I owned and operated an adult website for 18 years. For 15 of those years it was primary source of income. It was completely lawful and above board, no user-generated-content so I never once had any issues with controversial content etc. One day last year we get a notice from our bank telling us that we were deemed "high risk" and they were closing our commercial accounts. For months we tried to find any bank or credit union that would take us but they all turned us down.
Someone actually posted our story to HN but it's not really tech related so didn't get many upvotes or engagement.
So I know how devastating it is for ignorance and stupidity on the part of the others to shut down something that a) you worked hard to create yourself and b) was such a huge part of your life for so long. Extreme empathy.
The right to bank should be enshrined in the laws of free societies. I don't care what the business is or what people's moral qualms might be--as long as it is not breaking the law, there is no excuse for cutting off this critical business infrastructure.
It is in Germany, at least for individuals. In practice it's a bit bumpy for immigrants with unrecognised passports and no registered address, but the principle is there and can be enforced with some effort.
There exists regulated markets in which businesses are not free to do anything they want. Banking is already regulated and is a necessity in modern world. Essential banking services should be treated like a utility.
Banks are not companies. They are allowed to create money out of thin air [1], unlike a "normal" company. They are heavily regulated by the government, unlike other companies. They are in fact an essential service in today's world.
Credit isn't unethical. There are a lot of good things that would have never happened without credit.
Even employment is a form of credit. "I'll work X hours on this task, and at this time, you will pay me $X" is an incredibly simplified form of credit.
Borrowing a few bucks to make it to payday from your friends isn't unethical for either the lender or the payer.
Usury is what is unethical about lending, specifically unregulated usury. That, and being allowed to refuse service to people or businesses that you don't like or whose legal business your stakeholders find distasteful.
If you're in the banking or finance business, you shouldn't be allowed to choose to not provide service for citizens who are performing legal business, and you should have the amount of profit that you make from a lending transaction regulated and limited by a third party whose goal is to ensure equal treatment.
See Fractional Reserve Banking for the gory details, but the gist of it is, private banks create money out of thin air (within limits) so they can lend it to you. And then they charge interest back for it.
That's not how it should work. First there's the morally questionable interest rates to begin with (not all societies or religions permitted that), but even if we assume it is legitimate, the justification for this is something about investment and risk taking. Which are supposed to involve your own funds, not money you printed out of thin air.
But there is a risk, and there is a service. How should they charge for it? Well, it's simple: risks are supposed to be (and are) handled by insurances. And then there's the paperwork and checking and all that that most likely should involve a flat rate. This should be much more ethical than charging interest over money that didn't even exist to begin with.
(Edit: 3 downvotes in 30 minutes, no rebuttal… guess I hit a nerve. I'll just say this: if you disagree with anything I've said here so strongly that you feel the need to downvote it, at least take the time necessary to articulate to yourself why.)
I'm very familiar with fractional reserve banking, thanks.
>the justification for this is something about investment and risk taking. Which are supposed to involve your own funds, not money you printed out of thin air.
Money is socially constructed. If we agree, societally and legally, that banks can lend out most of the money that their depositors place with them (fractional reserve), then the money the bank lends out is no less real, no more "printed out of thin air," than any other money. And we do agree to that statement, legally and (for the vast majority) societally.
> risks are supposed to be (and are) handled by insurances.
Which is exactly how banks handle interest rates on loans. This is why we have credit scores: so that the underwriter at the bank can assess how risky your proposed loan is, and how much interest (i.e. premium) to charge you. Exactly like an insurance underwriter assesses how risky your proposed insurance policy is and how much premium to charge you. Both insurance and banking largely automate these decisions these days, but there are still human underwriters who can override the automated decisions.
A few years ago I briefly worked in the credit risk department of a bank, and as part of my orientation I spent an afternoon sitting with one of these underwriters watching and listening as they dealt with clients who wanted to appeal the automated credit decisions.
