In recent months, there has been a growing number of instances across the globe of legacy banks withdrawing their services and support for companies dealing in Bitcoin.
In Bangladesh, the national bank threatened up to 12 years in a very unpleasant Bangladesh prison for doing business with or even educating people about Bitcoin.
In the United Kingdom, just one day before the Crypto Valley Summit, a number of banks pressured the firm that handled Bitcoin accounts into closing any Bitcoin associated accounts. Now it appears that Swedish banks have gotten into the act as well.
Gustav Nipe of New Technology Today indicated that the Swedish banking system is extremely resistant to new technologies, despite the many problems that it has been experiencing, such as the policy of a zero percent interest rate, which never came to be at all.
The low rate he suggests indicates a very slow growth economy. Banks often raise and lower interest rates to stimulate the economy, but the fact that this might no longer appear to be a tool that is available to Riksbank indicates real trouble. If interest rates are not lowered it could begin to cause a lack of trust in the banks, resulting in less loans being made, which translates into less business expansion.
The high interest rates in previous years was one of the reasons why Bitcoin began to catch on in Sweden because it seemed to be inflation proof and its decentralized nature really appealed to Swedes in general.
Finally, the fact that there was no real transmission fees, even for very large transactions, made it popular with the business community. A simple internet connection allowed customers to make payments without all the paperwork and fees that usually come with this activity.
But now it seems that banks are arbitrarily closing accounts of the dozen or so Bitcoin companies. One bank, Länsförsäkringar, announced that they did not want any customers using Bitcoin and Nordea closed the accounts of Bitcoinbolag. Then, in response to questions about the reason, the bank announced that they have no obligation to provide a reason.
Nipe speculated that the reason was a simple fear of competition by the banks from a decentralized currency because Bitcoin can operate outside of the financial system controlled by them:
“We need more entrepreneurs who dare and can develop new payment systems, which are stuck in old ways of thinking. Riksbank's statement on introducing a zero interest rate will continue to raise house prices and bring the economy into a new bubble. The winners are those who speculate healthy and sitting on large loans. Small savers with money in the bank are the losers.”
Keeping the actions of other banks around the world in mind, Nipe may in fact have a valid point. The fact is that for most people, banks are simply a safe place to store assets. The problem is that this storage can cost many consumers a great deal of those assets overtime and bank failures have been happening with increasing regularity over the past century, especially as governments seek more and more deregulation of the financial industry.
Because of the current unpredictability of the banking system, new paradigms such as Bitcoin can serve as a real alternative to their monopolistic system.
St. Louis Fed economist David Andolfatto released a presentation on Bitcoin in April of 2014 and he seemed to agree that Bitcoin did in fact present a threat to the central banks, explaining:
“I do think its existence as a threat is very good: It will discipline the Fed and other central banks to continue to run responsible policies — if they don’t, people could switch to something else. The idea of currency competition: Many countries impose currency controls. In Albania, you would suffer severe consequences if you were caught with U.S. dollars in your pocket. The purpose of currency controls is to stimulate demand for domestic currency, because the central bank and the central government want to exploit the people by inflating excessively, so the threat of currency competition — if a central bank, a government, knew people could stop using domestic currency and flock to an alternative, that would force the government to behave more responsibly.”
But now, we not only see banks refusing and closing accounts, influencing third parties to discriminate, but also threatening users and businesses with prison time such as in the case of Bangladesh. So far none of the larger countries banks have declared open warfare on Bitcoin, but if the last few months is any indication, there may be real trouble on the horizon.
Did you enjoy this article? You may also be interested in reading these ones: