Fiat, Banks and the future of Cryptocurrencies

[pvk444]

As probably most people on this forum, I am fairly active in investing and trading in cryptocurrencies. I had some luck and made a little money with it, but I am now concerned to move some of the gains back to fiat.

In particular, I am working for a large, global bank (which shall remain unnamed for now). They are in the process of setting up new guidelines to deal with clients that engage in cryptocurrency markets. For instance, they are monitoring money inflow from cryptoexchanges and would reject any money that comes from non-approved exchanges (in particular those that don't have strong KYC procedures). Furthermore, for larger amounts, they would even require some proof how the gain was obtained.

A couple of critical items I want to raise for discussion:

1. If somebody has experienced such complications with their banks already, it would be interesting to hear about their stories
2. If more and more banks adapt similar measures (or even stricter ones, like some credit card companies disallowing financing of cryptos all together), what do you think the implications on the market place will be? For instance, do you think exchange without KYC's will suffer?
3. Do you think this could lead to "ICO heavens" where only ICO's will have a chance to survive that undergo a stringent background check that would be acceptable for banks?

I do understand the banks concern to ensure that there is no money laundering or criminal financing involved, but such restrictive, strict measures could have a significant impact on the entire cryptocurrency market. In a doomsday scenario, I could even imagine banks globally to impose similar restrictions worldwide, and thus even killing the entire cryptomarket. The fact that more and more internet shops, service providers, or even brick-and-mortar shops might accept cryptocurrencies does not really solve the problem, as these shops would be forced by THEIR banks to impose stricter measures on their clients. Thus the problem remains, but would be shifted along the chain.  Do you think such a scenario is plausible?

this is the most obvious fud attempt I have ever seen on this forum. if you want to share some insight, well please do but saying that you made some money but you will probably exchange it back to fiat it's like calling to go short from your side haha

I am not one for swearing, but you, sir, are a fucking idiot!

[pvk444]

Hi,

I don't really think that the issue for banks is about money laundering. Because this happens in some countries and large, worldwide banks have no issues being involved, as long as they make profit. I rather think that they see bitcoin as a threat.

I don't really have a solution to offer, but I would say that it is good for cryptos... it means we are on the right tracks, important enough now for traditionnal financial institutions to react.

Not so bad for a geeky tool without any future!

Have you ever seen the internal policies of banks as they relate to their clients dealing in crypto currencies? I have. And what I posted is a paraphrased, shortened version of what some of the large globally operating banks (US, European and Asian banks) have as their policy right now. These banks don't see bitcoin as anything more than a toy for gambling and to hide illegal activities, certainly not as threat  (the blockchain related technologies are quite another matter though). The main concern for them is being caught up in any AML and money laundering scandal.

[pvk444]

...
Now, this banks. It will always be the best way to get that large amount and they could stop anything you want to get through them without you explaining where you get it but there is this limit.
Will it work if I do it in different banks and not overflow the limit or they are all connected somehow?

I think it would be possible to use several banks right now, but only because there is not yet a regulatory requirement to report cash flows from crypto-exchanges. However, I would think if you just opened a few accounts and started to deposit money from crypto-exchanges without having any other regular flows into those accounts, or a history with the bank, then that would equally raise suspicion.

It is seems nearly impossible to move large sums from crypto-exchanges back to bank account(s) without raising any questions.

I wonder how crypto-day traders deal with this problem. They MUST move money back to fiat, to live on. And I know from my bank, they would not accept clients who do day trading in crypto, again, because it's difficult to ensure compliance with money laundering laws.

[Kprawn]

There are many other ways to move bitcoins to fiat, you do not have to work through your Bank. {Do some research and ask

the right questions and you will find the answer} A lot of these methods are not exactly legal, so you should be aware of that.

In most countries there are more than one group of Banks. Some are even "Bitcoin-friendly"  ... I have yet to see one

Bank having total dominance in one specific country. They tried this in Australia and they were taken to court for

uncompetitive behaviour and the people won. 

