Coinbase customers are reporting a minor victory in the war banks are waging on cryptocurrency.
In a shocking turn of events, it seems that Chase Bank has started to refund their customer’s additional fees previously added to cryptocurrency transactions. The fees were a result of banks deciding that cryptocurrency transactions fell into the realm of cash advances, a type of charge that comes with an additional fee and much higher interest rates than a traditional transaction.
As a result of the new coding category for cryptocurrency with payment processors, customers have been complaining about surcharges of $5 or even $10 per transaction made using popular cryptocurrency purchasing app Coinbase. This in addition to blocks four large U.S. banks placed on their credit card users, ultimately leading to Coinbase removing the credit card feature for it’s U.S. marketplace.
The tide appears to be turning in the marketplace, because earlier this week, customers started to report that Chase Bank began to refund the additional fees it charged them over the past few months. A minor victory that is long overdue for the bank’s customers, as the initial decision was made without proper warning and served to take advantage of their client base.
Whether or not other large banks will follow suit, has yet to be determined. So, for now, the good news only extends to Chase customer. However, it appears that Chase in addition to refunding fees they collected over the past few months, will no longer charge fees moving forward.
This story breaks just weeks after Chase and Bank of America disclosed in their annual statements that they view cryptocurrency as a legitimate threat to their way of business. While the path forward between the traditional financial industry and cryptocurrency seems rocky at best, its clear banks are not willing to be left behind by the technological revolution that is cryptocurrency.
As always we here at Cryptobase will keep you up to date as this story unfolds.
Litecoin Foundation & TokenPay strike a strategic partnership
TokenPay, The self-proclaimed “Bitcoin on steroids” has entered a partnership with the Litecoin Foundation for a 9.9% stake in the WEG Bank in Germany. In May 2018 TokenPay acquired just under 10% of WEG Bank with the option to purchase up to 90% if approved by the regulatory commission of Germany. In a move to leverage Litecoins marketing and technology service TokenPay has handed the 9.9% over to Litecoin in hopes that it will put TokenPay on the map as a major player in the cryptocurrency market.
TokenPay CEO Derek Capo said in a recent statement “We are building an entire ecosystem that includes merchant services, banking, escrow, gaming, e-sports, employment services, etc., where we have entire control of the vertical integration needed to lower costs, but also control our destiny. Litecoin is a top-five blockchain in the world, and boasts more than one million followers worldwide, which helps increase the chances of TokenPay’s ecosystem to succeed.”
What does this mean for TokenPay & Litecoin?
This partnership will provide TPAY access to LTC’s massive user base and will give the users the opportunity to buy, sell & trade as well as gain access to the company’s debit card service. In turn, Litecoin will benefit by having exclusive access to TokenPay’s long-standing bank connections to hopefully integrate the LTC blockchain network into a wide range of monetary associations.
Charlie Lee, CEO of the Litecoin Foundation responded to the partnership by saying “This partnership is a huge win-win for both Litecoin and TokenPay. I’m looking forward to integrating Litecoin with the WEG Bank AG and all the various services it has to offer, to make it simple for anyone to buy and use Litecoin.”
Each company will play a crucial roll in the partnership by focusing on TPAY crypto and its accompanying blockchain as well as the TokenPay multisignature transaction engine, which should accelerate payment and transaction speeds tremendously for both companies.
There is no word yet on exactly when the technology side will be implemented but TokenPay is geared up to make some major moves that include partnering with multiple other financial establishments.
Challenges Await Banks Looking to Expand Into Crypto
In a recent weeks, a widening range of Wall Street titans from Goldman Sachs to the New York Stock Exchange have signaled they are interested in expanding their footprints in the booming cryptocurrency universe in various forms.
While many market observers believe the entry of established Wall Street banks and exchange operators is a positive for the alt-coin space, some analysts believe there are hurdles facing banks looking to expand their presence in the crypto space.
“Centrally cleared cryptocurrency derivatives could be a real-world test of clearinghouses’ margining and default procedures, particularly if derivative notional volumes increase and cryptocurrencies exhibit heightened price volatility,” said Fitch Ratings in a recent note.
Crytpo-related derivatives currently available in the U.S. are mostly confined to Bitcoin futures, which debuted in December on the Cboe and CME. Nasdaq is also considering launching bitcoin futures at some point.
Some big names on Wall Street are embracing digital assets. For example, Goldman Sachs recently made its first cryptocurrency hire and said it plans to use its own capital to trade bitcoin futures for clients. However, Fitch sees challenges for banks looking to venture into digital currency derivatives.
“A dramatic increase in financial institutions’ exposure to cryptocurrency derivatives could challenge clearinghouses and large financial institution clearing members in ways beyond those typically associated with the introduction of new market products,” said the ratings agency. “Cryptocurrencies are prone to extreme price volatility, which has been exacerbated by a nascent, unregulated underlying market with a limited price history and without generally accepted fundamental valuation principles. These factors complicate margin calculations, particularly related to short positions, for which losses cannot be capped.”
Bitcoin futures, which are cash settled, still have light volume relative to other well-known contracts in the futures market.
“As of May 9, 2018, open interests in XBT and BTC were modest at 6,287 and 2,479 contracts, respectively, worth approximately $59 million and $116 million, respectively. However, if challenges associated with trading the cryptocurrency are addressed, including uncertainty over regulatory, tax and legal frameworks, cryptocurrency derivative volumes could grow,” according to Fitch.
JPMorgan Chase Acknowledges The Cryptocurrency Threat
JPMorgan Chase joins the growing list of major banks that acknowledge the threat that cryptocurrency poses to their way of business.
On February 27th, 2018, JPMorgan Chase filed their annual report with the U.S. Securities and Exchange Commission (SEC). In the report they listed cryptocurrencies and peer-to-peer technology as a direct threat to their way of business, citing the potential “disruption” and future cost it could cause the financial industry.
In the annual report, JPMorgan Chase said:
“Furthermore, both financial institutions and their non-banking competitors face the risk that payment processing and other services could be disrupted by technologies, such as cryptocurrencies, that require no intermediation. New technologies have required and could require JPMorgan Chase to spend more to modify or adapt its products to attract and retain clients and customers or to match products and services offered by its competitors, including technology companies.”
The annual statement from JPMorgan Chase, the largest bank in the U.S., comes just one week after Bank of America, the second largest bank in the U.S., made similar claims in their annual statement.
With new information comes a new level of clarity for the recent actions and policies posed by both JPMorgan Chase and Bank of America. Previous to the release of their annual statements, the two financial powerhouses along with two other major U.S. banks started to systematically make it harder for clients to obtain digital assets. Resulting in the popular cryptocurrency purchasing app Coinbase to remove the credit card payment feature for all U.S. based customers and seriously examine it for their other marketplaces.