Capital One and Metropolitan Bank become the latest to join the all-out war against virtual currency by refusing service to customers sending funds to exchanges.
Capital One has decided to refuse service to any customer sending money to a virtual currency exchange and in a typical banking fashion doesn't bother to tell the customer until well after the funds never arrive. Metropolitan Bank has shut down all international wire transfers involving virtual currency.
Both state "fraud" and "risk" as motivating factors. Really?
Wiring funds to a regulated exchange like GDAX (operated by Coinbase) or Bitstamp puts a customer at risk? Who on earth is supposed to believe this pile?
Where's the fraud? Who's at risk?
The bank. That's who.
The Best Damn Buggy Whip
There's an old movie called "Other Peoples Money" which starred Danny Devito. According to our demographics, most readers here were somewhere between grade-school and college or just entering the workforce when it debuted in 1991.
In that movie Devito's plays an investor "Larry the Liquidator" who gives a speech at a shareholders meeting where he says:
"... there must've been dozens of companies making buggy whips. And I'll bet the last company around was the one that made the best god-damn buggy whip you ever saw. Now how would you have liked to have been a stockholder in that company? You invested in a business and this business is dead ..."
Same is true for landline phones, cassette tapes, CD's, dial-up modems, print-media and bookstores, video rental stores, etc...
Another industry fading away are bank products. According to US Today and a Gallup Poll, 73% of Americans do not trust banks.
Americans’ confidence in the U.S. banking system was eroded during the Great Recession and has yet to fully recover. According to a Gallup poll, just 27% of Americans are confident in the country’s banking system...
Why should they be? Just look at the multi-billion dollar bail-out that was required to keep them floating. Where did that money go? In part to banking executives who continued to earn 6-figures, even getting massive bonuses of tax payer money.
Others were tortured with 6 to 8 months of waiting for the Federal Deposit Insurance Corporation (FDIC), a federally owned and operated corporation, to pay their claims when they lost everything when their bank imploded.
Traditional Banking is Simply a Dying Industry.
"I didn't kill it, it was dead when I got here..."
Virtual currency and its blockchain technology is another knife in the heart of banks so naturally they are going to go down kicking and screaming.
Exceptions do exist like BBVA and USAA who recognized the future and have supported the industry. USAA even allows integration to Coinbase for visibility of asset holdings in Crypto from a USAA banking account online.
For the most part however, banks like Bank of America, Wells Fargo, JPMorgan Chase, CitiGroup, etc., and now Metropolitan and Capital One, have been in an all out war against the blockchain and virtual currency industry.
The bigger the industry gets, the louder banks are going to bitch and moan about it and the more they bitch and moan about it the bigger the industry is going to get until they are simply obsolete.
What is a bank good for anyway? Charging you for keeping your money from you and making the decision for you on how you can and cannot use it?
Perhaps there are those who are irresponsible enough that they need to flush money down the toilet so that they can be told where and where not to flush money down the toilet.
The Risk of Banking
Here's one question for Capital One and Metropolitan. Do you plan to keep offering savings accounts?
That's not only risky, it's a guaranteed loss.
That's not only risky, it's a guaranteed loss.
The annual rate of inflation in the United States is currently 2.54% compared to the annual earnings on a traditional bank product called a savings account which earns less than 1.5% on average annually.
Capital One offers one of the highest interest rates on savings accounts in the nation at 1.4%.
If we take $10,000 and put it into a savings account at Capital One, here's how that breaks down from 1 to 10 years.
CAPITAL ONE 10 YEAR ROI
| Year | Interest Rate (1.4%) | Inflation Rate (2.54%) | Value |
|---|---|---|---|
| 1 | $10,140.90 | $10,256.98 | ($116.08) |
| 2 | $10,283.79 | $10,520.56 | ($236.77) |
| 3 | $10,428.69 | $10,790.91 | ($362.22) |
| 4 | $10,575.63 | $11,068.22 | ($492.59) |
| 5 | $10,724.64 | $11,352.65 | ($628.01) |
| 6 | $10,875.76 | $11,644.38 | ($768.62) |
| 7 | $11,029.00 | $11,943.62 | ($914.62) |
| 8 | $11,184.40 | $12,250.54 | ($1,066.14) |
| 9 | $11,341.99 | $12,565.36 | ($1,223.37) |
| 10 | $11,501.80 | $12,888.26 | ($1,386.46) |
[info title="Editors Note" icon="info-circle"]Notably, we found the highest rate of interest at 1.5% from both Goldman Sachs and Live Oak Bank.[/info]
At the end of the 10 year term, you essentially have $1,386.46 less than you started with which equates to starting with $10,000 and ending up with $8,613.54 in your pocket.
At the end of the 10 year term, you essentially have $1,386.46 less than you started with which equates to starting with $10,000 and ending up with $8,613.54 in your pocket.
Let's apply this same model to Bitcoin which has performed astronomically better than 100%, but we'll be fair and use 100%.