I am not interested in the "easy" route of illegal methods. And yes, some banks are bitcoin friendly. But the details and nuances here are important. My bank has also no issues accepting even large sums gained from cryptos. It is even know on the street as one of the more liberal banks with regards to ctyptos. I know of one case where somebody invested a few thousand USD in Monero at an early stage, and pulled out a few million. The bank questioned the origin of the money, and this person was able to show the flows from bank to exchange into ripple and bank. So all was OK.

But this "clean" flow is an exception. I have move my funds from one crypto into others and back, including some ICO's etc. There is no chance I would be able to provide a detailed trace to prove that I obtained my gains through legal means and unrelated to any AML.

With regards to the Australian Banks, I don't think it went to court. Do you have a reference?

I know NAB, ANZ, CBA and Westpac were in the spot light  :

https://www.smh.com.au/business/bitcoin-tensions-rise-as-investors-claim-banks-freezing-their-accounts-20171229-p4yy3z.html


And in there, the critical statement is the following:

“Where we cannot verify the origin of transfers we may act to ensure we comply with Australia’s anti money laundering obligations"

Again outlining the challenge that if somebody made large gains in cryptos over time, but cannot provide a detailed trace, they would have troubles getting to the money.

Some of the methods are not "illegal" and I will take an example. I buy 50 items at a reduced prices from a Bitcoin merchant

and sell it for Fiat currencies. If you bargained for a good discount for bulk purchases, you might even make a profit. You

could also pay for a friends dinner at a merchant that accepts Bitcoin and that person can give you the cash. These are

simple examples, but they are ways to get around Banks. {This might be a much slower process, but you will never be

stuck with those bitcoins, because the Banks wants to sabotage Bitcoin.} The same goes for the Banks that sabotaged Bitcoin

by not allowing people to buy bitcoins with their credit card. I use the credit card to buy something else and sell that item

for cash and I buy the bitcoins. Problem solved. {There is always a way, not the easiest... but it is still possible} 

[BillCoin]

First I do not know why it is a problem to transfer some of your profit to fiat,you do not want to pay tax or your crypto exchange does not have KYC?

I think that banks are perhaps the most powerful institutions in the world,and if they want it is very easy for them to strike on cryptocurrency very hard.Imagine that all or most of worlds banks say that buying/selling cryptocurrency becomes illegal,it means no direct money flow from banks to exchanges and vice versa.People would have to find another way to to buy/sell crypto,so only to trade in person or maybe on ATMs.

So far banks still evaluate situation what to do with BTC and cryptocurrency in general,we see some news that they are not still seriously concerned(not losing to much profit I suppose),but if profits star to go down and Lightning Network really improve scalability and make transaction fast&cheap there will be some reaction from banks for sure.

Regarding ICO I do not have any opinion how would such scenario reflected on this kind of business,but in general they will also be affected if banks are set completely negative toward cryptocurrency.

It's not about not paying taxes for fiat, the bank refuses to take the money once it realizes that you earned it from crypto trading, and you can't really pay taxes without declaring that you received the funds from crypto trading.
You can't really bypass it and to transfer the funds into your local banks, the only way you can do that is by doing it illegal( transferring the funds into cash, and slowly use the cash, you can't really pay taxes on bitcoin, and that's the big problem).
Banks won't take the chance as they can't really verify that you weren't involved in money laundering.

[pvk444]

...

Some of the methods are not "illegal" and I will take an example. I buy 50 items at a reduced prices from a Bitcoin merchant

and sell it for Fiat currencies. If you bargained for a good discount for bulk purchases, you might even make a profit. You

could also pay for a friends dinner at a merchant that accepts Bitcoin and that person can give you the cash. These are

simple examples, but they are ways to get around Banks. {This might be a much slower process, but you will never be

stuck with those bitcoins, because the Banks wants to sabotage Bitcoin.} The same goes for the Banks that sabotaged Bitcoin

by not allowing people to buy bitcoins with their credit card. I use the credit card to buy something else and sell that item

for cash and I buy the bitcoins. Problem solved. {There is always a way, not the easiest... but it is still possible}  

I see now where we have the disconnect. I am not talking here about amounts that can be used up on an occasional dinner, but amounts with which to finance your life (i.e. as a regular, decent income) or as a large lump sump.

