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Credit-card firms are becoming reluctant regulators of the web (economist.com)
305 points by mastazi 54 days ago | hide | past | favorite | 275 comments



I don't think they're that reluctant, honestly.

But it goes beyond credit card companies too. It applies to the whole banking system.

It will soon be the case where the majority of Americans live in states where recreational cannabis is legal (it was ~1 in 3 last year but NY, NJ and others will push it over). Yet you can't use a credit card to buy cannabis pretty much anywhere AFAIK.

Worse, dispensaries have to operate on an all-cash basis because they simply can't get bank accounts.

Granted, the legality of cannabis is a grey area since states allow it but the Federal government still maintains it as illegal.

I personally don't like the financial system being gatekept for legal activity this way.

Whether or not they could is a legal question. It seems though they're happy to appease politicians and "values" voters by virtue signaling on these issues, however.

As for sex work, in particular, this one is tricky. While I fully support body autonomy and in an ideal world, sex-for-money and the like should be legal, it's not that simple in reality. Why? Because the sex industry is deeply tied to human trafficking. I have no idea how to solve that problem.


> Granted, the legality of cannabis is a grey area since states allow it but the Federal government still maintains it as illegal.

This isn't some incidental detail - it's the entire reason why the banking and credit card industry doesn't want to interact with cannabis right now.

Guess who regulates the banking industry and has authority over interstate commerce? The federal government. This particular example has nothing to do with credit card companies making a statement against cannabis, and everything to do with them not wanting to break the law.


> This isn't some incidental detail - it's the entire reason why the banking and credit card industry doesn't want to interact with cannabis right now.

FYI - Banks do work with cannabis in states where it's legal. Those banks just can't be national banks - they have to be state ones that are regulated by the state. In other words, Chase/BoA/etc. can't touch it because they operate at the federal level and are highly regulated.

https://www.riskscout.com/post/the-state-of-cannabis-banking


The moment they’re legally allowed to they will be all over legal weed. It’s not like the finance industry has any issues profiting from other recreational substances, such as alcohol or tobacco.


Agreed. Any suggestion that “the banks won’t deal with $GROUP even though they could be making money” is an allegation that the banks aren’t actually very profit-motivated. This allegation seems unlikely to me.

As far as I can tell, the stuff the banks won’t touch is either legally risky (weed) or financially risky.


It's strange. On one hand banks and payment processors have been shown to bow to public pressure and turn away money in exchange for a little PR, but on the other hand banks also have no problems working with terrorists and cartels which are very much legally risky.

https://www.forbes.com/sites/afontevecchia/2012/07/16/hsbc-h...


The financially risky stuff they're usually willing to take on too, but the folks providing the service usually find the associated interchange fees unreasonable.


Exactly. Companies like CCBill specialize in high-risk transactions and will handle anything legal, but your fees might be as high as 14.5%!

https://ccbill.com/pricing


So they why do payment processors (paypal in particular) avoid firearms stuff? That's big business and the consumers involved pretty much all have discretionary income by definition. You'd think they'd be all over that.


Because gun purchases are a high chargeback risk; this is explicitly the reason that PayPal gives. I had a colleague of mine have a debit card stolen from them and then used to try and purchase a handgun. Given the criminal utility of a firearm purchased under a fake name with a stolen card, I doubt this is a rare problem.

(PayPal also cannot be used for cigarettes or porn, so they have a policy of avoiding what they see as high risk items, including items regularly handled by other card professors)

On the flip side Amazon will sell all kinds of firearm related accessories, just not the firearm itself or ammunition, presumably because they're not actually a FFL and can't handle the legal requirements.


Cannabis is legal in Canada, and indeed you can use credit and debit cards to buy it without any issue whatsoever.


Absolutely.

My last employer was just as happy to bid on jobs building grow ops as they were solar farms, all while maintaining the insurance mandated drug testing policy.


You don't give the banking industry enough credit here. They are involved in designing the legislation/regulations governing themselves.

The market for legal marijuana projected to be $100B by 2030. If the banks want a piece of that pie, then they will change the rules and "fix" the problem.

https://flowhub.com/cannabis-industry-statistics


The US is an exception in its fragmented banking system. Usually there's no conflict of legality between state and federal government, and banks are consolidated in a few big players that are pretty eager to satisfy business owners demands so having bank accounts is not usually an issue (even for somewhat-illegal or unregulated market business). Even startups nowadays are getting fast access to corporate credit cards.

But credit cards are on scope of an entirely different order of magnitude compared to a local bank checking account. Visa and Mastercard are global authorities on cashflow. And this is exactly why they're accidentally becoming regulators, they transcend the US weirdly fragmented banking system.


The clothing manufacturing industry is also deeply tied to human trafficking, but no one is talking about banning credit card transactions at the Nike store.


I had no idea that human trafficking in the garment industry was a thing.

https://www.borgenmagazine.com/textile-industry/


There is no US law against that.


Yeah, there’s a big difference between “dudes with guns will throw me in prison for this” and “as a company we cannot in good conscience contribute to xxx.”

Banks and CC companies by usual standards are staying out of things more than average. If it’s not a risk to their liberty or wallets the financial sector is happy to stand back and watch all sorts of awful things.


And frankly, I don't want them to project their own morality on my transactions any more than I want Comcast to. It's the job of legislators to decide what is and isn't legal. This is just financial infrastructure.


In the case of adult content, they aren’t doing this because they are morally against it, it’s because there is a lot of porn from human trafficking, underage or simply non consensual (like stolen personal videos or revenge porn). It should not be allowed to profit from these things, so I think it’s right that the bank imposes rules on those sites for them to be able to process credit card transactions.


> It should not be allowed to profit from these things, so I think it’s right that the bank imposes rules on those sites for them to be able to process credit card transactions.

In my opinion it's not the role of the card issuers to make this determination or to implement unilaterally the restrictions. This is a matter of law and should be handled in court.


As for sex work, in particular, this one is tricky. While I fully support body autonomy and in an ideal world, sex-for-money and the like should be legal, it's not that simple in reality. Why? Because the sex industry is deeply tied to human trafficking. I have no idea how to solve that problem.

You can't solve that problem, but I believe you could mitigate it by making prostitution legal. Funny thing is that prostitution is legal at the federal level, it's just that all the states except Nevada have laws against it. So it's kind of the opposite of cannabis, and if the credit card companies wanted to be consistent in following federal law they would allow it.


The Netherlands can serve as a counter-example to your wrongly held belief


> The Netherlands can serve as a counter-example to your wrongly held belief

This is vague. What are you saying? Please cite sources for whatever position you’re presenting (I’m not trying to be argumentative; truly can’t tell).


Parent has unbased beliefs, and I should do the work of doing the leg work for him?

For those that has yet to learn about the Googles, then they should know that sex work is legal in the Nethelands: https://www.government.nl/topics/prostitution, yet human trafficking for prostitution is still a very real problem there: https://www.dutchnews.nl/news/2017/10/some-6000-people-a-yea...


I was initially going to say the same thing, but then I reflected on what I saw in the past.

In a very real sense, government required compliance effectively forces banks into a gatekeeper position. And while some BSA enforcers do act in their interest the same any group does ( cops, politicians, IC, doctors ) by extending their reach and influence, others are wary of expanding it beyond current regime ( which is already pretty onerous ).

It does help that banks tend to get very sensitive about some things as they do rely on deposits to survive. In one of the banks I used to work for, teller BSA training included a mention to be sensitive about customers and questions along with a story of a teller, who prodded a little beyond what the customer deemed acceptable and who then proceeded to close the account with 'none of your god damn business'.

What I am saying is that things are only the way they are, because we allow it that way. Cash is still a viable, albeit annoying choice.

And banks have been complacent until now, but the cost of complacency seems to be going up.

All that said, ABA better gets it shit together. Between high compliance burden on banks combined with low to non-existent compliance on fintech startups can quickly amount to real trouble for the banking system in US.


I find it remarkable that in the same post where you criticize those who would maintain bans on drug purchases, you end up finding your own reasons why to maintain a ban on a different vice. But sex work has externalities I guess is how you might respond, but drug bans are also based on arguments of externalized social harm.

At first I thought you were going to give an argument for removing financial gatekeeping, which I think is an inappropriate point to apply leverage towards moral ends. But -- and this is the heart of the problem everywhere -- you end up picking and choosing between vices. This maintains the processor's position as the morality enforcer, which is the entire issue: it's just one more thing that power-driven agents can strive to influence.


> ... where you criticize those who would maintain bans on drug purchases, you end up finding your own reasons why to maintain a ban on a different vice.

Well done on missing my point entirely, possibly intentionally. I'm fine with whatever happening between consenting adults. Unfortunately, there's a link between sex work and human trafficking that cannot be ignored [1]:

> Countries with legalized prostitution are associated with higher human trafficking inflows than countries where prostitution is prohibited.

and

> Criminalization of prostitution in Sweden resulted in the shrinking of the prostitution market and the decline of human trafficking inflows.

