After achieving some level of success on your speculative cryptocurrency trading, you want to enjoy the fruits of your labors, but cashing out isn’t as easy as buying into the cryptocurrency space.
Why is there a problem?
The problem arises when the cryptocurrency space butts up against the realm of traditional currency and banking spheres. Many of the big exchanges began when cryptocurrency trading was completely unregulated, and the people who traded digital currencies already had them, whether by mining or trading between themselves for goods or services.
While crypto exchanges were in their infancy, there was little interaction between the crypto space and traditional finance. Like-minded individuals may have traded coins for cash but nothing that required any banking intermediary.
There is still the persistent feeling of illegality around cryptocurrency, the stench of the Silk Road is proving particularly difficult to eradicate for legitimate cryptocurrency business.
We have to be honest; cryptocurrency was created for the benefit of financial freedom from government theft. Have you ever heard “tax evasion,” said quite so poetically? However, we phrase it, tax evasion or avoidance is still illegal.
Why aren’t banks playing ball?
Banks have been denouncing cryptocurrency and blockchain technology since the moment some started saying that they could replace established banking practices. While some banks and have begun to come around to the idea of the blockchain, and even holding a less hostile approach to cryptocurrencies, they are still running scared from the idea that cryptocurrencies are gaining ground.
We come back to the issue of regulation, which is a thorny problem for banks and cryptocurrency spheres alike. While the world governments try to regulate the cryptocurrency space, with different levels of success, banks are subject to stringent checks regarding Anti Money Laundering (AML), Counter Terrorist Funding (CTF). Let’s not forget the rigorous Knowing Your Customer (KYC) checks that are required even to open a bank account.
The terrifying point is that all of these regulations and checks require banks and their partners to treat their customers as potential threats. If banks can’t legitimately account for the source of your deposit, they don’t want to touch it. If you insist on making money through risky cryptocurrency trading, they don’t want contact with you, either.
Banks and similar financial institutions are hamstrung by fear of illegality and reprisals from the regulatory bodies. They may be allowed to experiment with blockchain technologies and ‘play in the sandbox’ with cryptocurrencies, but regulatory agencies across the globe don’t want their central banks and economies exposed to the volatility and risk inherent in the cryptocurrency sphere.
What is the solution?
We have the beginnings of a solution in place, right now. It has meant the reduction in the anonymity that cryptocurrency was initially lauded for, but it does mean you might reap the benefits of the 1000% profit you made on your bitcoin investment.
Since bitcoin exploded into the mainstream, in 2017, cryptocurrency exchanges have realized that they need to make some concessions to the banking industry. Implementing AML measures into their policies and carrying out KYC on their clients before they can open accounts, is all going against the founding tenets of the cryptocurrency origins, but is attempting to assist banks in their compliance measures. Some exchanges, at least the ones who do facilitate cryptocurrency to fiat exchange, even insist on proof of ownership of your bank account before they will process your transaction.
How much more does a bank need? DNA?
Some Credit Unions have advertised their acceptance of funds from cashing out of crypto. They have seen the gap in the market and stepped up to fill it.
Unfortunately, the banking world as a whole does not appreciate the measures that are being taken to ensure their compliance.
How can things improve?
Credit unions and payment platforms stepping into the breach between cryptocurrency and its fiat equivalent is a good start. However, until crypto become much more widely functional, we are still held financial hostage by banks and their policies.
To start, a spirit of cooperation between resistant banking circles would be a good beginning. Perhaps with banks sharing their AML, CTF and KYC policies with crypto exchanges in an attempt to find a standard methodology that works for them both, or at least plug the gaps that banks perceive that crypto exchanges leave in their policies.
Ideally, there would be a mutual shift toward cooperation between the two worlds, to bridge the gap, and allow people access to the funds they have earned. Moreover, in some countries, this is happening now. What is needed is a united approach, but until there is a uniform approach to cryptocurrency, in general, there is unlikely to be a united approach to making access far easier than it is right now.
So far the best approach has been to contact your bank directly and inform them that you trade in cryptocurrency and that you want to deposit funds acquired from that employment.
One trick that won’t work is claiming that Coinbase is “coin collectors site.” Banks and compliance officers may not be particularly crypto savvy, but they aren’t completely ignorant