Take the later, and let's make this concrete. Assume you were lucky enough to have bought sufficient BTC years ago, so that you have now the equivalent of USD 10m sitting in your Coinbase account. You decide that this is more than enough to live on and quit your job. You still will need to use cash (or fiat) to pay the rent, continue shopping where you have been shopping so far and at shops that don't (yet) accept crypto currencies, or you might decide that you want to buy yourself now that Lambo you were dreaming about. What now? The Lambo dealer might only accept hard currency, and not bitcoin. Your landlord, grocery store, tailor etc. the same.

My guess is, you will not be able to get to your money without involving a bank or some finance institution. And unless they are of shoddy character, and unless they are already used to seeing millions being moved in and out of your account for other legitimate reasons, such transactions will raise alarm bells.

Also, the example of the credit card to get cash with which to purchase BTC is fine, except you did not say how you move the cash to an exchange to buy BTC. Ok, for small sums you could do a physical transaction at a local meet-up. But larger sums, and regularly? Again, I don't think there is currently a way to circumvent banks. Either way, moving money INTO the cryptomarket is less problematic. Moving it out again, however, still is.

[Mometaskers]

I've never had issues with my bank before. And I've only cashed out through banks. My cheap ass refuse to pay the fee when cashing out via other methods (there are no fees when cashing out through banks). I've never bought BTC using money from the bank though, that might have been different.

[St4yInTh3D4rk]

In some countries the bank accounts were frozen because of large amount of money transferred into their accounts from the exchange.But in that case people can use localbitcoin where the money transferred from an individual account to our so there is no problem I think.
The regulation will give the solution for these kind of problem so never transfer big amounts until the crypto will be regulated in your country.

[alyssa85]

Use your common sense and be discrete.

Set up several new current accounts to receive fiat money that you are withdrawing from the exchanges. (Don't use your main current account because you don't want to put that at risk).

Then withdraw about $500 worth a week till you have withdrawn all your money. The key is to not trigger the bank's algorithms, so you need a lot of patience.

[pvk444]

Use your common sense and be discrete.

Set up several new current accounts to receive fiat money that you are withdrawing from the exchanges. (Don't use your main current account because you don't want to put that at risk).

Then withdraw about $500 worth a week till you have withdrawn all your money. The key is to not trigger the bank's algorithms, so you need a lot of patience.

Using the example above of wanting to move USD 10m out of crypto into fiat:

With your strategy it takes 20'000 weeks or about 384 years to withdraw USD 10m! Even if you set up 10 accounts and withdrew USD 5000 per week, this strategy takes almost 40 years to get the money out.

[Kronos21]

Use your common sense and be discrete.

Set up several new current accounts to receive fiat money that you are withdrawing from the exchanges. (Don't use your main current account because you don't want to put that at risk).

Then withdraw about $500 worth a week till you have withdrawn all your money. The key is to not trigger the bank's algorithms, so you need a lot of patience.

Using the example above of wanting to move USD 10m out of crypto into fiat:

With your strategy it takes 20'000 weeks or about 384 years to withdraw USD 10m! Even if you set up 10 accounts and withdrew USD 5000 per week, this strategy takes almost 40 years to get the money out.

I do not believe that such money is earned honestly. Therefore, people are used to deceive the state. There are always black exchangers. You can exchange bitcoins for cash without using a Bank account. There are online exchangers that make the translation from private individuals. Such a lot of options. Everyone chooses for themselves is acceptable.

[St4yInTh3D4rk]

Use your common sense and be discrete.

Set up several new current accounts to receive fiat money that you are withdrawing from the exchanges. (Don't use your main current account because you don't want to put that at risk).

Then withdraw about $500 worth a week till you have withdrawn all your money. The key is to not trigger the bank's algorithms, so you need a lot of patience.

