Cryptocurrencies will never be 'money'

The aspiration of cryptocurrencies to be recognized and used as money has just been dealt another blow, this time in the UK. Chase UK, the digital bank owned by JP Morgan, has informed its approximately 1.6 million customers that as of 16 October they will no longer be able to make crypto transfers via their debit card or bank transfer. Giving a new twist to the precautionary principle, the bank's communication to its clients said if "we think you're making a payment related to crypto assets, we'll decline it....you can try using a different bank or provider instead, but please be cautious, as you may not be able to get the money back if the payment ends up being related to fraud or a scam." The bank attributes its move to a significant rise in cryptocurrency scams; Action Fraud, the UK's national reporting centre for fraud and cybercrime says that crypto fraud went up by more than 40% last year compared to the year before and reached a new high of £306 million ($372.3 million). Jamie Dimon, CEO of JP Morgan, has frequently voiced criticism of cryptocurrencies, called Bitcoin earlier this year a "hyped-up fraud".

Whatever happened to 'caveat emptor'?

Chase is just the latest UK bank to try to protect its customers against themselves. In 2021 TSB started blocking cryptocurrency dealings; the digital bank Starling prevented cryptocurrency transactions last November. At the start of this year HSBC announced a ban on the use of its credit cards to buy cryptocurrencies, followed shortly by NatWest, which set limits on transactions (of £1,000 to £5,000, about $1,200 to $6,100) on cryptocurrency exchanges, to "protect consumers" (it said) against possible losses. The limitation on and/or outright ban on cryptocurrency dealing is not simply about protecting customers from being defrauded; it's also about lowering the risk of duped customers seeking financial compensation from their banks.

But the creeping strangulation that such restrictions represent is dealing a blow to a principle - caveat emptor, or buyer beware - and a practice, the underlying effort of cryptocurrency to become money. The precautionary principle - which came to the fore with a vengeance during the Covid-19 pandemic - is killing off the principle that has until recently ruled many customer-service provider transactions, that principle being buyer beware, caveat emptor. The principle of buyer beware, that it's the buyer's responsibility to ensure a product or service works as it claims to, has been steadily replaced with a new principle, caveat venditor, augmented by the precautionary principle. The financial interests of buyers of almost everything, from automobiles to houses, are protected by regulatory bodies in almost every jurisdiction. Why should cryptocurrency dealings be any different?

The contradictory heart of crypto

Transparency and regulation are essential if fraud is to be combatted and consumers to be protected. Yet transparency and regulation contradict the core ethos of cryptocurrency, whether it is Bitcoin or any other of the more than 22,000 cryptocurrencies currently existing. Bitcoin was created partly as a means of transferring and dealing in value while being beyond the power and/or control of any government or its appointed regulatory bodies. This is one reason why the much-hyped exchange traded funds (ETFs) that are seen by some as breaking the currently stagnant uptake of cryptocurrencies are inherently contradictory - ETFs, especially ones that provide leverage (the chance to borrow multiples) are tightly regulated. Cryptocurrencies are largely unregulated in the UK, although crypto firms operating in the UK will face new rules imposed by the Financial Conduct Authority from 8 October. In the US crypto regulation is currently ambiguous; several regulatory bodies have staked a claim to cryptocurrency oversight.

The long-term ambition of the leading cryptocurrencies, the ones that have gained a strong following, such as Bitcoin, is that they will one day be seen and used as money, replacing the fiat currencies that dominate the world. While computers, contactless cards and smart phones have changed 'money' and how we use it forever, they have not changed one necessity for something to be regarded as money - trust. The scope for abuse of trust in cryptocurrencies is as big as the imagination of the next inventive criminal. The scope for abuse of trust is not on the same scale with gold. Sure, there have been scams and would-be frauds in the gold world. But if you hold gold with Glint - allocated gold, which really belongs to you and not to an intermediary, and gold that can be used as money - then you can be assured that your asset is safe.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.