The owner of 50cycles, Scott Snaith is experiencing a banking nightmare after performing some relatively small peer to peer trades on Localbitcoins. Localbitcoins is the most popular peer to peer Bitcoin trading site in the world, where individuals can contact each other and exchange Bitcoin for every fiat payment method imaginable while using an escrow system that ensures minimum scamming. However, Scott Snaith did some deals in excess of USD 10,000, as little as 2 bitcoins, and his bank accounts with Barclays and HSBC were frozen. He received cash in his personal bank accounts in exchange for Bitcoin, but then those personal accounts and a connected business account were frozen.
Scott Snaith says “My two personal bank accounts and business account were frozen for using a well known Bitcoin trading site. No unlawful activity has taken place but just because the word ‘Bitcoin’ was mentioned my accounts were locked instantly. A ‘senior fraud advisor’ then closed my complaint off – leaving me with no choice but to take the issue to the Financial Ombudsman for appeal. This situation is a complete nightmare and the knock-on effects have been unbelievable. One of my staff left as they had just had a baby and couldn’t afford to be in a job that was unable to pay them, which isn’t surprising. I’ll never be able to bank with Barclays again. I’m a professional business owner taking advantage of new financial technologies and it looks like the banks are failing to keep up with their customers’ habits. We are the ones being punished. The banks are deliberately creating obstacles. They are anti-digital currency and displaying a new form of financial discrimination. The message is clear: your funds are not yours”.
Apparently, Scott Snaith had been exchanging the Bitcoin as part of research and development for his business 50cycles, which rewards a cryptocurrency named TOBA for every mile pedaled, about GBP 20 for every 1,000 miles. As seasoned Bitcoin traders know, frozen bank accounts are a common consequence of trading Bitcoin peer to peer, or even trading with an exchange. As Scott Snaith experienced, banks don’t have to give a reason for freezing an account and can hold the money long term or even outright seize it. Banks do this under the guise of protecting customers, while in reality, they are crippling their customers who use Bitcoin.
Perhaps some people would say Scott Snaith would have had better luck if he used his business account instead of his personal account, and the best way would have been to exchange the Bitcoin with an official regulated exchange like Coinbase via his business account. However, as Bitcoin traders know, even when doing everything with business accounts and official exchanges eventually the bank freezes the account anyways.
The most logical explanation that banks have is Bitcoins from Localbitcoins could be from money laundering, but they usually don’t explicitly say this since they are not required to give a reason. Banks have the right to freeze funds at will, that’s in the terms and conditions when people sign up for bank accounts. This logic breaks down when people have their bank accounts frozen even if they’ve only exchanged Bitcoins with an exchange like Coinbase, at that point, it becomes clear that banks have a very negative view of Bitcoin.
This incident and similar incidents that numerous other Bitcoin traders have experienced reveal a strong point of Bitcoin. Banks are centralized and can freeze money and ruin businesses at will. Bitcoin is decentralized, and can never be frozen or seized. This makes Bitcoin a much better option than banks for business and any other financial needs.
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