Using the example above of wanting to move USD 10m out of crypto into fiat:

With your strategy it takes 20'000 weeks or about 384 years to withdraw USD 10m! Even if you set up 10 accounts and withdrew USD 5000 per week, this strategy takes almost 40 years to get the money out.

Woww if you want to withdraw that much amount into your fiat account surely you will be in a risk.So wait for few more years when you can spend crypto as a direct mode of payment,if you can't wai then you will lose all your money or you have to pay taxes upto 40%.

[pvk444]

Use your common sense and be discrete.

Set up several new current accounts to receive fiat money that you are withdrawing from the exchanges. (Don't use your main current account because you don't want to put that at risk).

Then withdraw about $500 worth a week till you have withdrawn all your money. The key is to not trigger the bank's algorithms, so you need a lot of patience.

Using the example above of wanting to move USD 10m out of crypto into fiat:

With your strategy it takes 20'000 weeks or about 384 years to withdraw USD 10m! Even if you set up 10 accounts and withdrew USD 5000 per week, this strategy takes almost 40 years to get the money out.

Woww if you want to withdraw that much amount into your fiat account surely you will be in a risk.So wait for few more years when you can spend crypto as a direct mode of payment,if you can't wai then you will lose all your money or you have to pay taxes upto 40%.

Yeah, i wish I had that much. Just trying to illustrate a challenge.

And it's really not about the taxes, but the fact that if somebody made really such amounts they are not able to get it out.

[buwaytress]

Fair enough question to ask, OP, even if you're getting quite the blowback on your questions, it's just that I suspect people here feel your intentions aren't as innocent as you present them, so you'll accept the tone of responses.

I don't have much experience of my own to be able to give more than an educated guess at what this future relationships banks will have with cryptos. On one hand, you've got banks that seem to be very keen at least with blockchain tech and Bitcoin as an investment tool - probably not fully realising or understanding that Bitcoin threatens their very existence. On the other, as you note, KYC/AML processes are tightening, not easing up - and this trend will be happening whether we like it or not.

It is important I think to remember that banks are always interested only in self preservation, and maintaining their relevance to state economy and the reliance of money on banks. So we might note that this behaviour is partially motivated by the derisking strategies of banks, as well as their eagerness to comply with national/regional on their ends... sort of making amends for their roles in last decade's financial crisis. In other words, they're simply doing this to cover their own asses, not so much to restrict crypto.

[Kprawn]

...

Some of the methods are not "illegal" and I will take an example. I buy 50 items at a reduced prices from a Bitcoin merchant

and sell it for Fiat currencies. If you bargained for a good discount for bulk purchases, you might even make a profit. You

could also pay for a friends dinner at a merchant that accepts Bitcoin and that person can give you the cash. These are

simple examples, but they are ways to get around Banks. {This might be a much slower process, but you will never be

stuck with those bitcoins, because the Banks wants to sabotage Bitcoin.} The same goes for the Banks that sabotaged Bitcoin

by not allowing people to buy bitcoins with their credit card. I use the credit card to buy something else and sell that item

for cash and I buy the bitcoins. Problem solved. {There is always a way, not the easiest... but it is still possible}  

I see now where we have the disconnect. I am not talking here about amounts that can be used up on an occasional dinner, but amounts with which to finance your life (i.e. as a regular, decent income) or as a large lump sump.

Take the later, and let's make this concrete. Assume you were lucky enough to have bought sufficient BTC years ago, so that you have now the equivalent of USD 10m sitting in your Coinbase account. You decide that this is more than enough to live on and quit your job. You still will need to use cash (or fiat) to pay the rent, continue shopping where you have been shopping so far and at shops that don't (yet) accept crypto currencies, or you might decide that you want to buy yourself now that Lambo you were dreaming about. What now? The Lambo dealer might only accept hard currency, and not bitcoin. Your landlord, grocery store, tailor etc. the same.

My guess is, you will not be able to get to your money without involving a bank or some finance institution. And unless they are of shoddy character, and unless they are already used to seeing millions being moved in and out of your account for other legitimate reasons, such transactions will raise alarm bells.

