(Noted News) — The UK’s largest bank is coming down on crypto, hinting at the beginning of a trend. Days after Bitcoin reached its all-time high of $41,941, HSBC announced it would be blocking all cryptocurrency transactions, including payments, and deposits from their digital wallets. This means that anyone who trades or invests in Bitcoin can’t put their profits into an HSBC bank account.
Cryptocurrency investors rely on exchanges and wallets to trade their digital assets, but ultimately need traditional banks to convert their crypto into fiat currencies. Without a bank to receive their profits, holders of crypto run the risk of having all their investments trapped inside an app on their phone.
HSBC’s move against cryptocurrencies coincided with a statement from Britain’s Financial Conduct Authority (FCA) that anyone investing in crypto and other digital assets is at risk of “losing all their money.”
The FCA listed what they viewed as the greatest risks to investing in cryptocurrency, which were: consumer protection, price volatility, product complexity, charges, fees, and marketing materials. Cryptocurrency enthusiasts would argue that those things apply to all investment securities, and with Bitcoin wildly outperforming the stock market by a mile the past year, these risks seem minuscule to many.
In October, the FCA also banned the sale of any crypto derivatives, claiming that the ban would save Brits at least £53 million a year that would otherwise be lost gambling those products.
Sheldon Mills, interim Executive Director of Strategy & Competition at the FCA, said, “This ban reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here.”
“Significant price volatility, combined with the inherent difficulties of valuing crypto assets reliably, places retail consumers at a high risk of suffering losses from trading crypto-derivatives. We have evidence of this happening on a significant scale. The ban provides an appropriate level of protection.”
“The FCA considers these products to be ill-suited for retail consumers due to the harm they pose. These products cannot be reliably valued by retail consumers because of the:
- inherent nature of the underlying assets, which means they have no reliable basis for valuation
- prevalence of market abuse and financial crime in the secondary market (eg cyber theft)
- extreme volatility in crypto asset price movements
- inadequate understanding of crypto assets by retail consumers
- lack of legitimate investment need for retail consumers to invest in these products.”
In the US, people are still free to deposit their crypto gains into a bank account, but as the crypto world gains awareness and popularity, some authorities are trying to keep it in check.
The American based Ripple XRP token faced a move by the Securities and Exchange Commission (SEC) to declare XRP as an “unregistered security” and then slam them with a lawsuit. Since anyone can trade XRP, the SEC essentially deemed Ripple to be selling unapproved investment products and violating investor protection laws. This forced many different exchanges to halt or delist XRP and prevent anyone from investing in it, collapsing most of its value.
Ripple responded to the suit with a 6-page statement challenging the move, arguing that attacking XRP was an attack on American innovation in the industry, and played right into the hands of the Chinese Communist Party.
“Innovation in the cryptocurrency industry will be fully ceded to China. The Bitcoin and Ethereum blockchains are highly susceptible to Chinese control because both are subject to simple majority rule, whereas the XRPL prevents comparable centralization.”
XRP’s founders have argued in the past that much of Bitcoin exists on computers in China and is therefore susceptible to seizure by the Chinese government, and their American based token solved that problem.