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I wonder why this happened. Visa is primarily a technology company - not a financial institution. It's incentivesed to keep fraud on visa cards low (so that mer

I wonder why this happened. Visa is primarily a technology company - not a financial institution. It's incentivesed to keep fraud on visa cards low (so that merchants continue to accept it) and keep its ecosystem of issuers + acquirers happy. If I'm not missing anything, I believe this must have happened because of unusually high levels of fraud on Bitcoin visa cards. Certain acquirers might've complained about abnormal amounts of "shady" volume from WaveCrest BINs. Alternatively, Visa might have seen a settlement risk on WaveCrest's end. I.e. Visa might be worried that fluctuations in BTCs price would put WaveCrest in a position that they wouldn't be able to settle funds with Visa (and consequently the acquirers + merchants). Any other ideas on what could've prompted this? I think if this was anti-BTC regulatory action, the prompt to turn off these cards would've come from WaveCrest's banking partners and not Visa.

Kazamai 9y ago
Tether
- jaxytee 9y ago
  Exactly. The SEC has said they consider crytpos securities. That would mean the fraudulent price manipulation in the crytpo space (Bitfinex treating tether as USD and pushing up the bid) is securities fraud. This is probably why Wells Fargo stopped clearing Dollar transactions for Bitfinex.
  - ActsJuvenile 9y ago
    Wire transfer fraud. I am an insider in the Bitcoin industry, and within 1 day of opening a new bank account we started seeing fraudulent wires flooding in. When we dug deeper, it was shocking to see how many Americans' bank credentials have been hacked. It takes almost no effort for a EEU/RUS hacker to send a wire from a hacked bank account. Once the fraudulent wire is sent, rest of the wire transfer system is tediously manual. So wire network participants simply choose to block bank accounts that receive repeated bad wires. This is why Wells Fargo cut out Bitfinex and Visa has decided to stop working with Bitcoin companies. ACH fraud is even more rampant because you can pull money from someone's account without their consent (as long as they don't notice/contest within certain number of days). Coinbase profit margin is 0.5% per trade, so they need to keep their ACH fraud rate below that number to not lose money. ACH fraud rate is well over 1% industry-wide. This is why I strongly believe that Coinbase has to be losing massive amounts to ACH chargebacks.
    - tonyztan 9y ago
      As far as I understand it, Coinbase does not allow a user to fund using ACH unless they first prove control of the bank account by: 1) Providing the username and password for online access to the bank account; or 2) Allowing Coinbase to make two micro-deposits to the bank account, and then providing the correct amounts of the deposits when they are received.
      - benjaminjackman 9y ago
        If some nefarious actor has the users credentials (e.g. username / password) won't they then be able to circumvent both of those checks? Maybe it's possible that so many people are signing up for Coinbase right now that it's flooding out the fraud?
        tonyztan 9y ago
        > "If some nefarious actor has the users credentials (e.g. username / password) won't they then be able to circumvent both of those checks?" They would. However, typical ACH fraud entails pulling money using only the routing and account numbers, which can be found on all paper checks; this mechanism prevents that.
    - throwaway2983 9y ago
      Regarding CB ACH, They had/have a huge exploitable hole in their ACH system that a friend discovered by accident. Long story short, they credited them for a large sum that they never took from his/her account. I won't put the exact detail of how to trigger the error but suffice it to say it was shocking to learn how a system that deals with large sums of real money could fail in such a way (and likely in a repeatable manner although my friend didn't try as repeating it would likely be seen as stealing). It's really quite shocking how a ecosystem that touts decentralization has a glaringly centralized failure point - the fiat exit exchanges. When one or two of them goes, it will bring down the whole house of cards. And given how shitty CB's software was (or maybe still is) I just hope I can get my gains out before the whole thing comes crumbling down.
  - DennisP 9y ago
    The SEC has said they consider some cryptos securities. They've been pretty reasonable about it so far.
    - rspeer 9y ago
      Yes. For example, they've said that you could use a blockchain to keep track of book borrowing in a book club, where people expect to use the blockchain to get books and not to get rich. I do think this is pretty reasonable, but it sounds like you meant something else.
      - DennisP 9y ago
        In addition to those sorts of uses I specifically mean "currency," since in their Dec. 11 statement the SEC says "there are cryptocurrencies that do not appear to be securities." https://www.sec.gov/news/public-statement/statement-clayton-2017-12-11 https://www.sec.gov/news/public-statement/statement-clayton-...
  - keytarsolo 9y ago
    This seems like a pretty sensible decision though, since most cryptos don't really work like a currency they work more like an investment. Especially now that the transaction fees are so high, and the transaction processing time takes so much longer than debit cards, credit cards, paypal or other electronic transfers.
  - arisAlexis 9y ago
    your second sentence is very far from the facts
xorcist 9y ago
In that case it wouldn't have been WaveCrest itself that was dropped. They don't touch the Bitcoin, it's their partners that do (the ones that have their names printed on the card). WaveCrest sells pre-paid cards in general. In the Reddit thread someone pointed to new financial regulation in Gibraltar that took force January 1st but so far they haven't communicated themselves in the matter so it's mostly all speculation.
toomim 9y ago
Bitcoin competes with Visa. It's in Visa's interest to cut it off, while giving only vague "reasons" why, so that we all assume that it's because Bitcoin users have high fraud.