Also, the example of the credit card to get cash with which to purchase BTC is fine, except you did not say how you move the cash to an exchange to buy BTC. Ok, for small sums you could do a physical transaction at a local meet-up. But larger sums, and regularly? Again, I don't think there is currently a way to circumvent banks. Either way, moving money INTO the cryptomarket is less problematic. Moving it out again, however, still is.

The problem with large amounts are more complex. Even if you found a way to get past those Banks, you still need to get it

past the tax collector.  They will audit you and then you will have to explain those big purchases. {If you can even buy

that with large amounts of cash these days} You are f@cked either way, no matter what you do. I would still do it my way,

but I would do it like you would be eating an Elephant.... small pieces, day by day. 

[motoprose]

There are things that could interfere with those who are wanting to transfer their value of crypto into fiat currency.
It all depends on the country in which you reside in to be honest.
I am talking about the tax implications that the government can impose upon you once you do transfer the crypto into their own local currency.
Along with many other things that the banks can nail on you since now you have a paper trail with those transactions so to track you down.
Obviously your bank has all your personal information and they do work with the government when it comes to claiming the revenue an individual has accummulated in relation to their annual income.

[Hydrogen]

AIM/AOL blocked the blockchain.info domain which prevented me from receiving 2FA emails to login to my blockchain wallet. This was maybe 6 months ago? I don't know if AOL is owned by banks but there could be emerging anti bitcoin and anti crypto measures silently being tested and implemented. I know my state in the USA is also pushing anti crypto currency legislation quietly.

I wouldn't mind if crypto exchanges operated out of servers hosted in international waters or neutral legal territory which protected them from the demands of foreign nations, similar to what thepiratebay and others have done in the past. I think that might be too dangerous to pursue. But for countries like russia which are being hit with economic sanctions, they might have the influence and chutzpah to make something like that happen. It could be profitable enough to be cost effective.

[gambitcoin53]

first of all, why bother in transacting with banks? once you have transferred bitcoin into fiats using banks, your account is no longer anonymous, they can even trace your online transaction then forward you to government tax departments, why bother doing business with banks when there are blockhains and online wallet that you can convert it anonymously. banks and cryptos does not work together, they never will. if you are planning to transfer small amounts using banks, it is useless because it will be taxed, if you want huge amount to be transferred, you will be convicted of money laundering or hoarding, they will question you where did you get all that money, then you will be taxed, again.

[entrepmind23]

In our country, some banks already act negatively about cryptocurrencies. There have been some news on social media circulating about some people getting their accounts close because they are involved in cryptocurrency trading. If they trace your account sending and receiving large amount of money but below the amount that will alert AMLA, they would then ask the account holder to show some proof where he got his money and if he will say about bitcoin, they would close the account of that holder and say it is not allowed but when they are ask about that rule, they cannot show anything. The account holder then ask the central bank about it and they said that there is no particular rule about cryptocurrencies being illegal. Our central bank are even granting licences to some companies involved in cryptocurrency so it just shows that some banks are against it because it is a threat to them.

[jhongzjhong]

first of all, why bother in transacting with banks? once you have transferred bitcoin into fiats using banks, your account is no longer anonymous, they can even trace your online transaction then forward you to government tax departments, why bother doing business with banks when there are blockhains and online wallet that you can convert it anonymously. banks and cryptos does not work together, they never will. if you are planning to transfer small amounts using banks, it is useless because it will be taxed, if you want huge amount to be transferred, you will be convicted of money laundering or hoarding, they will question you where did you get all that money, then you will be taxed, again.

Yes, you are right why we should bother our self about transferring fiat to the bank through bitcoin cryptocurrency that we all know banks and crypto will not work together. Banks hate crypto because they think that cryptos as there big competitive when it comes money saving or bypass money without knowing by our governments or not traceable to them. Here our country we are not involving banks to claim our fiat from bitcoin through blockchain wallet apps we convert bitcoin into fiat and we may claim any remittances, by claiming our fiat through remittance that the time we pay the tax.