A financial professional paid $10 to his bank for making more than six saving withdrawals. Later, he admitted that using ₿itcoin could have been cheaper.
Short the Bankers
Pat Chirchirillo, a financial advisor at Philadelphia-based McAdam Financial, found a 3,233% different between the cost of withdrawals in banks and ₿itcoin. From the look of it, he overreached his withdrawal limits, per a Federal rule called Regulation D which limits per saving account withdrawals by month. As a result, his bank – Bank of America – charged him a $10 fee as an act to ensure that Chirchirillo uses his savings account for just saving.
However, he took the opportunity to compare the banking system with cryptocurrencies like ₿itcoin.
“Bank of America just charged 10 dollars because I made more than [six] transfers between savings and checking this month,” tweeted Chirchirillo. “[Six] transfers with crypto would cost about 30 cents. That’s 3,233% more expensive.”
Bank of America just charged 10 dollars because I made more than 6 transfers between savings and checking this month. 6 transfers with crypto would cost about 30 cents. That's 3,233% more expensive
Long ₿itcoin, short the Bankers
— Pat Chirchirillo (@PatChirchirillo)
“Long ₿itcoin, short the Bankers,” he added.
Comparing Regulation D with Cryptocurrency Protocols
Regulation D is a way of the Fed to ensure that people practice savings more than spendings. The protocol also warrants that banks have a proper amount of currency reserves. This law applies only to people with savings accounts and excuses checking account holders. Like always, breaking it lands a penalty/fee on the concerned savings account holder.
On the other hand, a common cryptocurrency protocol such as that of ₿itcoin does not cater to the Federal securities laws. Its entire purpose is to settle and record payments over a decentralized network, using a native token which can be ₿itcoin, Ether, XRP, or even a stablecoin. In it, the transactions are entirely peer-to-peer. For every settlement that occurs in a cryptocurrency network, users voluntarily add a fee for miners to speed-up their transaction confirmation time.
Also, in cryptocurrency networks, each transaction consists of inputs which determine how much resources it would require to get verified. For instance, sending 1 ₿itcoin which has four inputs would require fee than sending 1 ₿itcoin which has one input.
75 ₿itcoin Transactions in $10
In retrospective, cryptocurrencies are much more accessible than banks. Using a ₿itcoin network, it would take Chirchirillo as low as 75 transactions to pay a $10 fee. In the case of banks, as mentioned above, it just took six.
Banks are still considered too expensive. It is never a piece of good news when 1.7 billion people still do not have access to essential financial services. The Financial Clinic, a business coaching nonprofit, recommended its customers to rely on alternative payment mechanism than banks. The clinic’s executive director Mae Watson Grote had New York Times in 2014:
“When I sat down and looked at my clients’ bank statements and saw that they had paid $110 in fees, I often ended up sending them to the check casher instead.”
Only now, in 2019, a financial advisor sent people to cryptocurrencies instead.
Published at Thu, 31 Jan 2019 00:00:16 +0000
