Have banks now accepted cryptocurrency? Their concerns over the years and the phenomenon of cryptocurrency.

August 19, 2022
Natalie Thorburn

 

Bitcoins have been on a roller coaster ride for years. Nobody had heard of the phrase "bitcoin" ten years ago, let alone understood how to do so or if it would be a safe, recognized form of currency. Concerns were raised since bitcoins are untraceable and autonomous. With more companies and e-commerce websites embracing bitcoin, it doesn't appear like it will go away anytime soon. Which banks support cryptocurrency is not a simple question having clear solutions. Many banks remain skeptical of bitcoin. TD and PNC Bank have also prohibited cryptocurrency purchases, and JPMorgan Chase and Bank of America, Citigroup have all prohibited the purchase of bitcoins using their credit cards.

Why most US Banks don’t support Cryptocurrency:

Because Bitcoin values are erratic and unsafe, most US institutions have decided not to provide cryptocurrency services. Their worries about cryptocurrency price fluctuations and fraud dangers are mostly unjustified since Bitcoin is both safer and more reliable than most fiat currencies. The blockchain makes money laundering and theft extremely difficult, and the limited supply of Bitcoins essentially prohibits money from being "produced" out of thin air. Furthermore, unlike banks, BTC and other cryptocurrencies are not subject to third-party control. This decentralization reduces outside impact and human involvement, which aids in the elimination of biases. Banks, on either hand, are extremely centralized, which means they may make choices that affect their customers without their knowledge. While centralization isn't always a negative thing, the margin for human mistakes in these networks makes them susceptible, especially when selfishness is involved.

However, US banks' concerns are rationalized in some ways since there was no government advice on how banks must handle cryptocurrencies until recently. The workplace of the Department of the Treasury regulates all national financial institutions (OCC). If a bank violates the OCC's regulations, it may suffer substantial economical and reputational consequences. Because the OCC has been largely mute on the subject of bitcoins, many banks have refrained from investing in alternative currencies for fear of getting into trouble.

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Top Risks for Banks Related to Cryptocurrencies:

Bitcoin will not replace government currency:

Cryptos are trendy, but most people do not trust them as much as they do the US dollar, euro, or Japanese yen, which are all supported by a central bank. Despite the loss of trust in political institutions, the majority of people still prefer cash regulated by a central bank, which is not going to change very soon.

Digital currencies bring challenges:

Digital currencies and associated technologies are anticipated to lower transaction costs and lower the cost of gathering and sharing knowledge, which sounds wonderful but might upset financial markets and amplify market contagion. They have the potential to undercut traditional banks' business models and their position in the banking markets, making it difficult for central banks, which primarily function via the banking sector, to ensure financial stability.

Status of Bitcoin:

An important concern is Bitcoin's position as a payment mechanism. Bitcoin has had relatively few genuinely recorded uses since it was issued to the general public. Cryptocurrency has garnered popularity as a preference for illegal transactions as well as a speculative tool.

Electronic Money:

Though the practical currency is still extensively used in most nations (excluding Sweden, where cash use is fast declining), customers throughout the world frequently make transactions without actual currency, paying using debit cards or mobile phones. Furthermore, much of the money issued by central banks is only available in electronic form. So, in some ways, the concept of digital currency is not entirely novel.

Digital Currency can affect Financial System:

Virtual currencies and other payment system advances might speed up domestic and bridge transactions, lower operating costs, and eventually, expand access to banking services for poor and rural families.

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The positive side of Bitcoin in Financial Infrastructure:

  • For starters, it avoids the issue of extra spending. Each bitcoin is one-of-a-kind and cryptographically secure, which means it cannot be hacked or copied. As a result, you cannot spend or counterfeit bitcoin twice.

 

  • Second, despite being autonomous, Bitcoin's network remains a dependable system. In this context, confidence is an analytic idea. Transfers must be authorized by nodes located all over the world in order to be included in the Bitcoin network's ledger. Even a single node disagreement might prevent a transaction from being recorded on Bitcoin's ledger.

 

  • Third, by accelerating the pace of developing and delivering cash, the Bitcoin network eliminates the need for a fixed network. Anyone who has a full node at home may produce a bitcoin. The use of intermediaries is not required for peer-to-peer interactions between different accounts on the Bitcoin network. As a result, no central bank-licensed banking system is necessary to distribute bitcoin.

Crypto-Friendly Banks:

Ally Bank:

Ally Bank, like the other banks on our list, does not enable consumers to buy Bitcoin and retain it in their bank account. However, there is a possible workaround through which you may utilize Ally Bank to obtain Bitcoins. Customers at Ally Bank may link their banks to Coinbase, a crypto trading platform, in the same way, they would join some outside bank account. You may then use your Ally Virtual debit card to purchase bitcoin from Coinbase. It's not the same as purchasing cryptocurrencies straight from a bank, but Ally is going in a crypto-friendly route by enabling consumers to do so.

Morgan Stanley:

Morgan Stanley was the first U.S. bank to provide Bitcoin to its clients during the first quarter of 2021. This does not, however, imply that any banking user may just buy Bitcoin using their accounts. For starters, this limits access to high-net-worth customers, and only Bitcoin money, not the real cryptocurrency, may be acquired. However, this is still a means for high-net-worth individuals to invest in Bitcoin through a U.S.-based bank. If this "experiment" proves beneficial for the bank and consumers continue to want the option to buy cryptocurrencies, access to ordinary banking customers may be extended eventually.

USAA:

USAA, like all other banks in the United States, does not enable consumers to purchase cryptocurrencies. You may, however, link your USAA bank account to your Coinbase currency account if you have one. While you can't buy cryptocurrency using your USAA card, you will be able to locate your Bitcoin address at Coinbase once it's linked. This will let you examine your Coinbase balances and track your transactions via your USAA account. This alone qualifies USAA as among the most crypto-friendly banks available. Perhaps it will be among the first to accept true bitcoin transactions at some point.

Chime:

Chime does not enable direct bitcoin purchases, yet it is crypto-friendly since it may still be used to obtain cryptocurrency indirectly. With Chime's Paypal function, you may utilize your Chime platform to share fast transactions with friends. You may use the Pay Friends tool to connect to the peer-to-peer Bitcoin blockchain Paxful, ensuring that your money gets up in your friend's account as Bitcoin. Although this is a long way from Chime accepting Bitcoin transactions, the final result is that you may utilize your Chime account to effect a Bitcoin transaction. In today's banking landscape, that's enough to label Chime as "crypto-friendly."

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The future of Banks and Cryptocurrencies:

As the complexity of bitcoin and blockchain technology grows, these technologies offer enormous potential for consumers to invest in and utilize various kinds of digital money for products and services via online vendors, all with the click of a button. However, although cryptocurrencies provide enormous convenience, they also carry a significant level of risk and volatility. Should Bitcoin continue to be used as a widespread form of cash, as a networked form of money, it might displace fiat money, rendering banks obsolete.

Despite this danger, we're witnessing a growth in cryptocurrency adoption from banks as they recognize the potential of blockchain technology and customer readiness to utilize digital currencies. Banks and cryptocurrency's future is unknown, but as technology progresses, we may see more banks engage in bitcoin and blockchain technology initiatives.

 

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