> And then there's the paperwork and checking and all that that most likely should involve a flat rate
This also already exists, it's called an origination fee.
> This should be much more ethical than charging interest over money that didn't even exist to begin with.
In summary, this is completely wrong. The money does exist, just as much as any other money exists, and if it's not repaid the lender is on the hook for it[1], just like any other money. And the way you think lending should work is indistinguishable from the way it already works.
[1] Or, in many cases, the person who bought the loans from the originating bank.
> And the way you think lending should work is indistinguishable from the way it already works.
With one crucial difference: right now the main criterion is whether the bank will get reimbursed or not. Whether it will make money off of the credit. And credits are so important to our lives right now that I don’t believe such an important decision should be left to that kind of invisible hand.
I mean, it’s as important, perhaps more important, than the state’s budget. This suggests, if not a democratic oversight, at the very least a clear set of democratically chosen rules over what kind of loans should be given.
I'd flip that around: whether it will lose money off the credit, not whether it will make money. Based on my time in credit risk this is more accurate to how banks actually think about loans. The upside for each individual loan is much smaller than the downside, so the threat of loss dominates the discussion.
Once you flip it around like that it becomes much less attractive to think of forcing banks to make loans that they expect to lose money on.
> if not a democratic oversight, at the very least a clear set of democratically chosen rules over what kind of loans should be given.
Which, again, we already have. There are many rules and regulations about what information banks may and may not take into account when deciding which loans to approve, and what interest rate to charge. Rules put in place and enforced by the democratically elected government.
> Once you flip it around like that it becomes much less attractive to think of forcing banks to make loans that they expect to lose money on.
That's not what I'm proposing, though. I'm proposing that each loan would come with the creation of central money, such that any that falls through results in nothing more than a little bit of inflation. And the people who issue the loans would effectively be government workers. Or contractors or whatever, but they would do all this on behalf of the state.
> Which, again, we already have.
I have to confess ignorance here. Do we have rules that forbid specific industries from contracting loans? (Industries that are otherwise legal, I mean.)
There's no difference between "central" money and other money, though. It's all just money.
> Do we have rules that forbid specific industries from contracting loans?
Regulations differ by jurisdiction, but generally you can't do any kind of banking business without being licensed specifically as a bank. For example, if you get a car loan "from the dealership" it's not actually the dealership giving you the loan, but a bank that they partner with.
You misunderstood my question. I was asking, are there industries, say Oil or Porn, who are by law or regulation forbidden to borrow money from any bank?
>>See Fractional Reserve Banking for the gory details, but the gist of it is, private banks create money out of thin air (within limits) so they can lend it to you. And then they charge interest back for it.
So I've googled and read upon it every time I hear this almost exact same sentence (and I see it every now and then), and I don't get it at a basic level. I have little to none awareness of high level finance, but my understanding of 'fractional reserve banking' is thus:
1. 100 people deposit $1 each to a bank. It has $100 of deposits
2. Without fractional reserve banking, bank would basically have to keep $100 in its vaults. It would be useless money going nowhere doing nothing.
3. With fractional reserve banking, bank basically has to (say) keep $10 in its vaults (digital as they may be), but can loan $90 to other entities (and do more complicated things with it). There are risks and benefits to this, and it is basically a full time job of many people at the bank and regulator to find various balances of risk and benefit, to bank and society, based on the policy and goal.
I don't understand where, in this simple math, does a regular bank "create money out of thin air". I'd love to understand when and how this may be the case (but NOT via angry youtubers, please:).
I do understand that central banks and/or the government control circulation and "create money" through various mechanisms, but I never get the feeling that is what we're talking about when people say "fractional reserve banking means private banks get to make money up".
> I don't understand where, in this simple math, does a regular bank "create money out of thin air".
Through rinse & repeat.
When the bank has loaned those $90, the deposits still show $100, and are still available to their respective owners. Just not all at once, but we don’t care as long as the illusion is maintained — and it is.
