Has Chase Begun a Covert War on Bitcoin?

The past several days have seen considerable weakness in the price of bitcoin. The selling was sparked by the revelation that the Chinese government had essentially instructed its financial system to avoid it. Then yesterday it was revealed that China had banned third-party payment companies from doing business with bitcoin exchanges. As far as price is concerned, I have stated repeatedly via Twitter that I think the China news caps the upside in the near-term (baring other material news of course) and that we are in a new range of $650-$1050 per BTC. At roughly $700 where we are now, I think at least 75% of the “China premium” is now out of the price. This sets up a solid risk/reward profile. However, there is one thing in the U.S. that people should be aware of and represents some headline risk if true.

Recently, a friend of mine noted that Chase has threatened to shutdown his business account due to his use of Coinbase (remember Coinbase recently received the largest VC investment in Bitcoin to-date). Apparently, the problem hasn’t been when money moves out of U.S. banking deposits and into the Bitcoin ecosystem, but rather when the currency is converted back to dollars and then deposited back into the Chase accounts. With this already being in my mind, I read the following Reddit post this morning:

Hi everyone,

A few weeks ago, I posted that Chase decided to terminate my account, and they never notified me as to why they would do this. However, I believed it to be Bitcoin-related.

Prior to the termination, my business (BuyAHash.com) had signed a deal with Chase PaymenTech for credit card processing, as PayPal was showing some signs of being anti-Bitcoin. Through that process, I asked my contact at Chase if PaymenTech would follow suit and become problematic with us. He advised us that they wouldn’t, and that the two companies were separate.

Turns out, that is a lie. We just began processing credit cards on our site a few days ago. Over the weekend, we were “Flagged” because of some large purchases (ASICMiner cubes for fiat). We went through their fraud resolution process, and today, I got a notice from them stating that our account would be terminated on 12/30.

Furious, I called up both the analyst at Chase that was doing the investigation, as well as the contact that brokered the agreement (because part of this “Termination process” involves Chase holding $20,000 of sales back in case of chargebacks, as part of their reserve process).

A few minutes ago, I had the analyst call me back, and (for the first time ever), gave me a very clear statement, which is as follows:

*Chase has deemed any activity involving Bitcoin as high-risk, and therefore is banned from our company. This includes both selling Bitcoins, and Bitcoin related hardware.

This was the direct statement from the analyst. Anything that you may have that is involved with Chase that has ever involved Bitcoins is not safe. PaymenTech processes 60% of all US credit card transactions (or so they say), so if you sell anything related to BTC/BTC products, you will need to move your accounts immediately or face termination. The analyst stated that this decision was very, very recent, but is official. He said he’s never dealt with this kind of termination. People may be able to fly under the radar if they haven’t got flagged for anything, but I am certain that as soon as they review your account, they will terminate it as soon as its convenient for them.

TL;DR: Chase looks like its officially adopted an anti-bitcoin stance for merchant/businesses, and deemed them in a high risk category that they will refuse to do business with in the future

Update 1: Please note that this pertains to business accounts/merchant processors only. There are many people that have commented that their personal accounts are fine, despite using CoinBase. If you’re a personal customer, you may not be in jeopardy, but as a business, you really should look elsewhere, as I am not the first business to have drawn the ire of Chase.

The reason for this post is simple. If you are a Bitcoin related business and use Chase for banking, you should immediately inquire whether any of the above is true, and consider moving to a more Bitcoin friendly bank.

In Liberty,
Mike

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7 thoughts on “Has Chase Begun a Covert War on Bitcoin?”

  1. Meh. this is standard practice for a Risk Averse US based Acquirer. Has absolutely NOTHING to do with a covert war. BTC is risky when doing it via credit cards (there are several examples of exchanges going out of business due to high chargeback ratios related to scammers etc.), hence the big old bank has slated it high risk and keeps a 20k rolling reserve. If the exchange goes belly up, Chase get’s stuck with all the fines from the card schemes. Which can run in the hundreds of bucks per transaction easily. Acquiring margins in the US are wafer thin to begin with, and if you have large businesses in your portfolio they are lower still: which is the case at Chase. They do large volumes at low cost, simply because they are US focused and fairly old school too (not a lot of added value). Hence you do not want to have too much risk on your books in that area, and take an averse stance to BTC. You shouldn’t be with them to begin with if you are in BTC.