Sex trafficking impacts people who aren't consenting (including minors).

So what are the negative externalities of cannabis consumption? Long term cannabis abuse can be a problem but pales in comparison to, say, alcohol abuse. Basically, there's no world that makes sense for alcohol to be legal and cannabis not to be.

Also, cannabis legalization has arguably hurt the illegal drug trade [2].

[1]: https://orgs.law.harvard.edu/lids/2014/06/12/does-legalized-...

[2]: https://time.com/3801889/us-legalization-marijuana-trade/


> Well done on missing my point entirely, possibly intentionally.

Nothing you said here illustrates that. You made yourself clear, and clearly you are for cannabis, but only theoretically for sex work between consenting adults, because you see negative effects from sex work that you think make it worth suppressing sex work between consenting adults.

Other people see externalities from cannabis use (although you argue as if you've never heard anyone mention any.) Other people see the fact that companies and banks can't support sex workers as something that causes sex work to be unmonitored and underground.

Neither of those last things are the point I'm making. The point I'm making and that the person you replied to was making is that you're having the debate. You don't have a problem in using the ability to receive payments or bank to prevent or encourage behavior, your problem is that you personally are not the regulator.


This is not compelling, and it's you who has missed the point. I can lay down as many links, and provide as many stats, as you want about the societal harms of drug use.

Is that how we should be deciding who gets to charge a credit card?

This is like the ring from LOTR: throw it out altogether, because there is no way to use its power responsibly.


> you end up finding your own reasons why to maintain a ban on a different vice.

From my understanding, based on that 2018 rule, the executives at CC processors are personally liable if they process money for sex work. Like "you are an accomplice to human trafficking" guilty.


Dispensaries are getting wise too. Even though you can't use a credit card anywhere, they have found a way for you to use a debit card. Basically it's just like an ATM withdrawl but they tie it into the checkout flow so to you the customer, its just like you paid with a debit card.


I've used a credit card at dispensaries many times. Details in this comment: https://news.ycombinator.com/item?id=28829949


The credit card companies, like every heavily regulated industry works like the federal government without the rules holding them back. Banking is only the most powerful hammer for it's favorite nails, but has been reluctant to use it much until recently. Once they started removing the gun industry's credit card access, it has slowly creeped everywhere. I am happy because it will only be a matter of time before people move to alternatives like crypto.


> Why? Because the sex industry is deeply tied to human trafficking. I have no idea how to solve that problem.

I mean, drug trafficking is deeply tied to human trafficking, as well, and your post concerns cannabis legalization, which is one way to combat that problem.


Human trafficking isn't happening on Patreon or OnlyFans, though.


+1 the credit-card companies are surprisingly keen to be our morality police.


The reason the payments industry doesn't like sex isn't human trafficking. It's the high fraud and charge back rate.

When your parent or partner finds out you paid for an OnlyFans membership, you lie and tell them you lost your card. This happens incredibly often, and payments companies don't want to touch this.


The benefit of public oversight over free trade is accountability via due process. If you manufacture a hot dog and it's contaminated with something, or falsely advertised as kosher or halal, or doesn't meet any of a thousand little constraints in production, maintenance, delivery, and communication about the product, you are held accountable for violating the law.

Sex trade is different because of stigma and culture and prohibition. Stigma and culture have to change through education, activism, and time, but prohibition can be dealt with immediately. Create a robust framework of protections for sex work, protecting the rights of workers, and incorporate the industry into the existing legal system.

Getting rid of trafficking, pimps, and lack of recourse for workers and consumers negates far greater harms than any moral social corruption predicted by pearl clutchers.

The same applies to almost everything which society tries to cope with through prohibition. Black markets spawn second class dealers in vice, money and trade off book to the detriment of everyone except kingpins and corrupt agents of government and law enforcement. The vulnerable and desperate get locked into feedback loops of abuse and exploitation.

Legalizing all drugs and sex work almost completely eliminates the niches that perpetuate black markets. Forcing banks and legal jurisdictions to treat trade in vice equally to any other economic activity gives society the opportunity to treat drug abuse as a health issue. It enables sex workers to receive justice for abuse. It virtually eliminates the primary sources of income for cartels and kingpins. It forces culture to adapt, eventually allowing activists the opportunity to destigmatize responsible activities of adults in private.

We have laws that protect consumers and service providers, that give resource for violence and theft and fraud. It shouldn't matter what substance or sex act or hot dog brand was involved if a citizen is injured.

Adults have no business telling other adults what they can consume, or do in private. The business of government is behavior in public and in maintaining the rights of citizens in private.

We have ample and overwhelming evidence that prohibition always creates more harm than good, across thousands of years of history. It never works and always creates opportunities for abuse and horror. We also know that legalized vice results in more responsible use and less frequent consumption and fewer harms across the board.

It should be a no brainer. We should have responsible drug use education. We should have public sex work education.

Financial institutions crafting pseudo-moral gatekeeping policy from the whims of executives, pr departments, and Twitter outrage is a disgusting offense against society.


> Yet you can't use a credit card to buy cannabis pretty much anywhere AFAIK.

Every dispensary I've visited here in the northeast accepts cash and debit cards, I assume they don't accept credit due to higher processing fees and higher risk of chargebacks rather than processors being problematic (otherwise they would not accept debit since they get ran through the same system anyway).


That's not true at all. I live in the northeast and my dispensary simply can not take credit cards even if they wanted to; credit card companies are liable for the transaction and they don't want to run up against federal law.

Some dispensaries can take debit card transactions, and they have to do so through "high risk" processors... companies like Square will not work with them because of federal law.


Its hyper regional. And when processing solutions are found, they may be gone the next month. You see a similar situation with groups like Eaze in the SFBA. Some months they just don't have a debit option, some months they do.


>credit card companies are liable for the transaction and they don't want to run up against federal law.

This. And while it's obviously not the same thing at all, since cannabis is a schedule 1[0] substance, the US government could treat processing credit card transactions for cannabis companies the same as they treated HSBC[1] or worse.

As such, until cannabis is moved off of schedule 1, Congress acts to make cannabis legal at the federal level, and/or the US Department of Justice makes it clear that providing banking services to cannabis companies will not be prosecuted under money laundering laws, US banks won't jump into the pool.

[0] https://www.dea.gov/drug-information/drug-scheduling

[1] https://www.investopedia.com/stock-analysis/2013/investing-n...


Your assumption is wrong, they are being refused by Square, Stripe, etc, etc. CBD are also in a grey zone which cause them tons of problems accepting credit cards. This isn't because of higher processing fees.


Or they are working the system and making an ATM withdrawal look like a debit from the consumer's point of view.


How does that make any sense? I put my card into the reader and it debited from my bank account. I didn't pull cash from an ATM and there was no ATM present in the business.


In my country, one can perform debit card transaction with 'cash back' - if I'm in the grocery store buying $50 of groceries with my debit card, and I also want $30 of cash, they can charge my card $80 and hand me $30 from the drawer.

This was a great boon for banks a few decades ago, as it functionally gave them a huge ATM network for free.

The debit card system understands this sort of transaction, and doesn't charge the normal x% processing fee on the cash withdrawal portion of the transaction.

In other words, retailers can create transactions that are effectively ATM withdrawals - without an ATM.


In California they charge your debit card and return cash change. They even overcharge your card to ensure there is cash to give back. $5 or so.

This turns it into an ATM withdrawal apparently.


And the really nice thing about this is that there are no fees.

If I just need $80 or so (I think the limit is $100), it's faster to go to the local Walmart and buy a candy bar or something and get back $80 cash than to go the closest ATM owned by my bank to avoid the double dipping fees.


Our local grocery store (Fred Meyer, aka Kroger) has started charging a fee to take out extra and get cash back. Not a lot, but a bit annoying. I used to get cash that way all the time, but even for a nominal fee I just avoid that store now. I am weird, yes.


Yeah it makes sense there are no fees for cash back. Walmart doesn't want cash, they want to get rid of it as soon as possible.

The ATM has to be actually refilled with cash, so they charge you for it.


That doesn't really make sense. My bank's ATM has to be refilled with cash and they don't charge me. Likewise, I doubt the Walmart self-checkout is sorting bills and only dispensing $20's: they also have to be loaded with cash separately.

The only charges I encounter are from using my bank's card at another bank's ATM.


It probably depends on the type of account you have with the bank. I certainly don't pay ATM fees so long as I use my bank's own ATM but perhaps there are more bare-bones account types that do.


> Yet you can't use a credit card to buy cannabis pretty much anywhere AFAIK.

You can in the UK. Dispensaries here do accept credit cards.


"anywhere" is basically inside US, not in other countries.

(Yes, I also hate it, but I do concede that America is physically big.)


> Yet you can't use a credit card to buy cannabis pretty much anywhere AFAIK.