Where those $90 go? to other deposits. So where we had $100, we now have $190. Only $100 of those are central money, but again, as long as the illusion is maintained (and it is), everything works exactly as if we had $190. And since money is but a convention, a good enough illusion is actually real. $90 really have been created.
And those $90 that have been added to deposits can also be used to lend money. $81 in the current example. So now we have $271. Rinse & repeat indefinitely, eventually you end up with up to $1000 total, with $900 created out of thin air. As long as the illusion works at least. And it does.
Sure, sometimes it breaks down. Sometimes we get a bank run. But in practice the illusion is so important that the state steps it an make it real: by creating actual central money to compensate for the bank run. Heck, often just the promise of doing so is enough to prevent the bank run in the first place, and maintain the illusion.
Strictly speaking money hasn’t been created. It’s just an accounting trick. But the trick works. Those $900 may be fake money, but if people are using it (and they are), it’s also real money. It’s not real real money, but it’s close enough.
> but we don’t care as long as the illusion is maintained — and it is.
> as long as the illusion is maintained (and it is)
> a good enough illusion is actually real.
> As long as the illusion works at least.
> But in practice the illusion
> maintain the illusion.
You sure like that word.
It's not an illusion. The money is real. It's real real. It's real real. There is nothing fake or illusory about it. It is just as equally real as a $100 bill straight from the Bureau of Engraving and Printing.
Stop pretending that it's not.
> But in practice the illusion is so important that the state steps it an make it real: by creating actual central money to compensate for the bank run. Heck, often just the promise of doing so is enough to prevent the bank run in the first place, and maintain the illusion.
This is false. FDIC is insurance. The money that is used to step in and rescue a bank is real money that comes from banks that pay insurance premiums to have their depositors' money insured. It's not "central money" created by the state. It's exactly the same kind of money that banks lend out to you and me. Banks pay insurance premiums to the FDIC and when a bank fails the FDIC uses those insurance premiums to step in and insure the deposits.
> Strictly speaking money hasn’t been created.
This is also false. Money really is created when banks give out loans based on fractional reserves. This is called the money multiplier effect, and it's a really important economic factor. But it's not fake money, it's real money. Real real money.
Yeah, the money is real. Yeah the money has been created. But you can't start from there when explaining it to a sceptic.
And there's still is one way the money isn't real: if everyone runs to the bank to retrieve their money they can't. Not all at the same time. But they never do, so the money is real.
> This is false. FDIC is insurance. The money that is used to step in and rescue a bank is real money that comes from banks that pay insurance premiums to have their depositors' money insured.
Oh, I see. A tad more complicated than I though, but the effect is the same, so my central point remains.
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My step dad used to work in banks, and you, he, and I agree on how this all works. Interestingly though he didn't want to see it as "creating" money. He didn't quite accept the connotation, and I suspect the full consequences of fractional reserve. His exact word was that banks are authorised to transform money (which I suspect is a legal term in France).
> Well, it's simple: risks are supposed to be (and are) handled by insurances.
So the banks charge a 5.75% “risk premium” and we’re back where we started.
And just because some cultures and religions are anti-usuary doesn’t invalidate it’s value. All interest does is price the value of money (ignoring all the shenanigans the central banks get up to). Money today is worth more than money tomorrow so you have to pay a premium to both access it and compensate the owner for the lost utility.
Yeah, fractional reserve lending is fraud but it’s legal fraud so what are you going to do?
I don't understand how it's fraud. Banks could not lend at all if they must retain 100% of deposits.
On the lending side, it would hurt everyday people and the economy if banks could not lend. Loans are important for homeowners (mortgages) and for businesses of all sizes (research and development).
On the savings side, your community bank provides incredible guarantees with your deposit that are difficult to find elsewhere: deposits are very liquid, principle is virtually guaranteed, and convenience in routing the money wherever you direct it.
Yes, banks couldn’t lend as much money if they couldn’t create it, and the way we’re making the economy work needs money to be created for those loans. So they definitely fill a need. However they are printing money and decide who can borrow and who cannot, without democratic oversight.
