It will only be a matter of time until centralized Bitcoin services will feel the wrath of the traditional financial ecosystem as we know it. Several Bitcoin exchanges have been struggling to find reliable banking partners in recent years and certain banks started halting all transfers involving Bitcoin. But when Bitcoin service providers start freezing funds and banning bank accounts themselves, things are starting to look very worrying.
Circle – Buying and Selling Bitcoin With Traditional Payments
Various Circle users have been reporting strange behaviour by the company in recent weeks. Several payments have been held by Circle for multiple days without so much as an explanation, whereas other users have issued with using their bank accounts for both withdrawals and deposits. Apparently Circle has started to blacklist several bank accounts.
While these are all unconfirmed reports at this time, the trend is worrying, especially when you consider how Circle prides itself upon sending and receiving money in an instantaneous and free manner. However, by creating a centralized payment system on top of Bitcoin, Circle is doing exactly the opposite of what Bitcoin set out to do.
The biggest concern is how service like Circle rely on existing financial infrastructure to facilitate money transfers from all over the world. Using bank accounts and credit cards for online payments has been a hassle since day one, and the financial sector has done absolutely nothing to offer any type of innovation in this regard.
In fact, the exact opposite has taken place, as traditional payment systems in between bank, debtors, creditors and other parties have become even more entwined than ever before. Financial experts often complain it is hard to determine where funds are coming from and where it is going to, as there are so many different steps involved to move money from account A to account B.
As a result, services who rely on this outdated traditional financial structure will have to comply with certain regulatory requirements. Bitcoin companies such as Circle are forced to ask for customer identification, which is then stored on centralized servers. Failing to verify an account may (and most likely, will) result in withdrawals being frozen for a few days and bank accounts being blacklisted from further usage.
One customer report talks about how Circle banned his bank account and associated credit cards, severely limiting access to the services provided by Circle. At first, it seemed like the bank itself had blocked all transfers because they are Bitcoin-related, but it turned out the decision was made by Circle themselves. Needless to say, any company or individual suggesting Circle for Bitcoin purchases to novice users will also feel the effects of these decisions made by the company.
A Cry For Decentralized Bitcoin Buying Services
The major problem with centralized services such as Circle and most Bitcoin exchanges, is that they not only hold customer funds in both fiat and BTC, but they also have the power to blacklist users without valid reason. Granted, there is always a possibility for a bank to block incoming or outgoing transfers, but that possibility will always be there. There is no need for a centralized service to provide an extra opportunity to block funds, especially not without proper communication.
Centralized services have no place in the Bitcoin ecosystem, as companies need to come up with creative ways to earn money by providing a decentralized service. However, falling back to centralized services is a guaranteed way to make money, without having Bitcoin’s best interests at heart. It will be interesting to see whether these drastic actions by Circle will lead to customers looking for alternative options in the near future.
Source: News Tip via Email
Images courtesy of Circle, Shutterstock