The dispensaries I've been to in LA will generally take credit cards now. They round it up to multiples of 5 and give you change in cash, and I think under-the-hood they're doing a cash advance or something?

This doesn't detract from your point; if anything, it reinforces it. Just an interesting factual point.


If they were doing this with credit cards people would know since they'd be hit with a cash advance fee and no grace period on interest.


They take cards, not credit cards.

Those are debit cards; the transaction is a cashback (that's why they give change in cash).


>It will soon be the case where the majority of Americans live in states where recreational cannabis is legal (it was ~1 in 3 last year but NY, NJ and others will push it over). Yet you can't use a credit card to buy cannabis pretty much anywhere AFAIK.

There is not a single state where cannabis is legal, there are only states that have decided they won't enforce federal law.


No states enforce federal laws. The federal government does that. If there is no state law criminalizing cannabis use there it's legal in that state.


No, the feds refusing to prosecute doesn’t make it legal. Federal crimes are crimes everywhere, even in states that don’t have the same crime on their statute books.


The locals generally enforce and investigate and then the feds prosecute.


> There is not a single state where cannabis is legal, there are only states that have decided they won't enforce federal law.

The feds don't really enforce it either. Is there a state the feds have sanctioned over legalization? They even collect federal tax dollars on the businesses selling these "illegal" products. Unless a law is actually enforced, it's just words on paper.


States don't enforce federal law.


Everybody wants to become a "reluctant regulator of the web" if it means them getting a cut of all economic activity (as the new tax man) without any liability

Let us not be naive. The decades long preference for oligopolistic rather than competitive markets is what created behemoths (both new and old) and now the only question is who of them is going to be granted the keys to the digital kingdom by fiat.


They aren't so reluctant. I think they get off on the power of doing this, but that's just me.


What do you mean, "are becoming"? They have always been. If the payment processors don't want to be associated with a service, they'll refuse to handle payments and then there's simply no way for the service providers to get paid. See wikileaks and other "problematic" sites.

Advertisers are also regulators. I've seen sites start heavily censoring themselves because someone complained to Google and they pulled the ads. Stuff like this ruins the web.


In a world where cash is starting to dissapear, payment processors and banking in general should be regulated and treated just like some sort of utility company (Ex: Water, electricity).

Advertising is a different beast altogether. Being able to to exchanges (money for goods, etc) is something quite a basic right(If I can call it that). That doesn't apply to making money though. I don't think it's normal in any way to force anyone to conduct business with someone they don't want to unless is a basic necessity in that particular day and age.


How credit card processing hasn't been classified and regulated as a utility is truly baffling to me. Especially with governments explicitly recommending contactless card payments instead of cash during the pandemic and many doing things like taking large bank notes out of circulation for years now.

We don't need crazy things like crypto - we need decentralised and accountable banks and payment processors (not that the distinction between the two makes any sense either). Speaking of credit card companies: why do they exist?? Why can't my card just sign a digital request for transfer and tell the POS terminal to send it to my bank to be executed. A room of computer science students could write an open standard for that in like a month and have a working implementation within the year.


The Brazilian government created an instant payment system that doesn't depend on payment processors. You can send money to anyone in seconds using their tax id number or their phone numbers, it clears in seconds.

It is named PIX.

All banks implemented it, so, no matter what is your bank you're able to do payments from your smartphone using your banks app.

It is so popular and easy to use that even street merchants accept it.


Awesome! We need more countries implementing systems like that. Once that happens, an international or at least EU standard is hopefully soon to follow.


I thought this was ubiquitous in Europe already: both countries I call home (Denmark and Portugal) have each had their own for a long time now.


Not in my experience, although I haven't done an insane amount or traveling. I've seen local payment systems in a handful of countries, but I don't remember any that were commonly used at POS. I know of a handful, for example, built by a few banks or a mobile network operator, but those have little market penetration due to only working with those providers or their partners (but of course not their largest competitor).


How do they deal with fraud/theft?


Well, the same you do with Credit Cards or other forms of electronic transfer of debts.

In most banks you must first authenticate your smartphone app by going to an ATM where you use your card and some sort of biometrics to authenticate along with your pin. The app can only be used after this first "machine" authentication.

There are also customer-customizable limits, the usual anti-fraud controls. Of course, there is a lot of scams involving people with less instruction, but it is not substantially different from the levels in other types of transfer/payment.


Very badly. It is now extremely common for criminals to force people to log into the bank app and transfer out all liquid assets, no doubt to bank accounts created with stolen identities. What happens after? I'm not sure. I assume the victim has to prove that a crime occurred in order to reverse the transactions.


No different from what could be done and was done before with debit cards, credit cards and standard wire transfers.

Don't give fuel to the FUD.


>Speaking of credit card companies: why do they exist?? Why can't my card just sign a digital request for transfer and tell the POS terminal to send it to my bank to be executed.

Because the POS terminal (or more likely, the payment processor) would have to work with thousands of individual banks. The credit card companies handle that complexity so that payment processors only have to integrate with a handful of credit card companies instead of thousands of banks.


That's because there is no open standard for it, which is mentioned in the following sentence.

> A room of computer science students could write an open standard for that in like a month and have a working implementation within the year.

(While I don't share the optimism regarding the timeframe, I agree with the general sentiment)


There are standards, however making them "open" wouldn't change anything. You've obviously never tried to integrate with a large number of separate entities before.


I have not, I've just clarified the point of the parent in case you misread.

But now I'm curious, what are the challenges with having a large number of entities implement a standard? Is it "just" the shrink-wrap effect of having a few-initial or large players, is it getting the parties involved to even agree to the standard, or what?


You are talking about a many-to-many relationship here. Every payment processor has to ensure their system works with every bank, and vice versa. So the standard defines the data format, great. What happens when Payment Provider #223 has an issue communicating with Bank #16252? On an even bigger scale, who is going to maintain all of the necessary technical info for the parties to all interoperate? Who will handle fraud detection? Who will be liable for fraud that goes undetected?

Credit card companies handle all of that and much more in exchange for transaction fees.


Crypto is the only competition that can force financial innovation in TBTF era.


Innovation isn't what's needed, it's regulation. Making an alternative that does a couple things better but a thousand things worse isn't going to turn a broken market into a free one.

There are multiple types of decentralization and the one we need for finance isn't the "everyone is (theoretically) equal and there are no rules" of crypto but the "distributed network of trusted providers" that we use for things like public key infrastructure and email. People WILL get hacked, lose their wallets, etc. so recovery MUST be possible and like it or not, law enforcement SHOULD have the power to freeze accounts and take back money that doesn't belong to someone.


I believe cyptocurrency has the potential to do everything a 1000 times better.

Take security: with natively programmatic money, security providers can be debundled from currency issuers and payment providers. For example with smart contract wallets it's possible to assign your own guardians which act as security backups and who need to approve all transactions, based on whatever conditions you set, e.g. m of n need to sign to approve >x amount withdrawn within y time frame.

This massively opens the space for competition which inevitably increases quality and efficiency.

It's the same with the security of data: the centralized finance approach has all customer data stored by one party. If that party is compromised, you have a massive leak affecting millions of different people. With programmatic money, digital commerce can work like cash, with no private information disclosed at all, to any one, and no private data being collected in large centralized repositories.

There are also basic institutional advantages with programmatic money on autonomous networks: the rules cannot be changed without consensus, so a rent-seeking party cannot use the network's monopoly status to extract economic rent. A centralized authority, like a regulator or a private company, can always abuse monopolistic control over an industry, meaning that risk will always hang over traditional industries, making them unreliable in the long run.


I'm no apologist for corporate power, but most payment network censorship seems to be driven by government regulations - Wikileaks, sex work, weed, and gambling are all things the government has passed laws to explicitly harm. As such, additional regulation is more likely to cement the current restrictions rather than repudiate them.


Yeah I should know this. I tried to donate to WikiLeaks before. My bank flagged my account and alerted my mother.


Sure, the standard could be made relatively easily, but how do you go about getting every bank to agree on this standard and update their systems to accommodate it, as well as the 10s of millions of POS terminals in the US alone to be updated, as well as all of the major credit card companies, etc.


You get banks to agree by mandating it. Just like the formats of SEPA Credit Transfers are written into law and required by all EU banks to support.

As for rollout: the NFC payment rollout took like a year to get to the point where I haven't encountered any non-NFC terminals since and that required all new hardware. Now that the hardware is out there, adding support for a new system is just a matter of software. At worst, a technician will have to visit every terminal and update the firmware manually (not sure if those things have OTA). "All the major credit card companies" == two, and it wouldn't really matter for their systems anyways since they're not banks, they are now-obsolete middlemen. People could still choose to use cards and vendors would likely still want to support them, there would simply be one more payment option available.

And yes, I agree that this would probably take forever in the US, but they're still using magstripe and the government is too big of a mess to be able to mandate a technical standard or even pass any legislation regarding banking anyways, so I think they have other things to deal with first.


