even in countries where crypto-currencies are legalized or not regulated, exchanges and individual traders are constantly in trouble with their bank accounts being cancelled. Banks ban anyone who sends or receives transactions from known exchanges and P2P sellers. [ref]

While it’s easy to understand why some governments aren’t bitcoin-friendly (since its nature disallows State corporations to control economics on its root), we might ask ourselves the reason behind all the campaign initiated by financial institutions against crypto-currencies. Visa processes around 1,700 tps (transactions per second) with peaks of 4,000 tps [ref] and, in theory, it can scale for up to 52k tps [ref]. Bitcoin’s current implementation is able to process 7 tps. Is Visa really worried about people buying pizza with bitcoin? Is the obsolescence of the standard payment systems the reason why banks fear Bitcoin?

Probably, not. A look at the freedom that is available to crypto-currencies’ users to transact funds to any wallet, regardless of which border the destination is behind, may reveal one of the reasons why banking institutions have felt threatened by crypto-advent.

It’s about the big players.

It’s known that banks earn profit on every operation. But the fact is that losing big players and big companies that depends on banking institutions on a daily basis for huge remittances could represent losses for banking companies.

In a regular international transfer, banks earn profits both on the currency exchange and on the transaction, itself, since they offer their own exchange rate for the destination’s currency.

In business matters, companies that have been paying higher rates for external currencies as well as expensive fees for delayed remittances could have it done instantly, at very lower fees and at a better exchange rate.

It’s about the environment.

Although it’s too early to say that payments processors fears the usage of crypto-currencies as payment methods, the advantages of crypto-currencies preference in several use-cases are good reasons to say it could surpass services that are only offered by banks. And it’s not only about remittance. Also, banks do not fear specified features from Bitcoin or other crypto-currencies, but the growth of the entire environment around crypto-currencies.

The environment is growing fast. We have crypto-backed loans, crypto-powered remittance, smart contract-based escrow, passive incomes (i.e. from master nodes) and several crypto-accepting payment gateways. The global acceptance and usage of these services could mean deficits on banks accounting.

And it’s time for cryptos to walk on their own foot,

A disruptive technology like crypto-currencies should not rely its success on standard payment processors and banks. Of course, having these on the boat could mean ease in different situations while working with cryptos, but perhaps the mass of enthusiasts still lacks to understand that the technology is powerful enough to walk on its own feet, supported only by the growing environment.

"the mass of enthusiasts still lacks to understand that the technology is powerful enough to walk on its own feet […]"

Here comes the importance of supporting blockchain-powered projects that replaces services offered by banks. Companies like Capitual, a European startup that aims to raise enough funds to operate as a full banking solution with a decentralized administration, where every token owner can suggest and vote on suggestions, while getting dividends for holding tokens.

Capitual’s ICO will start with a usable product and a payments processor, and the funds will allow projects that will widen the crypto-currencies usage, such as ATM machines, a physical card, POS machines, loans, escrow and also SMS banking to allow non-connected communities to send and receive crypto-currencies.

Crypto-currencies came to change the monetary system. It’s a matter of time until the crypto-environment is largely used and accepted. It’s capable of changing the world’s economics, but before trying to get the world to believe the crypto-environment, we shall believe it first. A lot has been done, and a lot is still to be done, but technological progress is unstoppable. Fortunately, it is by our side on this battle.

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What do banking institutions fear from crypto-currencies? Do you use crypto-related services? Tell us on the comments!
['Jefrey S. Santos']
['Bitcoin', 'Cryptocurrency', 'Blockchain', 'Cryptobank', 'Technology']