A financial professional paid $10 to his bank for making more than six saving withdrawals. Later, he admitted that using Bitcoin 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 Bitcoin. 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 Bitcoin.
“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 Bitcoin, short the Bankers @APompliano #disruption #RentSeekingMiddlemen
— Pat Chirchirillo (@PatChirchirillo) January 30, 2019
“Long Bitcoin, 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 bitcoin 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 Bitcoin, 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 Bitcoin which has four inputs would require fee than sending 1 Bitcoin which has one input.
75 Bitcoin Transactions in $10
In retrospective, cryptocurrencies are much more accessible than banks. Using a bitcoin 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 told 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.
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