> We don't need crazy things like crypto - we need decentralised and accountable banks and payment processors

Sounds like you're saying we need crypto. Decentralized banks? That's exactly the sort of crazy idea that's just not gonna happen outside of crypto.

> Speaking of credit card companies: why do they exist??

They provide a useful service. They pay for stuff for you, then you pay them back later. This is great because if fraud occurs it's their problem to deal with.


> decentralization => crypto

Banks already are a decentralized system, just not a very good one. I can send a SEPA transfer from any EU account to any other EU account no matter which banks they are with and there isn't a "SCT processing company" that handles that for me, the banks communicate with each other - the system is decentralized. But that transaction takes up to a day for pretty much no reason, so we use payment cards for most things. Those are centralized. If Visa/Mastercard doesn't want to handle my transaction, I'm screwed. If instead cards simply signed an SCT message and my bank refused to process it, I could simply switch banks.

> credit card companies

Yeah, my bad, I should've said payment card companies / card payment processors. For debit card transactions they don't provide any benefit, they are only middlemen between me, the merchant and our respective banks.


Banks are centralized enough to be targets for government intervention. There simply aren't enough nodes in this supposedly decentralized system for the failure of a single node to not matter.

> For debit card transactions they don't provide any benefit

Agree.


If it only we have some kind of country-wide entity that was run by the people through elections and that could create a centralized payment system with open access to everyone....

But no! The state! oh the horror! Cant have state-run things!!!!


Governments the world over are surveiling you without your consent right now. How could you possibly trust them? Centralized economic systems are nothing but yet another state surveillance apparatus. People think it is normal for the state to demand complete identification data on every person businesses transact with. It sacrifices our privacy yet fails to prevent crime. No amount of crime justifies this.

We need decentralized currencies with strong privacy guarantees. There must be so many nodes in operation no single government on earth has any hope of stopping the processing of transactions. Currencies must exist independently of governments, especially their monetary policies. It must be mathematically impossible for them to trace anything. Only then will people be free.


Man. You can't outrun the government. You can vote, you can try armed insurrection. Reform or revolt, those are the choices, and revolt is guaranteed suicide.

Believe me, you can't outrun it with your fancy digital currency with "so many nodes in operation no single government on earth has any hope..." is terribly naive. They can seize the networks man, they can arrest you, they can shoot you. They eat your bitcoin for lunch.


>>>Reform or revolt, those are the choices, and revolt is guaranteed suicide.

Revolt has worked out decently for the Iraqi Kurds and the Taliban. Jury is still out on the Burmese and the Houthis. Libya is a violent mess but technically they successfully overthrew the central government with significant external help, so at the very least that's a non-fail. Just for a few timely and relevant 21st-century examples that disprove your statement of "guaranteed suicide".


> Reform or revolt, those are the choices

There is a third choice. Technology.

Every time some new technology appears, it subverts government controls. They must become even more tyrannical than they already are in order to regain the same level of control they enjoyed before. We'll either end up with an uncontrollable population wielding ubiquitous subversive technology or a totalitarian government which polices every aspect of our digital lives.

Most likely, balance will be found along the way. We're gonna find out just how tyrannical they're willing to become and just how much people really care about their privacy and freedom.


> In a world where cash is starting to dissapear, payment processors and banking in general should be regulated and treated just like some sort of utility company

I'm not sure if you are missing contacts or providing irony. But the fact is payment processors and banking in general is extremely heavily regulated.

A few years ago when you saw almost all banks and payment companies starting to crack down on spending money to buy and sell cryptocurrency, that was to no small extent because federal regulators gave them a little side-eye about the subject. No specific regulations, to be clear, but a few pointed questions.

When every means of sending money overseas demands clear documentation of your identity, That's not so much because banks feel the need to know every detail of your business; it is strictly mandated by federal law. And while my examples all involve US banking, most governments around the world are similarly strict.


I think they're saying the regulations should include not excluding someones legal business because you 'dislike it' ala WikiLeaks.


Todays finance regulators require you to not do business with some people, often without good evidence.

For example, if you do business with wikileaks, you will get a nudge from the regulator to 'reduce the number of high risk clients' you work with... They're not saying it's illegal, but they're also saying they're going to find some regulation to prosecute you with unless you do as they say.

It's a sad state of affairs when these kind of regulations aren't written in stone, but instead are flexible and applied on a case-by-case basis.


This sort of thing is exactly why we need private and anonymous cryptocurrency like Monero.


Is this still the case today, in 2021? I know that Wikileaks was blockaded for several years, but I thought those were all dealt with.


There are different types of regulation. The one that exists now and primarily is regulation such that individual human people cannot transfer or store in to large amounts of money without federal investigation of the source and identity. Banking and processors comply with these rules and generally go overboard making things hard for human people so they can keep their own corporate asses safe.

But the type of regulation that is needed is regulation of the banks and payment processors themselves. Not of their clients or things related to their clients.


I'm not a fan of digital currencies, but this is one of their shining points.


It is supposedly coming, albeit decades late:

https://www.frbservices.org/financial-services/fednow


> Advertising is a different beast altogether.

You are correct. Web advertising is long overdue for some trust-busting. But for some reason, antitrust law is rarely enforced.


This is a recent situation. Back in the early 00's, paying for something online with a credit card, other than porn, was a novelty. I think things started to change in the late 00's.

I remember a LOT of software being sold online (licenses and such) was sold via money orders or sometimes wire transfers.


I was accepting credit cards online from 1994 (although I have to confess now that the business is defunct that the form—which didn't use https(!)—just emailed the entry to me(!)). My first order from Amazon was in 1997 (it was two books: The Psychology of Religion and Varieties of Religious Experience). I bought a number of musical instruments online with credit cards as early as 1998. Buying things from individuals was a bit dicey for a while, with a lot of trust involved where you'd send a check or money order to the seller and hope they'd send the promised merchandise. Paypal did a lot to mitigate that, and I opened my Paypal account in 1999.


That lines up with my recollection.

While it was much less widespread than today, credit cards for ordering from a catalog or e-commerce was becoming quite common by the late 1990s but, as you say, for an individual, it was hard to accept credit cards pre-Paypal. (I had a small software business through about the mid-90s and I eventually was able to accept a credit card through a local reseller but it wasn't at all a routine process.)


The first time I had a customer lose their credit card merchant acct for political incorrectness was in 1997. They put a goat on stage with a "Clinton" sign on it at an event.


In the US/Canada and Japan at least, it’s not that recent Perhaps a novelty in the early 90s - even then, the major online services all had online shopping options. Ebay, PayPal, and Amazon were all growing rapidly by 1999, and the dot-com boom was filled with retail shopping startups that were popular - just not profitable or well managed.


Travel is what enabled CC payments over the net. Airline/train tickets and hotel accomodations and internet payments are a match.


Why would online retail not also be a match? I assume there is are many more online retail transactions than travel related transactions simply because people shop retail more than they travel.


People did not shop online that much, 15 years ago (especially outside USA). But they already had travel booking needs, which could be taken fully online with CC payments over the net.

You could often pay upon delivery even when shopping online, but there's no need of delivery for tickets.


Didn't take long for catalogs and mail order to go away


A web site which offers payment-upon-delivery goods is a glorified mail order, anyway. It does not transform the experience much apart from removing some friction.


> If the payment processors don't want to be associated with a service

Generally financial institutions are happy to take anyone’s money, and lend to them too unless they don’t think they’ll get their money back.

Their regulators can change those criteria though, forcing upon them an unfunded mandate. This is no different than policing entities washing their searches through private entities (e.g. the telecoms).

I consider this a pernicious trend.


> I've seen sites start heavily censoring themselves because someone complained to Google and they pulled the ads. Stuff like this ruins the web.

You mean my web is ruined because I don't see more those ads selling the newest crypto ponzi scheme which promises 10000% yearly returns?

Let's deal with it, if advertising was totally uncensored that would be a nightmare for average user.


More like your web is ruined because the site that tries to write about some controversial topic has to stay less controversial else they can't make money by showing ads.


People can blog just fine without having to make money off them you know, and of those making doing it for the money the vast majority have to censor themselves to be able to grow and maintain their audience in the first place.

Somewhat obviously, you don't actually get a lot of people willing to pay for your content if you hold truly unpopular opinions.


This bugs the crap out of me, it sounds like "waaaahhh I can't rake in ad money being a provocateur". So deal with it. Get a day job. Accept that large chunks of society will hate you (that's the goal anyway, right?) and that your business won't be welcome.


They should still have access to basic banking services, as a utility.

Would you think it's okay if their water company tried to cut them off?


I was responding to a comment about making money from ads, but a similar line of thought works for banking services, I think.

