The Strategist

Why leading US banks are afraid of virtual money


02/05/2018 - 13:28



Last Friday, three large US banks banned their customers from buying cryptocurrency using credit cards. JP Morgan Chase & Co., Bank of America and Citigroup fear that customers would not be able to return the bank's money taken from credit cards in the event of a collapse in prices for digital currencies.



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The fall in prices for crypto-currencies in January led to the fact that large banks are increasingly reluctant to approach this risky asset, which is characterized by extremely high volatility. On Friday, three large US banks - JP Morgan Chase & Co., Bank of America and Citigroup - announced that they would no longer allow their credit card holders to buy cryptocurrency for borrowed money.

The reason for this decision is simple. Banks are afraid that in the event of a market collapse, their clients will not be able to pay off their credit card bills. So, in early January, bitcoin cost more than $ 17 thousand, and on Friday the quotes sank to $ 7,7 thousand. This fall prompted banks to act. JP Morgan Chase spokeswoman Mary Jane Rogers said that the bank does not want to take risks and therefore since Saturday, its credit card holders will not be able to use them to purchase digital coins. Earlier, two more major financial companies introduced a similar ban. Capital One Financial Corp did it in January, and Discover Financial Services banned customers from using credit cards to buy bitcoins as early as 2015.

In addition to potential problems related to the volatility of the crypto currency, banks have real problems because of transactions conducted by their clients with these assets. The fact is that American financial regulators require the banking sector to strictly control the movement of customer funds in order to identify potential violations, such as conducting doubtful transactions or financing illegal activities. Experts note that it is sometimes very difficult for banks to track the movement of funds after the usual money was converted into a crypto currency. However, the number of such deals gradually began to decline: according to MasterCard, the number of cross-border payments, often used to buy foreign currencies on foreign online sites, increased by 22% last year, but it began to decrease significantly after the price of crypto currency began to fall.

Investors are also very worried about the security of the crypto-currency market. So, in late January it became known about the largest theft of the crypto currency from the Japanese exchange Coincheck. The amount of theft is estimated at more than $ 500 million.

On Monday, Bloomberg, referring to the South Korean news agency Yonhap News, reported that North Korea is trying to hack South Korean exchanges in order to steal the crypto currency. At the same time, North Korea has already managed to steal crypto-currencies worth "tens of millions of wons," the National Intelligence Agency of the Republic of Korea informed earlier on Monday of South Korean deputies, Bloomberg writes.

source: bloomberg.com




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