We tend to reduce democracy down to restrictive laws & regulations. Whether we want guns or not. Whether we want to allow abortion or not. How heavy the penalties are for murder or theft. How a given industry should be regulated. But resource allocation is arguably even more important.
How we allocate our resources determine pretty much everything in our lives. It’s the choice between more roads or new train tracks, which industry should be prioritised, basically what direction our whole economy should take. And that, instead of being subjected to democratic oversight, is currently left to private interests, with a vague hope that it will somehow be okay, because "invisible hand" or something.
Damn, I’m just asking for more democracy, and there we are, way outside the Overton window.
>>banks couldn’t lend as much money if they couldn’t create it
I feel there's shifty language and moving posts all the time.
Fractional reserve banking, to my limited understanding and your previous post, is lending some of the money that got deposited to. Where is this "creating money" (for non central banks) coming from? The phrase comes in and out of various conversations about banking system and it's the most slippery thing I've ever seen. Can you please elaborate on your understanding of how "banks create money" so we can have a discussion from same basic understanding and principles?
And it's not "banks couldn't lend as much money". If we didn't have fractional reserve banking, it feels banks could not lend AT ALL. This is not shades of gray, it feels like a basic principle. If a bank gets deposits, and can't do anything with deposits, and has to keep all the deposits in a vault, then it cannot do any loans. SImplified and all, but again, I want to see if our basic understanding is in line.
Also, what does "more democracy" concretely mean here, as nice as the phrase is? Aren't regulations by government the spear of the democracy, in practical sense?
More or less. Long story short, when money is lent in a bank, it’s then deposited elsewhere, and then it can be lent again, such that with a fractional reserve of 10% you can ultimately multiply the amount of money in all deposited accounts by 10. In other words, a whole bunch of money just got created. It’s not central money, but it’s still money.
You could maybe try to counter with "but but but bank runs", but if this happens the state tend to print central money to compensate, thus actualising the money creation that happened with fractional reserve banking alone.
> If we didn't have fractional reserve banking, it feels banks could not lend AT ALL.
They could lend their own money.
> Also, what does "more democracy" concretely mean here, as nice as the phrase is?
In this particular instance I’m thinking of full reserve banking (deposit banks turn back into glorified vaults), print central money for mortgages (and burn that money when it’s paid back), and democratically (with congress, referendum, whatever) define clear criteria about who can contract mortgages, and what for. Criteria which would then be enforced by mortgage clerk, on behalf of the state.
The point here is that instead of letting private interests that want to make money decide, the people decide (possibly through elected officials) of the applicable criteria.
> this particular instance I’m thinking of full reserve banking (deposit banks turn back into glorified vaults), print central money for mortgages (and burn that money when it’s paid back), and democratically (with congress, referendum, whatever) define clear criteria about who can contract mortgages, and what for.
This is an interesting idea. The problem with a single lender is that it removes incentives for good customer service and (sometimes) good products. Monopolies, whether public (DMV) or private (your local cable company) are universally hated. It would be difficult to design the right incentives for the government to provide a good product.
I think the main disconnect is that deposit banks never operated as a glorified vault. Lending against deposits is supposed to be understood by anyone entering that agreement. I understand why it may be a surprise when you first learn about fractional reserves because it may not fit an existing mental model. Instead, it seems unfair that a bank can create money. But it's not. Money supply and money velocity is a term used by economists to describe how much and how quickly money exchanges hands. The world's accounting books, with all debits and credits, always sum to the same total: however much money the central bank has printed.
There are a lot of benefits of the current system (liquidity, virtual guarantee of withdrawal, conveniences). Your proposal would replace a system where you receive a small income from your deposits to a system that steadily decreases the size of your deposits; I think that would be a hard sell.
> Monopolies, whether public (DMV) or private (your local cable company) are universally hated.