Suppose that your use of the water service was creating public lashback against the water utility for "supporting" your business. A loud minority is pestering the water board members and complaining that what you're doing ought to be illegal even if it isn't strictly yet. Some are pressuring other big water users to reexamine their contracts with the utility, and someone even managed to talk a pump supplier into severing their relationship with the utility. A different minority is yelling stuff about "rights" and making trouble at board meetings.

The easiest possible thing to do in this situation is to find some vaguely plausible reason to cut your access to the public utility, and tell you that you have to truck your water in yourself from now on. Note that this kind of stuff actually happens to farmers, refineries, and other businesses.

As far as what's "right"... Damn if I know. None of this is happening in a vacuum, and these decisions end up being made by people who are accountable to and influenced by their family, friends, and community for the choices that they make. Clear laws can dilute that responsibility, but only to a point.


> I was responding to a comment about making money from ads, but a similar line of thought works for banking services, I think.

It depends on what level the ads are being cut. But sure, that can be different.

> As far as what's "right"... Damn if I know.

I stand pretty firmly on "everyone deserves access to utilities".

Maybe with a throttle at a certain level if they're abusing the utility itself.

So charging more to big water users is usually fine, refusing to deal at all is rarely fine.

The point at which someone is acting so badly they need to be removed from utilities, where fines aren't even enough, is the point where they should be going to prison. And then they should have access restored upon release.

And sending money in a simple electronic way should be a utility in the US.


And they should, for their own protection; they will be taken down hard if they are found to be complicit in financing things like terrorism and child pornography.

When it comes to the recent events around Pornhub and Onlyfans, the payment processors erred on the side of caution, because those two customers of theirs couldn't for definite guarantee that nothing shady was going on on their websites.


"nothing shady was going on on their websites"

There is more childporn on Facebook than Pornhub, you know why? Because pornhub requires an ID. But Facebook is untouchable because it's too big.

If they were concerned about 'shady', they would shut down Wells Fargo for fraud


> they will be taken down hard if they are found to be complicit

How can the provider of vital infrastructure be complicit in anything? Is the engineer who designed and built a bridge complicit when a criminal crosses it?

They should be considered neutral. Just like information carriers are considered neutral. Not liable for what goes on inside their networks. Searching for and punishing anyone violating any law is up to the authorities and they must do that without violating everyone else's privacy no matter how frustrating it must be for them.


More than ten years ago since Visa, Mastercard etc blocked access to WikiLeaks: https://wikileaks.org/Banking-Blockade.html.

I guess they started blocking things The Economist care about.


Yeah, and didn't seem reluctant at all at the time.


they just shrugged back then

"But calibrating that response raises questions of principle, practice and priority. Businesses will go their own way. Some, such as PayPal, Visa and MasterCard, which handled donations to WikiLeaks, and Amazon, which provided web-hosting services, have dumped it as a customer in response to American outrage. More may follow. They risk attacks from its fans, just as those that refuse face hostility from their customers in America. Too bad: business is full of hard choices."

https://www.economist.com/leaders/2010/12/09/the-right-react...


I remember this whole thing. No one was ever reluctant! It happened pretty quickly.


Every single time there’s a HN discussion about censorship and I comment about how we shouldn’t be okay with censorship of anyone regardless of how offensive they might be or whether or not it’s some private corporation and usually it gets downvoted. When the wind starts blowing the opposite direction, only then do people wake up.


So you demand freedom for all ... except those that are using their freedom in the way you dont like.

For the avoidence of doubt, I am talking about the freedom to not have someone in your house / your company platform.


No, they demand a principled balance between the two freedoms, that's independent of the content of the speech. What you're talking about is what's status quo - freedom for private businesses to not serve someone, except when it contradicts certain narratives, at which point it becomes a national news story about bigoted business owners.


Saying the balance should be predicated on ignoring the content of the speech makes sense only if speech itself was a pure function without side-effects, only if saying something truly had no other consequence than it being said can we safely ignore the content.

But the precise content of speech is exactly the part that matters! If a death sentence is read out aloud in verse, or just sent in via a short text message (that is via two very different types of speech) is clearly not very important if the end result in either case is an aid worker being blown up with a Hellfire. Speech very often triggers actions, to ignore this fact is to state nothing may be prevented because judgment is only possible by examining actions committed to reality.


> we shouldn’t be okay with censorship of anyone regardless

That is not a balance, that is an absolute position in favour of one side of the coin ... regardless


The "balance" is based on something that, while explicitly stated, you somehow disregarded: that some--and, by and large, the current legal landscape--considers the freedom of speech right of the platform to censor people, and so to obtain "anyone can say anything" we have to take away "the freedom to not say something"... which we actually already do in various instances (often involving protected classes) and so, personally, I consider that to be a tractable goal to regulate: some things are "utilities" or even "quasi-governmental entities" and should be forced to be something like a common carrier.


So, if i would manage to besiege the city of rome, conquer it and declare the forum romanum mine, and to throw out all the romans. Does that make writing "Romanes eunt domus" an act, that forbids you forever the usage of my conquered streets? M i the conqueror allowed to sentence a citizen to house-arrest, by defining social negative space?


You are as free to forbid the speech as those are free to make the speech.


Social media companies which are actively working with the government to censor opposing view points while also enjoying legal immunity from lawsuits. You think there’s a fair balance of “freedom” here? Should telecom/electricity/railroads also get to ban whoever they like? Did you support net neutrality?


The false equivalence here between your house and your company platform is so ick.


I take it you dont believe them to both be private property?


A home can't take credit card payments.


That was not optional. The gov't forced them.


I would want to see regulations where banks are explicitly forbidden from blocking legal transactions.

If it's legal then banks should have no choice but to handle it.


The biggest problem with this is that we already have regulations than punish banks for processing illegal transactions.

If you don't want that, and you want the banks not to refuse any legal transactions, that's easy. They then don't refuse to process any transactions at all.

If you do want them to refuse illegal transactions, and they're allowed to refuse legal transactions, that makes it easy for the bank because then they just refuse anything marginal even if it's totally legitimate. This is what we have now. It's not a problem for the bank but it's a big problem for the people getting unjustly locked out.

Expecting the bank to process no illegal transactions and all legal transactions is an impossible burden, because nobody actually knows what that means. The meaning of a lot of laws isn't even settled until they get litigated in court and set a precedent. It would require the bank to be infallible, and know everything about everybody's business, because a mistake in either direction would incur penalties.

So which one do you want? (The first one actually looks pretty good when you consider the alternatives. Let the police be the police and the bank be the bank.)


Isn't that a false choice, that's only phrased to cater to the "that makes it easy for the bank"? They are now categorically refusing certain businesses. If those businesses could at least appeal and demonstrate that they are within the law, why wouldn't banks be mandated to process the transactions? This could go with some sort of safe haven for the banks, that if they did this review process that they won't be liable if an illegal transaction slips through. (And sure, some illegal transactions would slip through, but I'm convinced that this is already the case.)


Challenging it in court is an impossible burden for most people, so the most important thing is the default. Do we want the bank to assume you're a criminal, or do we want to assume you're innocent and make the police be the ones to prove if you're not?


The DMCA, with all its faults, outlines a challenge process performed largely outside the courts. Something similar could be done for banks: bank shuts down account for company, company appeals providing some proof, bank files proof somewhere and reinstates. If the bank is then sued by government or third party, it is "safe-havened" by such proof. If proof is found to be false, the company is responsible, not the bank.


Yes, that's sounds like a very reasonable system. I like that it shift burden of law enforcement from banks onto actual law enforcement system with proper checks and balances.


> Something similar could be done for banks: bank shuts down account for company, company appeals providing some proof, bank files proof somewhere and reinstates

You're describing your state banking regulator. Also, like a bajillion federal banking regulators.


Well then, something clearly is not working in that process, if we're here.


> something clearly is not working in that process, if we're here

The article talks about credit card networks. I'm referring to banks. Banks are highly regulated, including with respect to account closures. Credit card networks are much less regulated.

If you want a non-court public venue to dispute your bank on something, anything, you have several such venues. Depending on your state, they can be quite toothsome.


Possibly, but those businesses tend to be the ones that lack political cover and that a large section of the public and political sphere would happily ban anyway.


Parent's point seems like what they're doing here. Trading underage porn is illegal, as well as revenge porn in some places, etc. so they forbid that and allow legal porn. Seems like they really are doing "all legal things and no illegal things" more accurately, and it really is burdensome to everyone.


> Seems like they really are doing "all legal things and no illegal things" more accurately

Well, they're doing that but there's also a huge set of things whose legal status is "shmaybe?", and AnthonyMouse's point is that this is where the defaults matter. Currently, banks tend to merge that third category into "illegal" set. They could merge it into "legal" set instead, which would arguably be better for society.


I guess the question is whether the business they serve is legal. YouTube has some pirated content for sure. The business has rules in place to deal with it, for better or worse, and if someone pays with a credit card to watch something illegal in YT, that doesn’t count as the bank facilitating a crime.

I’m not defending porn as a grand corner of free speech but I don’t like banks deciding who can and cannot be paid.


