Why people will find it harder to buy bitcoins after CBDC launches: response from former BitMEX executive

November 8, 2022 by cryptobreak

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Central bank digital currencies (CBDCs) are seen by many cryptocurrency advocates as a direct adversary to the decentralised crypto market system. But crypto could have an unexpected ally in the fight against CBDC proliferation: commercial banks. This was stated by former BitMEX crypto exchange CEO Arthur Hayes in a recent article. He also shared his prediction on what different CBDC models might look like and why banks don’t like them. And he also made it clear that it will be much more difficult to buy full-fledged crypto once CBDC is up and running, as governments are unlikely to approve it. We tell you more about what’s going on.

When to buy cryptocurrencies

According to Cointelegraph sources, CBDCs are currently in various stages of development around the world. At the same time, crypto fans worry that CBDC’s digital currencies project implies full control of the state over money and the ability of every citizen to make purchases of certain goods, services or assets.

However, there are not only crypto enthusiasts among CBDC’s opponents. Commercial banks are likely to be in solidarity with them as well, Hayes is confident. Here’s his relevant rejoinder.

I believe that the apathy of the majority will allow governments to easily take physical cash away from us and replace it with CBDC, leading to a utopia (or anti-utopia) of financial oversight. But we have an unexpected ally that I believe will hinder the government’s ability to implement the most effective CBDC architecture for population control. That ally is commercial banks.

Former BitMEX CEO Arthur Hayes

Hayes also named the best period to buy bitcoins. Here’s his quote.

If any of this dum-porn is resonating with you, while not owning even a small percentage of your liquid capital in BTC, in which case the best day to buy Bitcoin was yesterday.

In his article, Hayes mentioned the three CBDC development models previously highlighted by Bank for International Settlements experts – direct, hybrid and intermediary. They are offshoots of CBDC’s two main operating principles. That is, the CB could resort to one of the following two schemes.

Create a network in which the nodes are commercial banks. The end user has a bank account and the nodes can move data – aka money – around the network. The central bank supports the commercial banks so that they do not go bankrupt;
Create a network with only one node – the central bank. Every citizen has an account directly with the central bank.

Conditional models for CBDC development

In the first case, commercial banks do not benefit from the whole system relying only on the central bank. Still, it would mean an abundance of control at one point and too high a probability of bankruptcy of individual banks, as they would become less important for the system as a whole. However, the CBDC will be a serious adversary for crypto in any case – Hayes notes that politicians will not abandon their attempts to seize full control of the financial flows of the population.

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That said, we don’t think banks should be seen as unambiguous allies of the crypto-world. A prime example of this is the recent innovation by UK bank Santander. Starting next year, it will start blocking payments to crypto exchanges in real time. The bank is also introducing a series of other restrictive measures before the end of 2022.

In particular, from November 15, payments to cryptocurrency exchanges using mobile and online banking will be capped at £1,000 per transaction with a total limit of £3,000 for any 30-day period. The new rules will not affect customers’ ability to withdraw funds from exchanges. A Santander spokesman commented on the news with the following quote.

In recent months we have seen a significant increase in the number of customers in the UK who have been victims of cryptocurrency fraud. We want to do all we can to protect our customers and believe that restricting payments to cryptocurrency exchanges is the best way to keep your money safe.

However, it is worth noting here that everyone has the right to manage their money as they wish. So in this case, the bank more than deserves criticism and customer churn for such decisions.

Santander Bank

Santander will continue to block payments sent to Binance in line with the UK Financial Conduct Authority’s (FCA) tough stance on the exchange, which was banned from operating in the UK in 2021. The FCA said the company was “incapable of effective oversight” and its “complex and high-risk financial products” posed a significant risk to consumers.

This is not the only news about governments’ ties to crypto. In particular, the US Department of Justice the previous day seized more than $3.36 billion worth of bitcoins from a hacker who stole the coins almost a decade ago from the Silk Road darknet trading platform. The man in question is James Zhong, who embezzled more than 50,000 BTC in 2012 – he was found guilty of fraud back in February this year. The cryptocurrency was seized during a police search of his home on November 9, 2021, with the Ministry of Justice only now releasing information about the seizure.

Largest cryptocurrency seizure

According to The Block’s sources, this was the seizure of the largest batch of cryptocurrency and the second largest seizure of property in the history of the Ministry of Justice. As a reminder, Silk Road was once the most famous darknet marketplace, where all sorts of illegal goods, including drugs, were distributed. Silk Road founder Ross Ulbricht is currently serving a life sentence.

We have written about this story in detail in two parts. Here is its beginning and conclusion. We recommend reading it, because usually such high-profile events are very rare.

Silk Road creator Ross Ulbricht

The Ministry of Justice announcement has the following quote from lawyer Damian Williams with his commentary on what happened.

James Zhong committed fraud over a decade ago when he stole about 50,000 BTC from Silk Road. Over the course of almost a decade, the whereabouts of this huge shipment of cryptocurrency has become a mystery worth more than $3.3 billion. Thanks to modern cryptocurrency tracking techniques and good old-fashioned police work, law enforcement found and recovered this impressive stash of criminal proceeds.

In addition to the cryptocurrency wallets, precious metal bullion and over $600,000 in cash were found in the convict’s home. Police found the bulk of the cryptocurrency coins in a safe and “on a single-board computer that was placed under blankets in a popcorn tin stored in a bathroom cabinet.”

Silk Road

Almost a year later, the Ministry of Justice made the seizure public. At the time it was the largest of its kind, but in February this year the record was broken during the arrest of Heather Morgan and Elijah Lichtenstein, a married couple who tried to launder money from the 2016 Bitfinex hack. As a result of the market crash over the past year, Jun’s bitcoins are now worth just over a billion dollars.

We believe that the scenario voiced by Arthur Hayes is indeed possible. However, in that case, those willing to buy and exit crypto would probably just activate P2P transactions and cash deals. So there will still be a way out, and the interaction with coins and tokens will continue.

What do you think about this? Share your opinion in our Millionaire Crypto Chat. There we will talk about other important blockchain-related topics.