Why Banks Continue To Block Cryptocurrency Transactions

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The COVID-19 crisis has brought many new users into the world of cryptocurrencies. However, one of the main concerns of users is whether their bank cards can be blocked due to the purchase of a cryptocurrency or when withdrawing funds from a crypto account. Can this risk be avoided?

Since the outbreak of Covid-19 and subsequent people's desire to protect their savings, interest in the cryptocurrency continued to cro ITRE. A survey carried out in June 2020 by The Tokenist revealed that 45% of respondents from 17 countries now prefer to invest in Bitcoin (  BTC  ) rather than in stocks, real estate or gold. In comparison, only 13% were given such an answer in 2017.

But there is one nuance to which clearly not enough attention is paid: Bitcoin's audience growth is due to people who don't know enough about the world of cryptography. Judging by the nature of the questions we have received in recent months, we have realized that it is precisely the fears associated with blocking transactions by banks that often prevent people from actively investing in cryptography.

State interests

In our experience, there are two broad categories of reasons that can lead to blocking cryptocurrency transactions. These are restrictions based on the regulator or the acquirer.

A state may impose limits and / or prohibitions on cryptographic transactions, the conversion of local currencies, and settlements or purchases in foreign currencies.

Argentina is the most striking example of banks blocking crypto operations due to regulatory restrictions. In the fall of 2019, local authorities were first lowered the purchase limit of foreign currencies of $ 10,000 to US $ 200 per month.

The Argentine government then imposed a ban on the purchase of crypto with bank cards, followed by a 30% tax on purchases in foreign currency. As a result, there has been no formal purchase ban on cryptocurrency, but local banks are blocking these transactions.

We have tried to contact Argentinian banks, especially Brubank, to find a solution for our users but have received no response. In such a situation, for regulated cryptography services, the only option is alternative payment systems available on the local market. Consequently, the cryptocurrency purchase transaction will be divided into two phases: a recharge of the local electronic wallet with a bank card, then the purchase of subsequent cryptocurrency from the balance of the wallet. Yes, such a transaction becomes more expensive, but it still guarantees a secure purchase of cryptocurrency. 

 

In other situations, when the freeze is only caused by restrictions on payments and purchases in a foreign currency, there is a solution: you can use a service that has configured transactions to buy cryptocurrencies in the national currency.

A warning against intermediaries

If the regulator, who introduces restrictions, generally thinks of the big picture of the country's economy, the buyers, as representatives of the companies, take care of their own advantages. These financial institutions are trying to prevent transactions that could be challenged such as illegal write-offs.

Consequently, buyers do not like card transactions without 3D Secure (transaction confirmation by SMS or push notification with a unique code). In this case, the acquirers increase the cost of the services and make the transactions financially unprofitable, or completely transfer responsibility for the transactions to the cryptocurrency seller.

This sometimes leads to situations where, for more favorable conditions, the bank indicates to the acquirer that its cards support 3D Secure, when in fact this is not the case. Transactions with such cards will also be blocked, as has happened recently with several banks in Mexico, which has been mentioned by our customers.

Purchasers can also restrict transactions on anonymous and prepaid cards. For example, in Russia, cryptocurrency transactions from cards that do not have a cardholder's name on Yandex.Money or QIWI can be blocked.

Buyers can ban certain types of purchases for the whole country. Recently, such a case occurred with our customers in the United Kingdom. To solve the problem, we have modified the parameters of our anti-fraud system and proven to the purchaser that we carefully monitor the legitimacy of operations: we only accept 3D Secure cards; we only register each user after getting to know your customer; and we use technological methods to protect operations, among other steps. 

As you can see, the development of the crypto industry is impossible without close interaction between the world of traditional finance and regulators. The banks in this system are like visa center workers who give the right to cross the border: some find mistakes in everything, while others warmly welcome crypto users. I hope that in the near future, more banks will follow the example in South Korea and become crypto-friendly.

 

Regulation and Society adoption

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