The counterpoint that a banker would make is that they're forced into this position by Congress, regulators, and prudence.

The alternative that might work is charging businesses fees that vary according to the risk of their transactions being illegal. Which sounds good on paper, but also runs the risk of leaving the bank in the position of making a large amount of fees from illegal activity, which rarely goes over well in court. Better, perhaps, to have a unified fee schedule and just refuse any business that could be unprofitable from liability.

I think the banker would have a strong point here. They're not in a place where these are always easy calls to make - transactions don't come with an evil bit. The constraints placed on them don't leave them a lot of viable choices.


Mastercard's BRAM rules involve blocking quite a lot of things that are legal though - you're not allowed to mention hypnosis, or blood, or vampires in adult content, even in a completely fictional context.


Do you have a link for that? I'm having a frustratingly difficult time trying to find a concise list of the BRAM rules.


Not a public one I can hand out, no. The lack of public transparency around the BRAM rules is also a significant issue imo.


It should not be so much whether it is legal or illegal in the strict sense. The question is whether bank has sufficient evidence to suspect that illegal activity is taking place.

So bank should be held liable if they:

- do not collect evidence

- do not act on evidence

- if they act without evidence

The bank should face appropriate penalties for making misjudgments in both directions. For example, you should have a right to sue bank for refusing to provide a service. The court could judge whether bank had sufficient grounds to refuse to conduct the business with you.

The bank should also provide the evidence to law enforcement to trigger investigation into alleged illegal misconduct. If the judicial systems clears you, then again, you should be able to compel bank to provide the basic financial services.

There is regulation like that for individuals in EU. Banks are obliged by the law to provide basic financial services (bank account and identification services if I recall correctly) to EU residents as part of the European Single Market.


> Banks are obliged by the law to provide basic financial services (bank account and identification services if I recall correctly) to EU residents as part of the European Single Market

While offering a "Basic bank account" is a legal requirement, they have no requirement to offer that service to any specific person. In reality, it typically means that they're offered to people in debt, but not to people the bank doesn't like, american citizens, prisoners, etc.


They do have a requirement to offer basic payment account to all legal EU residents. Even to people who have no legal right to reside in EU, but whose expulsion is impossible.

From DIRECTIVE 2014/92/EU CHAPTER IV, Article 16:

2. Member States shall ensure that consumers legally resident in the Union, including consumers with no fixed address and asylum seekers, and consumers who are not granted a residence permit but whose expulsion is impossible for legal or factual reasons, have the right to open and use a payment account with basic features with credit institutions located in their territory. Such a right shall apply irrespective of the consumer’s place of residence.

Member States may, in full respect of the fundamental freedoms guaranteed by the Treaties, require consumers who wish to open a payment account with basic features in their territory to show a genuine interest in doing so.

Member States shall ensure that the exercise of the right is not made too difficult or burdensome for the consumer.

From: https://europa.eu/youreurope/citizens/consumers/financial-pr...

If you are legally resident in an EU country you are entitled to open a "basic payment account".

When banks can refuse you a basic payment account

You can be refused an account if you do not comply with EU rules on money laundering and terrorist financing.

In some EU countries, you may be refused a basic bank account if you already have a similar account with another bank in the same country.

If you're applying for a basic payment account outside the country where you live, banks in some EU countries may also want you to prove a genuine interest for doing so – for example if you live in one country but work in another.


There is a third way. Financial institutions cannot facilitate money laundering (well...). But they can’t just let that hang. You do due diligence, you’re either happy that the business looks legit enough, or you have doubts . In the latter case you inform authorities, and they sort the question. Either you get the go ahead or you’re dealing with a criminal, and the state takes it out of your hands.

You can imagine a similar model for payments. The bank can’t just indefinitely say “umm not sure”, it has to go one way or the other.


> a mistake in either direction would incur penalties.

It seems reasonable to just make the fines small, and the bank can try to minimize them by having their policies match what a court will find for those which are taken to court.


It's a very difficult task to determine if a transaction is legal or not, sometimes impossible. Regulations differ not only on the country and state level, but sometimes the city level.

For example, can you buy alcohol in Delaware? Well, not if it's Sunday. How about a weekday? Not if it's between 1am and 9am.

Can you buy alcohol in New Jersey on Sunday? Sure, well not if you're in Bergen County.

That's one product. How do you propose these companies codify the entire world's regulations? It would require thousands of people to maintain the rule engine.


So, are you suggesting that credit card firms no longer process liquor transactions? I think it's understood that there are nuanced difficulties, but does that mean they should categorically shut out entire industries? (I feel like for liquor we generally fall on the side of "no".)


The bar should be, is this business legally allowed to conduct business, not finer grained. It’s on the business not not break local laws.


"For example, can you buy alcohol in Delaware?"

Next, TESLA eula will forbid you from going to questionable establishments, and the car will shut off if you arwle going to a strip club.

USSR couldn't dream of this level of surveillance, turns out the trick was to privatise it.


"I am sorry Dave, I am afraid I can't let you do that"

Only it won't be delivered by AI, but by a compliance script tied to geo-blocked locations. It will get extra tricky for cars to navigate when their owners are child molesters and have to stay 10 miles away from houses with children in it.

Onwards to our glorious future!


>If it's legal then banks should have no choice but to handle it.

Right. But banks are regulated by the US Federal government. And according to US federal law[0], possessing and selling cannabis is just as illegal as possessing and selling methamphetamine or heroin.

As such, unless and until that changes, the banks aren't going to involve themselves in what the US Federal government deems a felony, regardless of what the several states do.

[0] https://en.wikipedia.org/wiki/Controlled_Substances_Act


I believe that the concept is called Common Carrier in other fields and legislation is very well established and developed.


More likely to get the opposite.

https://en.wikipedia.org/wiki/Operation_Choke_Point


From the way you frame this, you seem to think legal or illegal is an easy thing for a bank to evaluate quickly and accurately. Is that a correct statement of your position?


The issue there is when it comes to likely fraudulent transactions. Like, a bank shouldn't have to give you 10MM in US currency because you hand them a "totally real check from Bill Gates" that looks like it was printed off a laserjet printer. But, they do make laserjet printed checks and maybe Gates uses them for the lulz.

All transactions have some likelihood of fraud, so it's a fuzzy line.


We would need at least _one_ chain of bank - payment processor that only works on payment fees and has a public mandate of letting the maximum transactions go through.

Basically a pubic service PSP with loss financed by govs. I'm not holding my breath, and I can't see a single action I could take that would bring us even a millimeter closer to this goal. It's depressing.


What would be the impact on consumer protections like chargebacks if banks were forced to process transactions they deemed to have a high risk of fraud?


We would need at least _one_ chain of bank - payment processor that only works on payment fees and has a public mandate of letting the maximum transactions go through.

Basically a pubic service PSP with loss financed by govs. I'm not holding my breath, and I can't imagine what could realistically be done at our level to be even an inch closer to that ideal. It's depressing.


The banks of the power and lobbyists to make certain things illegal.


> I would want to see regulations where banks are explicitly forbidden from blocking legal transactions.

I want the same thing from web service providers - if the content is legal then Amazon, etc. should not be permitted to refuse service.

Twitter should not be permitted to have its own terms and conditions, rather they should follow the law - it's either illegal, and ban the person, or it's legal and they must leave it up.

Maybe put a limit like: If your number of registered users is at least 5% of the US adult population, then a new set of rules kicks in.

There are some details I don't have answers for: What if someone posts things that are legal, but offtopic for the location? I don't want to prevent moderators from removing that kind of thing, but I also don't want them using it as a false reason.

I'm sure there are other edge cases I have not thought of.


That literally flies in the face of the first amendment. Forcing a website to host something they don’t like is compelled speech. They’re private corporations and can do what they want. The courts are very clear on that. If you want them to be forced to host everyone, you nationalize them into a utility.


That's what a common carrier is. It's not such a stretch to apply that to general purpose hosts.

And if what you say is right, how can the parent propose requiring banks to process any legal transaction?


Credit card firms should be just utility providers... Like roads are. You go on a highway, pay your toll, and noone asks you if you're driving to meet your parents, if you're going to get a prostitute or if you're going to buy drugs.

Law enforcement should deal with the endpoints, so dealers, brothels, and your moms shitty meatloaf.


I do not see why credit specifically be a utility. But electronic transfer of money should be, and supposedly will be:

https://www.frbservices.org/financial-services/fednow


Regulations like OFAC are still going to restrict payments, especially those made internationally or over a certain amount.

I'm not saying that the regulatory framework should allow payments to known terrorists or terrorist groups, more pointing out that electronic transfers are never going to be structured like a utility without significant restructuring of banking laws.


Do you mean Common Carrier laws? Kind of like how FedEx won't care that you're shipping to their competitor, like UPS.

This could happen, but it would also mean overhauling some of the finance laws that hold credit card companies accountable.


