Since its inception, bitcoin had troubled banks by disrupting the financial system of the world. Waging a war against banking institutes, bitcoin had received severe opposition from various banks. However, financials institutes rejecting bitcoin due to certain risks have themselves aren’t completely righteous as well. For instance, recently, a Dutch bank, ABN Amro NV got caught in a large scale money laundering scandal.
Apart from not reporting suspicious transactions, ABN Amro Bank NV failed to check its clients. Practices of the bank came out into the light when the Dutch prosecutor opened a criminal probe to extract the truth. The prosecutor also revealed that besides facing scrutiny, the bank will be investigated under Dutch anti-money laundering and terror financing laws as well.
Although ABN Amro NV had been planning provisions for checks and allocating huge budgets to prevent financial crime, the bank couldn’t prevent bad actors from executing their plans. Despite receiving a warning from Netherlands’ central bank a few months ago and dodging the sanctions, ABN Amro Bank NV didn’t take sufficient precautionary steps. In addition to self-harm, the bank had damaged the already struggling repute of banks. As narrated by the analyst Robin van den Broek:
With the low interest rates and a looming recession, the banking sector is already in a very difficult position.The money laundering issue comes on top of that.
Previously, the dutch bank went after the world’s first decentralized cryptocurrency, bitcoin. Regarding bitcoin as an unregulated risky currency, the bank decided to not launch a custodial bitcoin (BTC) wallet called “Wallie”. At that time, the bank‘s senior press officer, Jarco de Swart stated:
We have approached all the people who have shown interest. We have concluded that cryptocurrencies because of their unregulated nature are at the moment too risky assets [sic] for our clients to invest in.
Bitcoin, the world’s largest cryptocurrency by market cap, is a risky asset class due to several reasons. Firstly, the volatile nature of bitcoin makes it extremely risky for investors. As the digital currency is completely decentralized, accepting the fundamentals of supply and demand, the cryptocurrency is skyrocketing on one day but dropping down to the ground on the very next day. Talking with BlockPublisher, Liz Louw, Digital Marketing and Content Strategist, elaborated on the risks involved with digital assets. In this regard, Louw explained:
The prices of virtual goods and products, like real goods and products, constantly fluctuate over time. Any currency, virtual or otherwise, could be subject to large swings in value and at any time might become worthless. As such, the value of your holding may increase or decrease over time. With any type of market-based trading, buying or selling, there is an inherent risk that losses will occur. It follows that you should not hold money you cannot afford to lose in bitcoin or alternative crypto currencies.
Apart from volatile nature, fraudulent practices such as hacks and scams occurring every now and then in the crypto space raise several concerns as well. In the past, it was revealed that bitcoin looted by hackers was way more than possessed by the creator of bitcoin, Satoshi Nakamoto.
Besides, the pseudonymous feature of bitcoin gives too much control to its users. As users capitalizing multiple addresses for making transactions are impossible to track, the misuse of bitcoin is very common. A few months back, people were arrested for utilizing bitcoin on the dark web. They hired a hitman on the dark web to kill lovers of their ex-lovers against bitcoin.
It is surprising to acknowledge that the bank who dropped support for bitcoin wallet because of its risky nature isn’t a safe resort either. Although bitcoin’s volatile nature makes it an extremely risky investment, fiat circulated by the banks isn’t a stable currency either. Subjected to the unstoppable inflation, fiat currencies are bound to devalue over time. So banks bashing bitcoin due to riks concerns aren’t offering a non-risky currency themselves.
Administering complete control over fiat, financial institutes are capable of controlling the circulation of currency according to their interests. Therefore, before regarding bitcoin as a risky asset, banks have a long way to go to prove themselves and fiat as reliable and trustworthy entities.