I believe that's mostly a US thing. Here in France we love state monopoly on tap water, energy, and trains and snail mail service… Privatising those and opening them to competition generally caused more problems than it solved.
> Lending against deposits is supposed to be understood by anyone entering that agreement.
The only agreement most people understand, at the most basic level, is that money they deposit can be retrieved at any time. The idea that a bank run could even be a thing nowadays feels outlandish (I don't know the particular, but I understand that we have put various mechanims in place to make bank runs very unlikely, if at all possible).
> Your proposal would replace a system where you receive a small income from your deposits
I don't receive any income from my regular bank account. I even pay a small fee for the privilege of having that account. The things that pay interest back are special accounts, some of which I don't have immediate access to. For those the bank is very clear that it will use that money to invest in stuff, justifying why there's a return on interest at all.
Now if we went all the way to forbidding investment accounts, sure, every bit of inflation means your money is evaporating over time. I'm actually okay with that. It's a form of tax, with a flat rate, that rich people with a ton of money will pay more than the small folks. But yeah, it sure would be a hard sell to those rich people.
> banks couldn’t lend as much money if they couldn’t create it
How could a bank lend _any_ money if it must reserve 100% of deposits as cash?
> they are printing money and decide who can borrow and who cannot, without democratic oversight
I do not understand how regulations are equivalent to democracy. Either way, banks are heavily regulated in the G7 countries. Such regulation was thought to exacerbate the mortgage crisis of 2008 because regulations created incentives to offer mortgages to people who should not have qualified.
Supply and demand of deposits and loans creates a competitive market - banks operate with razor thin margins.
I still do not know how you would improve upon the current system.
> How could a bank lend _any_ money if it must reserve 100% of deposits as cash?
That’s the thing though, they could lend out and pay interest on “savings” with the understanding that the money might not be immediately available for withdrawal as it’s “in the wild”.
And a different class of banking, we’ll call it “checking”, would allow for immediate withdrawal as it’s backed by 100% reserves and doesn’t pay interest because it doesn’t make any money for the bank. Heck, they might even charge for the convenience of warehousing your money and being able to transfer it to any other economic actor you chose through a novel intra-bank clearinghouse.
What this doesn’t allow is for banks to lend out 90% of every dollar they take in — even ones available for immediate withdrawal.
As we’ve seen from the recent SVB[0] catastrophe if people assume their money is immediately available and it isn’t there’s big problems because everyone rushes to get their money right now instead of maybe getting their money at a later date. Big problem…
This is all stuff they figured out centuries ago, the main problem is it cuts into the banks’ profits so it isn’t done this way.
[0] as an illustration of the problem, they didn’t seem to get in trouble due to fractional reserve lending but from the liquidity of their assets.
> That’s the thing though, they could lend out and pay interest on “savings” with the understanding that the money might not be immediately available for withdrawal as it’s “in the wild”.
Those are Certificates of Deposit.
> they didn’t seem to get in trouble due to fractional reserve lending but from the liquidity of their assets.
It was the opposite. SVB had over-invested in long-term US treasuries, which are extremely liquid, but were falling in price due to the rapid increase of interest rates. If not for withdrawals squeezing their reserve, SVB could hold onto those treasuries until maturity and get back 100% of their principle.
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I think the disconnect is that savings accounts are not popularly well understood. People are shocked when they understand that the money they deposited is not sitting in a big vault.
You could tweak fractional reserves to be 20% (or 80%) of deposits, but that comes at a cost too. For example, it would create scarcity of money available for lending, which in turn would make loans more expensive (e.g., higher interest rate mortgages could double the cost of home ownership.)
The current system prevents the worst of bank runs by covering a good chunk of assets with insurance (FDIC in the US). It's a system that allows banks to fail and protect customer deposits.
The collapse of SVB was not a "catastrophe" because the banking system is intended to let banks fail. The alternative is far worse.
> Yeah, fractional reserve lending is fraud but it’s legal fraud so what are you going to do?