HN readers are wrong to think this will be fixed when the government creates a CBDC or regulates payment providers like a utility.

In addition to the government currently blocking transactions from semi-legal industries that should be legal (cannabis), the government has a history of censoring mail mentioning contraceptives (Comstock Laws) and pressuring banks to cut businesses with legal, undesirable industries (Operation Chokepoint). A few weeks ago, an IRS agent at a service center refused to help me because they didn’t like my clothes. (I was wearing a tank top.) This is inevitable when you create government-backed monopolies.


How strange, because your examples don't make sense.

Sure, some things should be legal but aren't. It hardly seems surprising that while they are illegal the federal government tries to prevent them.

The Comstock Laws applied to all carriers (private or public) and therefore would apply to FedEx or UPS as well. They also were ruled unconstitutional over a hundred years ago.

Meanwhile, Operation Chokepoint was something that lasted less than a year before the same administration said it was an overreach and reversed it. It was an error, and between that and congressional oversight got fixed. It sucks, but it should be pointed out that, again, it was government pressure on private entities. Nothing that wouldn't be at least as good under government control.

Meanwhile, if an IRS agent refuses to help you because you're wearing a tank top, that seems like something you should escalate. But I will point out many private enterprises (airlines, etc.) have refused to serve people wearing tank tops. To the point of refusing to honor their ticket and screwing up their whole vacation with no recourse. But the only official IRS dress code deals with profane/offensive writings. Tank tops are allowed, even for IRS agents.


> the government currently blocking transactions from semi-legal industries that should be legal (cannabis)

What does this refer to?


I think that a cursory search for banking and cannabis will reveal the pressure the US government puts on this industry. Banking for cannabis is much easier in canada. You can purchase weed with a Visa no problem.


> the pressure the US government puts on this industry

Sure. But OP mentioned the U.S. government "currently blocking transactions" from cannabis businesses.


AFAIK, a bank could lose their FDIC backing (Federal deposit insurance) if they support cannabis transactions.


The Lightning Network might or might not lead to a widely used open payment network.

I would love to hear more from people who already use it. How well does it work?

As far as I know, El Salvador is currently trying to shift their whole economy to Bitcoin. Handling day to day payments via Lightning. Is anybody from HN there? How practical is it for non tech people to use it for their daily payments?


I use it almost daily, don't have any issues. I run my own node though for my main "wallet". I've done transactions of up to 3k without hick-ups.

Any custodial ones I have tested have worked well, though.


What do you use it for?

Any benefits over paying with credit cards / cash / direct deposits?


The larger transactions have all been to transfer funds between exchanges. Very easy to transfer in and out when I want to quickly enter leveraged positions. It reduces counter-party risk for me.

For the day-to-day stuff it's obviously not as widespread as credit cards and I can't use it for much. For those situations I top up a debit card (Lastbit) using lightning.

In addition to that I spend a fair bit of money on Bitrefill. Obviously also a stop-gap until wider adoption gets here.

For someone living in a country where it's easy to send money locally and where cash isn't very common I don't think the benefits are apparent yet, for me personally. In my business I do receive a number of payments from abroad that always take at least a day to arrive and some funds are lost due to bad exchange rates. Lightning would help a lot here.


Its an option.

Basically a litmus test will be when a gigantic brothel in Europe or a European country’s Caribbean district does a very public but permissionless capital raise, gets filled by retail, and pays dividends while shares being actively traded permissionlessly.

Thats when you’ll know the floodgates are open. Just given how much unwanted attention and publicity that will generate.

To me, its surprising it hasnt happened yet but I think now it is just a matter of time. Many services will take a second look when ownership by address is still concealed. Most crypto platforms do not offer that yet for shares/assets issued on their platform (ie. Monero has no ability to have fungible assets traded on it). Lightning Network has a theoretical but limited ability to do this. Bitcoin will have a greater ability to do this after its current inprogress upgrade goes live (taproot, schnorr) but not a complete solution out of the box even then.


You don't generally need to raise capital for sex work, and the problem there is having a physical location that will be raided if it's illegal.

To me, the important litmus test is when bitcoin gets definitively linked to a specific terrorist incident. Now, terrorism in the West is mostly out of fashion, except US rightwing extremists, because it's hard to have a death toll that anyone would notice over COVID, but that's not to say it won't happen in the future.


So the interesting thing about the chosen example is that the brothels already operate compliantly enough in a regulated environment but those environments typically are marginalizing them in a variety of ways such as with zoning and exchange listings.

There is definitely room for price discovery in that industry from an environment with free floating shares. It only takes an enterpriser getting a little greedy or an existing shareholder bundling up their stake in a fund.

Capital formation in the crypto markets rivals VC’s fiat activity, but it is mostly crypto native purchasers for crypto native infrastructure. The systems do work for trusted centralized physical establishments, and the regulatory environments typically just require notice in the state's register. Those societies are comfortable with private sector exchanges being the gatekeepers in how people raise capital and plan exits, and have not factored in the reality where they are completely circumvented and marginalized industries grow, compliantly, and very quickly.


Very poorly. The only way it's usable is by relying on third parties, at which point you might as well use standard services. Or even actual cryptocurrencies for that matter.


Which third parties do you mean?


My understanding of lightning is, that unless you run your own node (which requires a lot of funds and needs to be online 24/7), you are using a third-party node for these payments. The positive would be, that there are (I presume, don’t know) far more nodes/services available to choose from than there are credit-card firms.

This is just what I remember from reading into lightning a few months ago.


I'm curious about what made you reach that understanding. My guess is that you either tried or heard from someone who tried to open channels with some LN giant like Bitrefill. You shouldn't do that. Big channel operators don't want to dilute their liquidity with unreliable small channels. You should instead establish a channel to a smaller node that may be directly or indirectly connected to that merchant. LN is all about routing.

Also in the thread's context we are talking about Visa and Mastercard banning merchants right? In a scenario where the LN is widely adopted that merchant can setup and run BTCPayServer (https://btcpayserver.org) to maintain his own independent LN or on chain payment process system.

As for users, there has been work to facilitate nodeless operation on software wallets. Probably based on https://github.com/lightninglabs/neutrino. I know Blue Wallet is building something based on a lightweight LN node so people can establish channels from their personal wallets (https://github.com/BlueWallet/rn-ldk). There is an Android exclusive wallet that (https://lightning-wallet.com) can do that and Muun (https://muun.com) is doing some smart tricks to provide nodeless and custodial LN experience.


You don't need a lot of funds, or to always be online. You can run the software quite happily on a cellphone (I have previously), the requirement to be "online" is only in the scale of occasionally (once a day would be more than sufficient), and even that can be delegated (dork "watchtowers") with little to no risk.


Ah, so you can leave the channel open without being online?


Yes. You only need to be “online” periodically to check for fraud, which is a task which can be relatively trustlessly delegated if need be.


Well, that’s a big part of the puzzle that most introductions seem to omit :D


I'm in a similar, semi educated situation as you are. But my interpretation of what I have read so far is different:

As far as I understand it: When a channel you have open is closed by the other side of the channel your wallet needs to know this within a certain time (24 hours? Can't remember).

So to avoid having to read the blockchain updates once a day, you would subscribe to some service that tells you when one of your channels is closed.

I also think you only have to do that if you distrust the other side of the channel. If you select a channel partner (a friend, a well known institution, a bank?) and only keep a small amount in that channel, I think you can just trust them and not sign up for any "watchtower" to watch if they try to cheat on you.

PS: Looking up the growth of the Bitcoin blockhain it seems that even if you do the watching yourself, that would only mean to read less than 1MB per day? Here is the data:

https://www.blockchain.com/charts/blocks-size


You're misreading the graphs, the chain size can grow at most by 576MB a day.

A maximum of 4MB per block, 6 per hour, 24 hours per day.


Oh, it is "368.664K Megabytes", not "368.664K Bytes"?

The day before yesterday it shows: 368.471K

Yesterday it shows: 368.664K

So "0.193K" up in that day.

What does that mean? 193 Megabytes?


I don't know, blockchain.com has a history of showing just complete garbage information.


My favorite block explorers (both self-hostable for the privacy-conscious):

https://blockstream.info/

https://mempool.space/


That provide liquidity, open or manage channels for you, watch your channel so you don't lose your money or even hold your keys (as is the case with some popular wallets people recommend).

And the network itself centralizes around large hubs (otherwise route finding doesn't scale).


The repeated comments about "routing not scaling" are sort of weird, there's no real technical hurdle to overcome. Approximations of route finding are really all that's necessary, there's no strong centralizing force to be found there.


"no real technical hurdle to overcome"

Uh, this kind of route finding is still an open problem, and there's not even an idea of how to address it.

Approximations don't scale, as routes will start failing more and more as the network grows(due to liquidity issues). Therefore routes will go through well-connected and well-funded nodes, which is the centralizing force you're looking for.


