Large banks in the United States are accused of employing high fee measures and restricting data access to engage in unfair competition with cryptocurrency platforms like Coinbase.
The tension between traditional finance and the cryptocurrency industry is escalating, with banks suspected of secretly obstructing the development of major cryptocurrency exchanges through transfer fees and excessive data limits.
MAIN CONTENT
Large banks in the United States are accused of using high service fees and restricting data access to hinder cryptocurrency platforms like Coinbase and Robinhood.
Despite facing many barriers, cryptocurrency exchanges are still resiliently developing with a series of initiatives such as launching Tokenized stocks and expanding products into Europe.
The market continues to evolve thanks to support from regulators and the trend of widespread cryptocurrency acceptance globally.
Do large banks in the US use high service fees to hinder cryptocurrency?
Large banks like JPMorgan are accused of using excessively high data access fees and transfer fees that hinder modern financial applications, including cryptocurrency platforms.
In a newsletter dated July 31, Alex Rampell, Partner at Andreessen Horowitz, pointed out concerns that these large banks are employing unfair tactics to slow down the adoption of cryptocurrency.
Banks are aiming to implement their own Chokepoint 3.0 — charging insanely high fees to access data or move money to crypto and fintech apps — and, more concerningly, blocking crypto and fintech apps they don’t like.
Alex Rampell, General Partner Andreessen Horowitz, July 31, 2023, a16z.com
Under the influence of the previous Biden administration's financial control measures (Operation Chokepoint 2.0), pressure from traditional banks is increasingly mounting through increased fees and access restrictions for both individual customers and fintech businesses.
What is Operation Chokepoint 3.0?
Operation Chokepoint 3.0 is believed to be a covert effort by US banks to stifle competition by combining high fees and restricting access to fintech applications, especially in the cryptocurrency sector.
This isn’t about revenue—it’s about killing competition.
Alex Rampell, General Partner Andreessen Horowitz, a16z.com
For example, JPMorgan has implemented data access fees for fintech applications, thereby pushing costs up for platforms that rely on this data source, including cryptocurrency startups.
If it suddenly costs 10 USD to move 100 USD into a Coinbase or Robinhood account, the number of users willing to participate will drop significantly. The competitive value of new, user-friendly platforms is threatened when compared to traditional products.
If it suddenly costs 10 USD to move 100 USD into a Coinbase or Robinhood account, maybe fewer people will do it. Or if it costs 10 USD to get a cheaper loan from a fintech, maybe you’ll be forced to take a crappier one from JPM.
Alex Rampell, General Partner Andreessen Horowitz, a16z.com
What evidence is there of US banks pressuring cryptocurrency platforms?
JPMorgan's moves to start charging for customer data access are a specific example. This is not just about creating a new revenue stream but also about eliminating emerging competitors in the cryptocurrency and fintech sectors.
According to Rampell, if traditional banks succeed with this strategy, a domino effect could occur where many other large banks will follow suit. This would cause platforms like Coinbase and Robinhood to face significant financial and customer difficulties in their service expansion plans.
JPMorganChase is an 800 billion USD company. Make no mistake: this isn’t about a new revenue stream. It’s about strangling competition. And if they get away with this, every bank will follow.
Alex Rampell, General Partner Andreessen Horowitz, a16z.com
Barriers such as high transfer fees, preventing personal account linking with cryptocurrency platforms, or blocking access and cutting services will compel consumers to maintain their habits of using traditional banking services instead of fintech or cryptocurrency.
How do cryptocurrency platforms face and adapt to barriers?
Despite pressure from the traditional financial system, cryptocurrency exchanges like Coinbase and Robinhood continue to grow and innovate their service products.
Specifically, Coinbase has researched deploying tokenized securities and derivatives products in the US market. Meanwhile, Robinhood has expanded over 200 types of tokenized stocks and ETFs for customers in 31 European countries.
This resilience is achieved thanks to efforts to build reputation, invest in international legal systems, and receive increasing support from modern regulatory bodies in both the US and Europe.
Despite concerns that JPMorgan is tightening its grip on the cryptocurrency industry, the bank's announcement on July 30 about directly linking bank accounts with Coinbase is a significant step forward, reflecting a shift in the traditional financial sector.