Isn’t that obvious? We’re living in an increasingly oppressive regime, and fractional reserve banking is but one of its many symptoms. So we’re going to do whatever people do under oppressive regimes.
Do you have the link to original story and HN post?
The engagement on HN tends to be due to interest in story but also time of day and other stories and specific wording of title and other fickle factors. I find that HN has a lot of interest in freedom of expression and how it interacts with banking sector, but sometimes topics slip nonetheless.
The story was posted before we closed, and we had put up a notice to our visitors explaining that we were trying to find alternate banking arrangements and would have to shut down if we couldn't.
If you visit the site today, there is still some NFSW content, so beware. But it also has all of the details of the history of the site as well as what led to us having to shut it down if anyone is interested.
So I use 4g net connection here in the UK and just tried to load what I assume is the site? coedcherry.com? I got a vodaphone (uk mobile phone co whose network I'm apparently connected via) nag page asking me to confirm me age, we protect young mobile users blah blah blah. Which... I have never seen before in the six months I've been using this connection. Any other porn site even massive ones like xvideos works fine, but coedcherry does not?
Which is very odd. I'm really rather perplexed as to why your site would be blocked but the biggest porn site on the net is not if the purpose here is to block childrens access to porn.
I used to hit this all the time when I lived in the UK. One of the first things you have to do when you get a SIM card there is ask the provider to turn off their "block randomly selected websites" function. At one point mine was blocking Wikipedia.
Very interesting. Also a bit scary how the government can basically shut down any business under the broad guise of “anti-money-laundering”. The level of detail that they wanted from you is basically like “Provide step-by-step instructions for someone at this bank to copy your business and capture your profits”.
Ah; I bet if title was "Legal Canadian adult site forced shut down due to billing processor" or something that provided context, it might have gotten more traction. Otherwise "Random site you've never heard of shutting down" does not entice interest necessarily :-/
( edit: Also, in your "Fuck Banks" page, I'm assuming " pay for offense expenses" is meant to be "pay for office expenses", in which case you may want to change it as "offense expenses" would go against much of the rest of the message of your post :-> )
> we will be ending our banking relationship with Amber-Lace Entertainment Ltd.[0]
> We found out, after connecting with industry colleagues, was that they all thought we were pretty dumb having the business name we do and were surprised this didn't happen way sooner.
The name isn't what killed the business in my opinion because it is quite tame. Your risk was probably evaluated by some automatic process and no innocuous name could have saved it.
would you be open to chat via email? I'm also in Ontario Canada. Every time I breach this type of thing to a non-IT person, they say "oh, porn sites are all sex trafficking and exploitative work", which doesn't feel mathematically true. I'm not a journalist or anything, but would as personal curiosity love to hear an (ex-)operator's perspective :)
> I'm also in Ontario Canada. Every time I breach this type of thing to a non-IT person, they say "oh, porn sites are all sex trafficking and exploitative work", which doesn't feel mathematically true.
Unfortunately this thread is definitely not the only example of perfectly-legal, but adult-industry[-adjacent] people being cut off from banking. Credit card processing is even worse.
It's not only adult. A huge range of legitimate industries are effectively cut off from easy banking & payment processing. This doesn't prevent those industries from existing, it just protects the monopoly of the large players in those industries, who can afford to have their legal team sit down with the bank / payment processor's legal team.
> One day last year we get a notice from our bank telling us that we were deemed "high risk" and they were closing our commercial accounts. For months we tried to find any bank or credit union that would take us but they all turned us down.
In August of 2022, Visa was facing a lawsuit that alleged they were assisting PornHub of profiting off of child porn [0].
This likely caused the card companies, as well as affiliated banks, to re-evaluate their customers and get any adult site off, including the user at the top of this comment thread.
Was his site allowing user-generated content? No. Was he at risk of facilitating child porn? Also no. Would the banks and card companies be willing to research that and make exceptions for a single account? Unlikely.
