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Bitcoin

This was originally posted as a TransferWise blog in April 2013:

"As you may have noticed, we stopped processing transfers to Bitcoin exchanges this week. We’re very sorry.

In many respects it breaks our heart to have taken this step (we’re a firm that champions financial innovation after all), but we know our banking providers are not comfortable with Bitcoin and want payments to these firms restricted. This is happening everywhere – notably Bitfloor and Bitcoin-24 shut themselves down recently.

The banks – just like everyone else in the sector – are nervous because they don’t know what to think of Bitcoin. The regulators and politicians’ silence on the topic leaves us all in the dark.

Financial firms make choices on the basis of clear rules. Without them, things like Bitcoin fall into the hands of those who use it for illegal activities. This leaves businesses like ours that meet their obligation to anti-money laundering and “Know Your Customer” procedures unable to deal with it.

It’s a shame because Bitcoin offers solutions to some of the absurdities of the traditional banking system. For example, a virtual currency like Bitcoin could dramatically speed up and reduce the cost of sending money abroad. It’s ridiculous that it can take four banks (all taking a cut) over a week to send dollars from a UK company to a Chinese producer. Implementing this change alone could save the real economy billions of pounds in card fees and transaction costs every year.

And it’s not just the big guys that would benefit. It could transform the prospects of millions of small businesses. The reduced cost and simplicity of a digital currency could circumvent laborious bank processes and give small merchants quick, fairly-priced access to online and mobile payments.

But to gain any of these benefits, the financial regulators need to take a stand. They have many questions to answer – how should the banks treat Bitcoin? Should it be regarded as cash or something new? Are new and specifically tailored “Know Your Customer” rules necessary? Unless the banks are told what is expected of them, they will happily keep on blocking Bitcoin, and consequently blocking our hope for financial innovation.

by Kristo Kaarman, TransferWise co-founder"

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