As banks declare war on cryptocurrency, will they end up harming themselves?

The free market. It's the true indicator of any freely capitalist society. Yet, every free market economy has some limitations on said freedom. Some limitations are indeed beneficial to society as a whole, but some recent restrictions, imposed by some of America's largest banks, are of a more dubious nature.

Major banks such as Chase and Citibank have recently imposed restrictions on the purchasing of cryptocurrency with credit cards. This begs the question - why?

The banks will say it is to protect the consumer. The bank - yes, that ever-watchful guardian, protecting clients from debt that could enslave them. Wait... isn't this essentially the whole point of banks issuing debt? After all, banks can not really make a whole lot of money unless their clientele are perpetually indebted to them. This is why banks will offer you more than you can afford to borrow - to the very limit of what they're legally permitted to lend you - far beyond what they ought to morally choose to lend to vulnerable borrowers.

Limits to protect the vulnerable from over-leveraging themselves could be, arguably, a good limitation. If this truly were the case with banks and cryptocurrency, I could see their point to some extent. However, these are the same banks that would gladly lend money to buyers to spend well beyond their means for other goods and services - just not for crypto.

So why not crypto?

Cryptocurrency is a fundamental threat to the bank system. People could literally give up on banks altogether eventually, with a more robust cryptocurrency system. At this point in time, banks are a key way to move fiat to and from cryptocurrency. But if society gets to a point - perhaps ten years from now - where a person is paid in cryptocurrency, purchases goods and services in cryptocurrency, puts their savings into cryptocurrency, and so forth, is there really a need for banks?

Short answer: No.

Eventually, banks as we know them today will have to change, or they will die. They will become the Blockbuster Video of the Netflix era.

So, naturally, many major banks are going to do everything they can to fight against this. However, there will be alternatives. It could be credit unions. It might be online banks that are looking to take advantage of the possible income from less overhead and fees incurred on trades going to and from their accounts. There will be other choices.

And that's the beauty of the free market. Consumers will choose what works best for them, not what works best for the banks. This credit card crackdown might just encourage clients to start looking at alternatives, of which there are many that are freely available to them.

The question is, how many consumers will move to a different service if and when their bank denies them access to cryptocurrency? If a large number of consumers begin to look at alternative means to move their fiat to and from cryptocurrency, banks better change, or they may go the way of the Dodo bird. This is the free market at its best.

Have you been looking into another choice for a bank service since the credit card crackdown? Share your experience and advice in the comments!

*This is not professional trading advice - it's just my opinion!

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