Ironically, MindGeek (also a Canadian company and the parent company of PornHub) is still in business. One of our former sponsors banks with a credit union in Quebec and that very Credit Union turned us down too. Our takeaway was that you'll get an exception if you're doing millions in transactions and are a huge corporation, but the "little guys" can GTFO.
> a credit union in Quebec and that very Credit Union turned us down too
Perhaps somewhat impractical, but a quick skim of Ontario's credit union laws does not seem to preclude a credit union operated by a trade association of pornographers, or similar, to provide personal and commercial banking services to that community.
I'm surprised given Quebec is one of the porn capitals of the world. Given how much money flows through you'd think at this point the porn producers would just form their own credit union!
I know the French Canadians have a reputation for being open-minded (judging by the attitude toward the LGBT community at least, from what I've been told).
I ran a web site and our e-commerce all ran through PayPal, about $2m a year. One competitor would email PayPal on a weekly basis to tell them we were selling CSAM which was a really great way to get PayPal to instantly block all payments while they investigated.
In fairness to PayPal, and the reason for my reply, is that PayPal's tech staff would go to town and do a very thorough investigation of our entire site, including the back end, to make sure it wasn't true, and then would restore the account. So, some companies do have the staff and willingness to actually make the effort to investigate. I had no problem with PayPal doing it, I just wish they didn't block first, but they were simply covering themselves and I totally understand their business position.
They never said. Not chargebacks though because we never sold directly to customers. We promoted affiliate programs and would get paid by our sponsors (electronically or by mailing us physical checks).
I can't pay my accountant, utility bills or my property taxes with Bitcoin though. At some point that money needs to be converted to fiat which means I still need a commercial account. And to maintain a commercial account in current year, "Know Your Customer" regulations force the bank to ask you an insane amount of details about your business activities and cash flow.
Even if they didn't, bringing in $120k / year into the account from a crypto exchange would raise a lot of questions and that, in and of itself, would likely get branded "high risk" by the bank since there is a perception that 100% of Bitcoin activity is money laundering.
You could have an old school exchange where people go in person to shout bids and offers and settle with briefcases full of $100 bills. Those can be used to pay accountants, utility bills and property taxes.
Accountants have KYC and AML obligations too. Briefcases full of cash are not going to sit well with a legit accountant (and a non-legit accountant is worse than none).
It you live in a big city, it's easy enough to find someone to meet in person and exchange crypto for $1-10k cash a few % below the market rate. Some will even pay above market rate if you can do $100k+.
> it's easy enough to find someone to meet in person and exchange crypto for $1-10k cash a few % below the market rate. Some will even pay above market rate if you can do $100k+
In case anyone is wondering, this is money laundering, and if you wind up with the wrong person on the other side, getting arrested and charged is among the better outcomes.
At least with respect to US federal money laundering laws (18 USC 1956, et seq.), there needs to be “specified unlawful activity”, as defined, involved for it to be money laundering.
I think what they are saying is that the counter-party in the in-person BTC/USD trade could have gotten those USD in an illegitimate way, and that by accepting those USD in exchange for BTC you’d be partaking in money laundering.
Is there really a legal responsibility placed on an individual selling BTC for cash to verify the source of funds?
I assumed that wouldn't be necessary if not operating like a business with the intention to turn a profit. If I sold my car for cash, would I have the same responsibility?
In what way would that help? At the end of the day the company will need to pay taxes and employees will need to be paid (who in turn also need to pay taxes on that). That basically forces conversion to fiat via a bank account that they cannot obtain.
All crypto has done is add an extra layer of complexity on top of the fundamental problem.
> All crypto has done is add an extra layer of complexity on top of the fundamental problem.
In the West - maybe, but check pornolab.net - they are asking for crypto donations right now. They can’t get anything else (but for a different reason) but they can make use of crypto.
