Opinions

A dubious story about double-charging in Marks & Spencer, the retail home of the British middle classes, is worth examining to make sure similar misconceptions don’t spread in the U.S.

A recap of the informed opinions (and the discussions they generated) on BankThink and AmericanBanker.com this week.

It's not just the anonymity. Like cash and Bitcoin transactions, Liberty Reserve transfers were non-reversible, and that's important to certain merchants.

To survive, Bitcoin businesses will have to do more than "de-anonymize" their operations. They will also have to cope with the loss of the digital currency’s most fundamental characteristic: irrevocability.

While face-to-face interactions may be nowhere near the most common banking transaction these days, they continue to have an inordinate influence on how customers think and feel about a bank. We cannot afford to waste them.

Liberty Deserved? A number of the comments on AmericanBanker.com and BankThink this week were strikingly sympathetic to digital currency issuer Liberty Reserve, which was indicted for alleged money laundering, and its customers. These readers were outraged that the authorities came down so hard on the Costa Rican outfit after serving megabank HSBC with a mere fine for similar money laundering charges. They were also skeptical of the government's explanations of its stance on virtual currencies and fearful for Bitcoin entrepreneurs and users who feel increasingly threatened by government encroachment. Commenting on American Banker Washington Bureau Chief Rob Blackwell's Q&A with Financial Crimes Enforcement Network Director Jennifer Shasky Calvery, one reader questioned her description of Liberty Reserve as the biggest money laundering operation ever. "Did you ask about her selective memory? HSBC's 'pervasively polluted' culture involved more money than Liberty Reserve, for instance." Another commenter saw ulterior motives in the prosecution: "The action against LR [had] nothing to do with money laundering. It was to undermine the growth of Bitcoin which [the government] considers more of a threat than the much greater money laundering by the likes of HSBC (which has more blood on its hands than a 1,000 LRs)." Our own "Monetary Future" columnist, digital currency expert Jon Matonis, noted that Liberty Reserve has been around since 2001, and wondered why the U.S. waited so long to prosecute the company. "Why are their 'crimes' of providing a neutral value transfer service more egregious than they were before?" But at least one reader found the government's position eminently reasonable, writing, "money transmitters need to identify people they transfer money for, and to report suspicious activity...we will either remain serious about money laundering/terrorist financing issues, or we can revert back to our pre-Sept 11 head-in-the-sand mentality." In his own column, Matonis talked to a venture capital fund dedicated to Bitcoin startups that's hired former Treasury officials as advisors, underscoring the increasing importance of compliance smarts to such businesses.

The threat posed by Google's new Gmail money transmission feature will put the onus on banks to deliver the ultimate person-to-person payments experience, which only they can provide.

Public officials talk as if facilitating anonymous financial transactions is in itself somehow nefarious. But there are legitimate reasons to keep online purchases and other activity private.

The crackdown on Liberty Reserve underscores the importance of regulatory expertise to digital currency startups. No wonder Liberty City Ventures (no relation to the indicted company) retained former Treasury officials as advisors.

Either prepaid will move to mobile or prepaid will have to be repositioned toward a more value-added proposition.