BITCOIN 10 YEAR ROI
| Year | Base | Inflation Rate (2.54%) | Value |
|---|---|---|---|
| 1 | $26,130.35 | $10,256.98 | $15,873.37 |
| 2 | $68,279.53 | $10,520.56 | $57,758.97 |
| 3 | $178,416.83 | $10,790.91 | $167,625.92 |
| 4 | $466,209.48 | $11,068.22 | $455,141.26 |
| 5 | $1,218,221.82 | $11,352.65 | $1,206,869.17 |
| 6 | $3,183,256.62 | $11,644.38 | $3,171,612.24 |
| 7 | $8,317,961.88 | $11,943.62 | $8,306,018.26 |
| 8 | $21,735,127.94 | $12,250.54 | $21,722,877.40 |
| 9 | $56,794,656.34 | $12,565.36 | $56,782,090.98 |
| 10 | $148,406,441.31 | $12,888.26 | $148,393,553.05 |
How about some unknown ShitCoin that earned only 10%, what would that bring?
SHITCOIN 10 YEAR ROI
| Year | Base + ROI | Inflation Rate (2.54%) | Value |
|---|---|---|---|
| 1 | $11,047.13 | $10,256.98 | $790.15 |
| 2 | $12,203.91 | $10,520.56 | $1,683.35 |
| 3 | $13,481.82 | $10,790.91 | $2,690.91 |
| 4 | $14,893.54 | $11,068.22 | $3,825.32 |
| 5 | $16,453.09 | $11,352.65 | $5,100.44 |
| 6 | $18,175.94 | $11,644.38 | $6,531.56 |
| 7 | $20,079.20 | $11,943.62 | $8,135.58 |
| 8 | $22,181.76 | $12,250.54 | $9,931.22 |
| 9 | $24,504.48 | $12,565.36 | $11,939.12 |
| 10 | $27,070.41 | $12,888.26 | $14,182.15 |
These numbers are estimates and can change at any moment but they are current. Bitcoin may never raise another single penny in value. Possible, but not likely. Capital One may offer 15% interest in 2018. Possible, but also not likely.
So we are to believe that losing $1,386.46 with a traditional savings account product offered by Capital One is worse than earning $14,182.15 with an unknown GarbageCanCoin?
Seemingly it is the bank that is the risk with risky products of guaranteed loss.
So we are to believe that losing $1,386.46 with a traditional savings account product offered by Capital One is worse than earning $14,182.15 with an unknown GarbageCanCoin?
Seemingly it is the bank that is the risk with risky products of guaranteed loss.
Here is an opinion which I did not previously believe, banks may well be threatened by virtual currency. They say no, however their actions seem to continue to prove otherwise because these actions do not appear to be risk mitigation, they appear to be self-preservation.
The only way banks feel they can stop money from going elsewhere and keep it in their pockets is to try and terminate its customers ability to invest in other products or offerings and when they say there is too much "risk" they are not talking about consumer protection, they are attempting to save their own ass.
Why don't they do this for the stock market? Is E-trade banned too?
People are far more at risk in the stock market than they are with bitcoin.
People are far more at risk in the stock market than they are with bitcoin.
The writing is on the wall, funds sent for bitcoin may never return to the bank because once it converts to bitcoin, it can go anywhere, it can be spent or otherwise used whereas stock earnings typically head back to the bank having no other outlet.
This is another reason for virtual currency investment interest, the investment can be used or spent. It's not trapped among a pile red-tape and fees required to free it.
Virtual currency investors that may require liquidation of any given asset can do so within an hour or so whereas this isn't possible with other investments. If liquidation is required for an emergency, this is exceedingly inconvenient. Moreover, virtual currency like bitcoin can be spent instantly without liquidation or conversion to other forms of value or fiat currency.
All of this sucks for banks.
This is not to say there is no opportunity for banks. Gateways (on/off ramps) for virtual currency, use of funds (debit payment cards), and other services in the industry provide ample opportunity for those who choose to embrace it. However, to date, only a few have had the innovative insight to do so and their actions will likely serve them well in the end.
Even if Bank of America and Capital One eventually come around to embrace the industry, the industry won't soon forget the terror they participated in of encouraging money laundering, causing bankruptcy and unemployment, and other derogatory actions for nothing more than their own greed and self-preservation.
Ask any bank why they won't service a virtual currency related money services business. If they're honest they'll tell you. It costs too much.
They don't make enough money off of you so you're not worth anything to them.
For average people just investing? Well they just threaten those customers by taking their money, forcing them to do without it while they tell them where and when they are allowed to spend their money.
If banks are going to dictate customer spending then what's next? Are you only going to be allowed to buy bank-approved milk? Will only bank-approve toilet paper be allowed to wipe your ass?
There's an easy fix. Withdraw your money from these banks and put it in another one or better yet, somewhere else all together.
Here's an idea, bitcoin allows you to "be your own bank" ... and nobody tells you how to spend it.
[accordion] [item title="Author and Credits"] Article by dinbits
Image Credits: Banner Image by dinbits.com staff
Devito Image (and quotes) courtesy Warner Bros.
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