As global banks are pulling out of high risk areas, bitcoin seems to be running into a bit of a problem. In the last few weeks, three separate bitcoin exchanges have said they cannot process transactions in dollars as a result of that pullback.
Bitfinex, the largest cryptocurrency exchange by market share, has said that Taiwanese banks are blocking all requests — meaning customers can neither withdraw nor deposit any currencies. Bitfinex is clearly displeased with the situation — so displeased that it actually brought a legal challenge against Wells Fargo & Co., alleging it had refused to process some bitcoin-related transactions through the Taiwanese banks.
That suite was quickly withdrawn with an acknowledgement that Wells Fargo has no legal obligation to serve every customer.
OKCoin International and BTC-e have warned users of disruptions in U.S. dollar transactions.
To change bitcoin into fiat currency, exchanges for bitcoin often have relationships with local banks that rely on larger “correspondent banks” to facilitate wire transfers and process transactions that involve foreign currencies. Global banks have long been wary of even indirect interactions with bitcoin exchanges — particularly in the case they could be held liable if something goes wrong.
J.P. Morgan Chase & Co. prohibits banks it transacts with from dealing with virtual-currency exchanges, for example.
And bitcoin will likely see more regulatory action here in the U.S. — the Securities and Exchange Commission last month rejected two separate proposals for bitcoin-based exchange-traded funds. There is still one more left to go — but most industry watchers don’t think the odds are good. China’s central bank is also considering further limits on bitcoin exchanges — specifically that exchanges need to be able to verify a client’s identity and adhere to banking regulations.
The market value of all cryptocurrencies this month hit a record $30 billion, and 2/3 of that is bitcoin alone. But trading is down, year-over-year, though it has been volatile price-wise since January.