Even if there were only as many nodes as there are countries in the world, that would make a more open payment network than the credit card systems.

There are 195 countries in the world. And a user could pay via any of those 195 nodes.

When you accept a certain credit card type (Visa, Mastercard etc) only users who are customers of that company can pay you.


The comparison should be with cryptocurrencies, which problems LN was supposed to solve, not the credit card companies.


Reluctant? Really? Citation needed.


My thoughts exactly. They might be reluctant to show they have so much power, but they're definitely not reluctant to wield it.


They're reluctant to take on risk, but that doesn't mean they want to have to suss out what's safe for them to transact & what isn't. I'm sure they've had to grow headcount to tackle this expanding question, and they certainly don't consider it as driving up business value: it's a growing overhead to avoid risk, without cutting off too much business, and without becoming too visible/noteable for refusing service. None of these activities are in any way a win.


> that doesn't mean they want to have to suss out what's safe for them to transact

There is nothing "unsafe" about handling money for journalist outfits, yet they still police the space - and very arbitrarily too.


Because enforcing regulations is expensive. They'd rather just take the revenues.


Reluctant because they aren't taking the initiative on these things. Some lawmakers or activist groups created a lot of pressure and they bowed to it.

I don't think they want to be dealing with any of this as it is costly (compliance staff and lost revenue) and fraught with political peril. But when the alternative is press releases arguing that Visa is helping aid sexual exploitation, they are going to choose to wash their hands of the market segment.


Simple economics is main reason.

Regulating is expensive and they are not being paid for it. It Same reason why online social media would do as little content moderation as they can get away with .

Jon Oliver did a great piece yesterday on the state of non English content moderation on popular social media like YouTube and Facebook : the numbers he gave were 90% users can be non English but only 13% of the moderators deployed for other languages .

The real sad part is most of the content moderators for these companies all come from developing countries like India and already know a lot of other languages better than they do English.

They only care so far as to make users and regulators think they doing enough.


I always thought that cryptocurrencies and the whole circuit around them are "useful" in the sense that they provide an alternative to the Mastercard / VISA duopoly - see all the "free speech" platform that were refused by CC circuits and at the moment are alive only thanks to crypto payments.

Obviously, a day will come when the biggest processors (ie Coinbase) will be forced to not accept certain clients / transactions, effectively destroying in practice the possibility of exchanging cryptocurrencies with dollars.


Agreed.

The relevant point, to me, has always been that CCs never needed to work perfectly for the payment use case, they just had to work well enough to be a viable alternative (warts and all).

The fact that some of them do fill this role and have since their creation, namely bitcoin, is what makes me pay attention to the space.


> Obviously, a day will come when the biggest processors (ie Coinbase) will be forced to not accept certain clients / transactions, effectively destroying in practice the possibility of exchanging cryptocurrencies with dollars.

This would only prevent that possibility for the affected clients and only on Coinbase.

By the way Coinbase already has the possibility to blacklist any USDC address it is required to do so by law enforcement. (USDC being a stable coins basically worth 1:1 with USD at this point). And that is because the smart contract governing USDC can have its list of blacklisted addresses updated at any moment.

So in a way the day you're talking about is already there.


> By the way Coinbase already has the possibility to blacklist any USDC address it is required to do so by law enforcement

> So in a way the day you're talking about is already there

In a way, yes. But there's a difference between "being required to do so by law enforcement" and "doing it preemptively". And obviously, there are many exchanges other than Coinbase.

The point is, I'm not even a crypto fan, but everytime someone comes up with the "how are crypto useful?" question, I can't help thinking "at the moment, they're the only alternative to VISA / MC for payments".


Weird to me how misdirected the mass outrage against tech censorship feels, given that it's really the payment processors doing the most to stigmatize & make untenable any form of speech & commerce they consider risky.


Google and other advertisers are also part of the problem. They set policies on what is and isn't acceptable for sites with ads they serve. Sites will literally censor themselves out of fear Google will pull their ads.


Payment processors are doing it in response to mass outrage, particularly about revenge porn.


Really? I thought they just had rather conservative people on their board.


Probably not, as they are now blocking payments and bank accounts for some conservative sites and public figures.


Is there anyone at all who doesn’t feel extremely uncomfortable with this development?


I'm more uncomfortable with the fact that Visa and MasterCard have a duopoly around most of the world. Without that most of these questions would become irrelevant because there would always be an alternative.


US, UK, Europe and China are exploring CBDCs (Central Bank Digital Currencies), e.g. June '21, https://www.msn.com/en-gb/money/other/bank-of-england-tells-...

> Tom Mutton, a director at the Bank of England, said during a conference on Monday that programming could become a key feature of any future central bank digital currency ... what happens if one of the participants in a transaction puts a restriction on [future use of the money]? ... Sir Jon Cunliffe, a deputy Governor at the Bank, said digital currencies could be programmed for commercial or social purposes ... “You could think of giving your children pocket money, but programming the money so that it couldn’t be used for sweets. There is a whole range of things that money could do, programmable money, which we cannot do with the current technology.”

At an IMF meeting last October, Swiss BIS director Carstens commented on CBDCs, https://www.youtube.com/watch?v=mVmKN4DSu3g&t=1451s

> With cash, we don't know who is using the 100 dollar bill today ... a key difference with CBDC is that the central bank will have absolute control on the rules and regulations that determine the expression of that central bank liability .. also we will have the technology to enforce that ... if an advanced economy issues a CBDC, and someone in a 3rd country wants to use it, it will require the consent of the central bank of the residence of that person, therefore the degree of control will be far bigger.

Well-intentioned initiatives like Linux Foundation GHP (https://www.goodhealthpass.org/), EU digital health certificate and Apple+Android digital driver's license can all be drafted into the service of CBDC initiatives which require digital identity for digital currency wallets, unifying online and offline policy for programmable "permissions" like carbon/food quotas or other social credits. If western citizens acclimate to "showing papers" for routine daily movement, then real-time policy can be applied to those movements.

This could replace fungible currency with "colored credits", with policy attached to both the origin of money and a whitelist of possible destinations, goods or services. PayPal has amended their ToS to include merchant content regulation as a condition of payment processing.


Payments should be treated like a public utility services, so that they cannot deny customers or uses that are legal. It is a bad idea to let any private service that is so widespread and fundamental to function as a proxy regulator of speech.

This problem was very apparent when Wikileaks faced a payment blockade a decade back (https://www.commondreams.org/news/2012/07/18/wikileaks-break...). We are overdue to reign in Visa and MasterCard, just as we are with giant social media common carriers.


> they cannot deny customers or uses that are legal

What about services that are maybe-legal? As I understand, a lot of the sex-related industry (porn, etc) have some issues related to revenge porn, consent, exploitation, etc. Its hard for the payment processor to trust that every transaction is legal. Especially when occasional illegal content slips in.


It shouldn't be their job, and blanket bans on specific subjects because "someone may do something illegal" is prejudice with a lot of collateral.

If someone is doing something illegal, it should be the authorities job to deal with it.


No they shouldn't. There are high-risk payment processors that will serve foreign intelligence operations like wikileaks, fascist political donation services, fraud-heavy industries like fiat to crypto onramps and socially regressive businesses like porn. There's no need to regulate low-risk payment processors as the industry is not monopolized in any way and it's trivial to find one that will take your money.


I wonder where this will go with the rise of Stablecoins like USDC, USDT and DAI. The traditional argument to this is just "use crypto" but the traditional counterargument is "what if BTC falls off a cliff tomorrow" or similar comments about the volatility of crypto.

But now with stablecoins, I wonder how long before all places deemed too unsavory to will just start accepting Tether or another stablecoin. You can already see the govt scrambling to patch their own weakness in this area with their own coin (forgot what it's called). The govt knows they are in the weaker position here because they have virtually zero regulatory authority over stablecoins.


If only there was a permissionless way to transfer value and payments across the internet without a gatekeeper


If there was, it'd only be used for Ponzi schemes and other criminal activities.


I would modify that statement without only a single gatekeeper. All countries ( ideally democratically elected) should have a say in how that system operates.

Having gatekeepers is not inherently bad, having just one who can effectively block anything is problematic.


OK so back in 2012, I donated to a site that was on everyone's bad list at the time. I had my bank flag my account after that. Not only that, but they texted my mother to inform her of the fraud alert/flag. Eventually, I called them and told them to quit it. It took a weekend to clear it all up. this has been going on since November/December 2010, actually.


They're basically commiting suicide at this point.

With them blocking all that kind of stuff, people will start looking another way (you know).


And this "other way" won't be cryptocurrency. Countries are and will continue to push for e-currency. It is simply too much power and granular control to give up.


It's not like they have a choice.


The intuition here is that credit-card firms have to take these precautions in order to protect against excessive chargebacks, right? Would it not be possible to create a new style of transaction that is unable to be charged back but requires account authorization and 3-days forewarning (maybe with small withdrawals first)?


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