According to information from the US financial sector, July 30, 2023
Despite tightening moves, cryptocurrency platforms are still recording expansion in services, customer scale, and product portfolios. This shows that the industry still has significant growth potential ahead, along with notable shifts from regulators and traditional financial institutions.
What factors help the cryptocurrency industry overcome challenges from traditional banks?
Besides the innovative initiatives from exchanges, support from regulatory bodies such as the Securities and Exchange Commission (SEC) also plays a significant role in maintaining the momentum of the cryptocurrency industry.
For example, under pressure for reform and modernization, the SEC and major regulators in the US and Europe are gradually paving the way for many financial products related to cryptocurrency, such as approving Bitcoin ETF funds, Blockchain-based financial products...
We have observed a strong increase in legalization initiatives and collaboration between exchanges and traditional banks in the US over the past two years, which contributes to minimizing risks, increasing transparency, and promoting legitimacy for the entire cryptocurrency ecosystem.
Report by Chainalysis, 2023
Global demand for DeFi, along with interest from major countries in new products, has provided the cryptocurrency community with a stronger foundation against the pressure from traditional banking giants.
Comparing costs and impacts between traditional banks and cryptocurrency platforms
To better illustrate how traditional banks and cryptocurrency platforms operate money transfer services and approach users, the table below summarizes some notable differences:
Criteria Traditional Banks Cryptocurrency Platforms Transfer Fees 5–20 USD/domestic transaction, 10–50 USD/international transaction (according to Statista report 2022) 0.1%–2% of transaction value, many platforms offer free internal transfers User Data Access Fees 15–100 USD/month/app connecting API (according to some market reports) Mostly free or very low (due to open, decentralized Blockchain) Service Scalability Limited by region, working hours Operates 24/7, no borders Transparency and Audit Mainly relies on third-party audits All transactions recorded On-chain, transparent, easy to verify Product Innovation Factor Slow to change, still conservative Continuously developing new products/fields
Future trend: Will the banking sector collaborate or continue to confront cryptocurrency?
Although recent signs like JPMorgan directly linking with Coinbase indicate a rapprochement, most large banks still appear cautious or continue to support through covert actions such as high fees and blocking data access...
However, the proliferation of DeFi products, Decentralized Autonomous Organizations, NFTs, and asset tokenization forces traditional banks to adapt, engage in dialogue, or form strategic alliances if they do not want to be left behind in the era of global financial digital transformation.
Forecasts for 2024–2025 will be pivotal for the integration of the two sectors. Those who adapt slowly will fall behind in technology and customers, while pioneers who create ecosystems will shape the future of finance.
Deloitte's in-depth report on digital finance trends, 2023
Legalization, standardization, and enhanced risk control are necessary trends that help parties feel secure in collaborating, leveraging the advantages of Blockchain and traditional finance to create a multidimensional, fair, and user-friendly financial ecosystem for global users.
Frequently Asked Questions
How are large banks in the United States accused of hindering the cryptocurrency industry?
Large banks like JPMorgan are accused of charging unusually high access fees for data and money transfers, restricting account access, creating barriers for platforms like Coinbase and Robinhood.
How does Operation Chokepoint 3.0 differ from previous measures?
Operation Chokepoint 3.0 is believed to be implemented by the banks themselves, rather than regulators, focusing on tightening fees and limiting services to compete with fintech and cryptocurrency platforms.
How do cryptocurrency platforms respond to barriers from banks?
Platforms like Coinbase and Robinhood are expanding services, launching Tokenized stock products, enhancing collaborations in Europe, and improving legal compliance to maintain growth.
What is the difference in transfer fees between cryptocurrency platforms and banks?
Transfer fees on cryptocurrency platforms are often much lower than traditional banks and transactions are faster and more transparent.
What role does the SEC play in supporting the development of the cryptocurrency industry?
The SEC contributes to guiding and legitimizing new financial products related to Blockchain, helping the cryptocurrency industry gain wider access and increasing legal legitimacy.
Has there been any change in the approach of large banks towards the cryptocurrency industry?
Some traditional banks have begun pilot collaborations, such as JPMorgan connecting its system with Coinbase, although most remain cautious about this sector.
What factors help the cryptocurrency industry overcome barriers from traditional banks?
Technological advancement, global DeFi demand, and support from new regulations help cryptocurrency continuously grow, despite challenges.
Source: https://tintucbitcoin.com/tac-dong-operation-chokepoint-3-0-crypto/
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