Kazamai 9y ago

Tether

jaxytee 9y ago
Exactly. The SEC has said they consider crytpos securities. That would mean the fraudulent price manipulation in the crytpo space (Bitfinex treating tether as USD and pushing up the bid) is securities fraud. This is probably why Wells Fargo stopped clearing Dollar transactions for Bitfinex.
- ActsJuvenile 9y ago
  Wire transfer fraud. I am an insider in the Bitcoin industry, and within 1 day of opening a new bank account we started seeing fraudulent wires flooding in. When we dug deeper, it was shocking to see how many Americans' bank credentials have been hacked. It takes almost no effort for a EEU/RUS hacker to send a wire from a hacked bank account. Once the fraudulent wire is sent, rest of the wire transfer system is tediously manual. So wire network participants simply choose to block bank accounts that receive repeated bad wires. This is why Wells Fargo cut out Bitfinex and Visa has decided to stop working with Bitcoin companies. ACH fraud is even more rampant because you can pull money from someone's account without their consent (as long as they don't notice/contest within certain number of days). Coinbase profit margin is 0.5% per trade, so they need to keep their ACH fraud rate below that number to not lose money. ACH fraud rate is well over 1% industry-wide. This is why I strongly believe that Coinbase has to be losing massive amounts to ACH chargebacks.
  - tonyztan 9y ago
    As far as I understand it, Coinbase does not allow a user to fund using ACH unless they first prove control of the bank account by: 1) Providing the username and password for online access to the bank account; or 2) Allowing Coinbase to make two micro-deposits to the bank account, and then providing the correct amounts of the deposits when they are received.
    - benjaminjackman 9y ago
      If some nefarious actor has the users credentials (e.g. username / password) won't they then be able to circumvent both of those checks? Maybe it's possible that so many people are signing up for Coinbase right now that it's flooding out the fraud?
      - tonyztan 9y ago
        > "If some nefarious actor has the users credentials (e.g. username / password) won't they then be able to circumvent both of those checks?" They would. However, typical ACH fraud entails pulling money using only the routing and account numbers, which can be found on all paper checks; this mechanism prevents that.
  - throwaway2983 9y ago
    Regarding CB ACH, They had/have a huge exploitable hole in their ACH system that a friend discovered by accident. Long story short, they credited them for a large sum that they never took from his/her account. I won't put the exact detail of how to trigger the error but suffice it to say it was shocking to learn how a system that deals with large sums of real money could fail in such a way (and likely in a repeatable manner although my friend didn't try as repeating it would likely be seen as stealing). It's really quite shocking how a ecosystem that touts decentralization has a glaringly centralized failure point - the fiat exit exchanges. When one or two of them goes, it will bring down the whole house of cards. And given how shitty CB's software was (or maybe still is) I just hope I can get my gains out before the whole thing comes crumbling down.
- DennisP 9y ago
  The SEC has said they consider some cryptos securities. They've been pretty reasonable about it so far.
  - rspeer 9y ago
    Yes. For example, they've said that you could use a blockchain to keep track of book borrowing in a book club, where people expect to use the blockchain to get books and not to get rich. I do think this is pretty reasonable, but it sounds like you meant something else.
    - DennisP 9y ago
      In addition to those sorts of uses I specifically mean "currency," since in their Dec. 11 statement the SEC says "there are cryptocurrencies that do not appear to be securities." https://www.sec.gov/news/public-statement/statement-clayton-2017-12-11 https://www.sec.gov/news/public-statement/statement-clayton-...
- keytarsolo 9y ago
  This seems like a pretty sensible decision though, since most cryptos don't really work like a currency they work more like an investment. Especially now that the transaction fees are so high, and the transaction processing time takes so much longer than debit cards, credit cards, paypal or other electronic transfers.
- arisAlexis 9y ago
  your second sentence is very far from the facts

xorcist 9y ago

In that case it wouldn't have been WaveCrest itself that was dropped. They don't touch the Bitcoin, it's their partners that do (the ones that have their names printed on the card). WaveCrest sells pre-paid cards in general. In the Reddit thread someone pointed to new financial regulation in Gibraltar that took force January 1st but so far they haven't communicated themselves in the matter so it's mostly all speculation.

toomim 9y ago

Bitcoin competes with Visa. It's in Visa's interest to cut it off, while giving only vague "reasons" why, so that we all assume that it's because Bitcoin users have high fraud.