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  2. Big banks have tons of reasons for why they will cut out anyone dealing with Bitcoin. All the more reason to use it & change banks. I’m amazed at how many savy people still use one of the big 6 banks. I’m not liquid enough to buy into BC yet, but will. China’s decision is no surprise….so what? Their people will go around the government also. I agree with Mike, BITCOIN IS ABOUT FREEDOM.

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  3. This is it. The fight of our lives. Truth is most people don’t want freedom. Especially the Zhedger’s who hate BTC. Flaming old farts and college kids who think Pharaohs with golden wands of monetary authority are still walking around.

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  4. Bitcoin will prevail. This isn’t just another e-currency, this is an entire framework for communicating information and money unlike no other ever before. This is the biggest revolution since linux and the more you use bitcoin the better and more complex you realise it is.

    Look at the following things:

    1) bitcoin can do everything a bank can do

    2) while it’s true that unlike credit cards, btc has no way to chargeback claims, also consider that in the past chargeback scams have defrauded business through payers likes paypal etc. Chargeback doesn’t prevent fraud at all, it moves the person being defrauded from one person to another. Also consider that escrow services do chargeback for far cheaper than credit cards do.

    3) bitcoin isn’t just a currency it’s a protocol that can be used to exchange information, nowhere in the headlines is this even mentioned files and information can be exchanged through bitcoin nobody has even looked at this yet

    4) JPMorgan wouldn’t have tried to patent their own version of bitcoin 170 times, if they didn’t think crypto currency wasn’t the future

    5) Russians wouldn’t have coprighted the bitcoin logo if there wasn’t money in it

    6) The government may well attempt to block bitcoin, and attack it by using rival crypto currencies to attempt to dilute the impact, however this will NOT work because bitcoin protocols can be upgraded.

    7) The government may well try and block the bitcoin protocol using port block and active packet inspection systems like ingress and egress, however, again, this will NOT work because bitcoin can upgrade it’s protocol. In the worst possible scenerio some way to block it will be found within a country. When that happens you can use dark web like TOR and proxies to bypass this censorship.

    8) Bitcoin IS backed by tangibles. You can buy things with bitcoin you can’t buy with ANY other currencies on the dark web. Despite what mainstream media says this will continue to provide bitcoin with liquidity. Just stop and think about this for a second, what is more valuable, something that can be exchanged for drugs or gold you have to take down to a pawnbroker ? Which is easier to exchange?

    9) Bitcoin just needs to get to a critical mass where a few companies provide all items you need to purchase to survive, as soon as that happens, bitcoin will be self sufficient and these companies will be able to keep btc off balance sheet where they will not be obliged to pay taxes, this is as big of an incentive as any for a seller. When this happens, there will be an entire ecosystem of commerce which is not answerable to the government. Furthermore there is NOTHING the government can do about it. When this happens, the government will be cut off from their taxes and will no longer have the credit rating to finance institutions that censor free speech and there WILL be a revolution. Currently over 22,000 companies accept bitcoin, and that number is increasing every day!

    10) Bitcoin can only fail for either of two reasons:
    a) a rival crypto currency offers better features
    b) all of the dark web is closed down which is the source of bitcoin’s liquidity / or the government somehow censors it

    Addressing these points in order: a) will not occur because btc is an upgradable protocol and if such a thing occurs, or a flaw in btc is found, the protocol will upgrade overnight. b) Given that after 4-5 years the government is _still_ trying to shut down pirate bay in the lightweb – and they are still failing, likewise with wikileaks. In the dark web only one of 200+ dark websites they managed to close down was SR, and that was only because the feds got lucky, and busted some guy stupidly ordering fake passports over the net. NSA cannot crack RSA encryption, if they could, why would they be installing backdoors into everything they can? Think about this logically for a second. RSA / SSL is something that US intelligence use to secure their data, would they use it if it was compromised?

    In summary, the best the government will be able to do is try and scare people off bitcoin using newspapers like someone trying to scare flies of a cowpat, and everytime the flies will return and there’s nothing they can do about this. When bitcoin comes of age, it will be the most amazing financial revolution the world has ever seen, which will be as significant and as influential as Unix was to computing.

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  5. this is a war againsr bitcoin, bitcoin will win in the end, bitcoin is a lot more than a currency and payment network, it is a measure of how you value your freedom.

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