While many countries are considering legislation or policies to induct cryptocurrencies into their economic programs, there are other financial institutions that are worried about the unreliable nature of this digital currency and choosing to stay away from it.
Wells Fargo – one of the largest banks in America – announced on Monday that customers will be unable to use their Wells Fargo authorized credit cards to purchase cryptocurrencies, specifically Bitcoin, or to engage in any cryptocurrency trade. According to a representative from the bank, this initiative has been taken to avoid the risks associated with such an unregulated and unreliable form of currency. He also mentioned, according to the post on Fortune, that they will “continue to evaluate the issue” with consideration to the advancements in the blockchain market. So, perhaps, there is a chance that the decision to ban credit card use to purchase cryptocurrencies could be altered if the market for digital currency stands strong.
Wells Fargo is not the first major bank to express their doubt on the durability of Bitcoin. According to the Fortune website, Wells Fargo is following the footsteps of similar announcements made by other major financial institutions: “J.P. Morgan, Citi, Bank of America and other payment processors.” This implies that if individuals are interested in investing or trading with cryptocurrencies, then they will have to find other platforms willing to loan the required amount. The reason many banks are turning their backs on funding cryptocurrency payments using credit methods is due to the continuous change in the value of Bitcoin which could lead these institutions into financial loss if customers are unavailable to repay their due credit.
The value for Bitcoin is governed by the simple economic theory of supply and demand. It is also a known fact that the price of Bitcoin is unpredictable since it is still a digital currency being established and the market for cryptocurrencies is still growing. Furthermore, the same article on Fortune also stated that the price of Bitcoin has been on a downward slope since 2017. Apparently, the value fell to $6,700 from $7,500 last Monday leading to massive losses for those who were already engaged in the cryptocurrency business.
Wells Fargo decision to disengage implies that the unpredictable nature of Bitcoin prices is making many financial institutions second-guess their involvement. This initiative in the western world is the direct opposite of the ongoing events in the eastern hemisphere, since many Asian countries are considering expansion or increased policy implementation and legislature to support and add cryptocurrencies to their economic goals for the year and, perhaps, for the long term. Unfortunately, if the value of Bitcoin doesn’t return to its original status – those interested in investing or trading will have to find other means of funding their decision.
Wells Fargo – managed by CEO Timothy J. Sloan – is the second largest financial institution in the U.S by market capitalization and the third largest according to total assets. Even with its fair share of scandals, the bank has maintained its position in the Top 5 banks in the United States of America.
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