Barclays Bank, one of the largest banks in the world, has today issued a warning on the nascent digital currency Bitcoin arguing that it is not backed by any government or central bank and the deposits are not insured. The warning follows numerous similar warnings by Consumer Financial Protection Bureaus in the aftermath of the still mysterious downfall of MT Gox.
Barclays urges its customers to beware of hackers and scammers and beware of rate fluctuations as well as general advice such as carefully read the contract and know with who you are dealing. Absent from the warning however is any indication of the risks that Barclays’ customers may face by opening an account with Barclays Bank, such as, for example, that Barclays was Britain’s most complained about bank in 2011 with the Financial Services Authority having recorded 276,315 new customer complaints.
Bitcoin Issues Consumer Warning on Barclays Bank
Unlike Barclays general warning about hackers and scammers which applies to all and any trading activity, the list of complaints against Barclays is very specific and far-reaching. In the 1980s students organized a boycott against Barclays for its involvement with the South African apartheid regime and in 2006 the bank was sued for indirectly supporting the apartheid government.
“Barclays bankrolls Mugabe’s brutal regime” was The Times headline in 2007 detailing numerous loans that saw Mugabe seize white owned land and turn 100,000 black workers homeless as well as ignore EU sanctions on Zimbabwe by providing bank accounts to two Zimbabwean ministers.
Barclays had to pay almost $300 million to the US government in 2010 due to its involvement in circumventing US laws banning financial transactions with Iran. It is further accused of engaging in money laundering as it provided an account to Equatorial Guinea President’s son who siphoned oil revenue from the government to then purchase a Ferrari and maintain a mansion with the funds from his Barclays account.
As “disgraceful” and “insulting” as the bankrolling of brutal regimes and accusations of money laundering are, they pale in comparison to systemic manipulation of the London and European Interbank Offering Rate, Libor and Euribor, which affects everything from loans and mortgages to more complex derivatives. The bank was fined $450 million by the US authorities and the UK’s Financial Service Authority levied the biggest fine it had ever imposed in its history due to “inappropriate submissions” which “affected the fixed rates.”
The list wouldn’t be complete without some allegations of breaching the US Foreign Corrupt Practices Act in 2008, when the bank refused assistance from the UK government and raised capital privately from H.H. Sheikh Mansour bin Zayed Al Nahyan, who invested £3.5 billion in the bank and made a profit of £3.5 billion. The deal, as well as questions in regards to fees and commissions amounting to millions of pounds, is currently under investigation by the Serious Fraud Office and other agencies due to numerous allegations.
And the blunders don’t stop there as we learn today that Barclays has put aside £500 million towards forex-rigging potential fines with the Financial Times placing the bank in reputation rehab as it further faces a lawsuit from a Saudi tycoon who alleges that Barclays has acted “corruptly” in the region.
Bitcoin, the nascent technology conceived on Halloween six years ago, does indeed have some problems as do all new technologies. As more research and development is allocated however, Bitcoin’s incremental improvements are likely to address most of these issues. Barclays problems, on the other hand, are far bigger, far-reaching, systemic, and unfixable. That is why Bitcoin came to us on Halloween as the treat to Barclay’s tricks of alleged corruption, systemic manipulation, fraud, tax avoidance, sanctions avoidance, etcetera. Their general warning, therefore, is highly ironic.
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