U.S. banks are scared.
Or, at least, recent actions taken by the American Banking Association seem like it…
In fact, they’re so upset that we’re seeing something that we haven’t seen since the big three American auto manufacturers were looking to get bailed out by Congress: The CEOs themselves are getting involved in the lobbying effort.
Who controls your money?
What we’re seeing is the playing out of bankers’ biggest fear: loss of control of who stores people’s wealth and handles their transactions.
After all, those make up a huge part of banks’ business models. Banks get people to store money (their purchasing power) at the bank, and the bank turns around and loans that money out with the profit on the interest in the loan payments as the bank’s profit from that process.
You may not also know that banks can make money from credit and debit card processing fees every time someone swipes their card at a store or restaurant (and, to a lesser extent these days, there are the returned check fees when someone bounces a check).
All of those processes come down to who holds and controls the movement of funds.
Who controls our money?
It’s the possibility of a change in their control of these processes that has banks so scared. An article over at Politico notes that bank CEOs are getting involved in the lobbying efforts to keep another player from being able to do what banks have had an exclusive monopoly on: the ability to “pay an annual percentage yield via rewards programs” to people who own stablecoins.
(If you’re new here and are unfamiliar with stablecoins, they are cryptocurrencies that have their value tied to something outside of the crypto world. Many stablecoins tie their value to the U.S. dollar, for example, though other stablecoins peg their values to other things with value. Learn more about stablecoins.)
What’s really at stake
What this really comes down to is who controls the flow of money.
It’s a relatively unknown fact that the people who made the most money from the American gold rush in the 1800s weren’t the prospectors. Not most of them, anyway.
No, the people who made the money were the people who facilitated the prospecting. It was the people selling prospectors food, prospecting supplies, shovels, picks, and other items to help them to prospect. Those were the real winners in that situation.
And in the modern economy, banks have played a similar role in that they are the ones that make sure that money gets moved from your account to Starbucks’s account when you pay $8.00 to get a vente mocha with vanilla soy milk and whipped cream (on your cheat day from your diet, of course).
Banks have also had something close to a monopoly on where people felt comfortable putting their money to keep it liquid and easily accessible while receiving a bit of a return (usually a very little bit of a return) on their money.
So this legislation about crypto exchanges being able to or not being able to pay yields is about control. Banks want to keep their monopoly on being where Americans keep their money. It’s stablecoin yields versus savings accounts.
And remember, the efforts to limit crypto exchanges is an effort to try to force you to do things their way for their benefit. Whether it’s what you’d rather do or not.
Banks want a monopoly on fund flows
There are several reasons why banks want to force you to go with them even if you’d rather use stablecoins (which you control, not them).
Of course, there is the profit from being the gatekeeper. After all, with credit and debit card processing fees, collecting those tolls for moving money from one place to another can be very lucrative.
But banks also have to make up ground for bad decisions that they’ve made. Specifically, as the FDIC noted recently, total unrealized losses for the U.S. banking sector total some $337.1 billion.
And because these losses are “unrealized,” not yet market down on banks’ balance sheets, that third of a trillion dollars in losses is hanging over CEOs’ heads. That’s about as much as the entire banking sector’s profits in a good year… In other words, it’s not chump change! So, of course they’re desperate to keep anything or anyone from competing with one of their biggest income streams.
They’re only looking at their side of things, though. The real issue isn’t what banks want or even why. The real issue is what you want.
Many people want more control over their money. They want more control over what they do with it, where they put it, and how they use it, and banks’ business model puts them in opposition to you having control.
Cryptocurrencies, though, give you control. You buy and sell, you hold, you move them when and where you want to. You are in control, not banks. (And if you remember the Great Financial Crisis, and the bank failures and the bank bailouts, then maybe you can see the appeal of diversifying your savings with cryptocurrencies?)
And you can diversify with cryptocurrencies in a tax-advantaged Digital IRA (get started anytime, day or night). Or start your due diligence by requesting the free Insider’s Guide to Crypto IRAs to find out more.