Yes, adopt a crypto currency that one day is worth 45k, and a month later it's worth 30k, and a month after that it's worth 20k, and 2-3 months later it's 15k (that's what happened in the second half of 2022)
You would need to hire a crypto savvy trader to distribute your risks over several currencies and exchanges.. and when you reaches $250,000 in valuation (which hopefully the employee tells you it is), you need to hire a second to make sure it all doesn't disappear in an uninsured irretrievable early retirement package for the trader.
You basically have to set up a crypto business along with your actual business idea... Compared to traditional small business where you can hire an accountant to do payroll for just a few hours, and you have next to no risk your accountant can easily run off with millions of your dollars that you can't get back.
Yep. The ability and willingness of banks and payment processors to play morality police is a perfect case study in the utility of cryptocurrencies. They ain't perfect, but "inconvenient to turn this payment into dollars to pay bills" is a considerable improvement over "no payment at all", and the sibling comments poo-pooing over said inconvenience are missing the point and letting perfect be the enemy of good.
Bitcoin is probably a barrier to entry, meaning the "users" in this industry don't all know or understand how to use Bitcoin, and so this would mean losing a portion of their less tech savvy userbase. On the other hand, almost everyone (who is online and able to purchase things) knows how to use a credit card.
Losing a portion of the less tech savvy userbase is a strict improvement over losing the entirety of the userbase due to an inability to take payments at all.
Like I answered to a sibling comment, I mistook who his customers were: advertisers! If we are talking about advertisers, switching to crypto makes way more sense.
No, but they are pragmatic. I understand this is simply a way to sidestep payment problems related to anti-porn regulations, not an ideological "crypto freedom" thing.
The advertisers are aware of what business the website is in, they want to advertise there, but the owner's bank closed his account.
It would be a different story if there were a simple and straightforward method to convert a crypto into cash directly with the handler, but until a major credit card company is willing to tackle that burden crypto may not be the answer.
It's not chargebacks specifically, but you can find a handful of articles and websites detailing how MasterCard and Visa in particular deciding that they will not allow certain kinds of adult content.
They flex this by putting leverage on the banks to not support this either, as they could lose the ability to work with Visa or Mastercard if they start doing banking outside their TOS.
There are some reasons why this could be a good thing - pornography is an industry rife with problems of trafficking, abuse, etc. and denying funding of that kind of behaviour is not without reason. But this tends to spill over to just about everything that /isn't/ abusive as well, which leads to adult sites and the like not being able to secure their own funding or get support from banks.
> pornography is an industry rife with problems of trafficking, abuse, etc.
In my experience in the industry that is perception, not reality. There were a few cases to make the news cycle, like the Girls Do Porn lawsuit and the MindGeek/PornHub controversy with user-submitted content.
But precisely because of public perception the adult industry tends to be pretty good at self-regulating in my experience and opinion. I remember getting an email from a sponsor of mine several years ago telling us that their content could in no way be associated with text that includes "drunk / drinking / intoxicated" etc. and they told us that we had to change the copy on the pages that featured their content. Consent is a huge topic and way more nuanced than most people assume.
The finance industry on the other hand? We're talking about institutions that fund weapons dealers and warlords. With global investments from rights-infringing countries. Not to mention the white collar crime and corruption that comes out of that industry.
Public perception of the adult industry being "rife with problems" stems from the taboo and ideology IMO. Nothing is without problems, but it's all relative and some industries do have it worse than others.
What you say matches my suspicions. In the end, the problem is that sex is taboo -- coincidentally the same thing that makes many porn websites "tick" -- and the conservative sectors of society will find a way to be alarmed about it. So getting alarmed about trafficking in porn to me seems like getting alarmed about cars being used to abduct kids and therefore trying to ban cars because of this.
High Risk of annoying "interest group" complaints. There's a lot of evidence about how much just a couple of loony religious groups send thousands of complaints each year to Visa/Mastercard/etc about every company they don't like, and that in turn affects Visa/Mastercard/et al's pressure/relationship with banks.
You'd think that annoying complaints from a minority of self-righteous people wouldn't have so much power in banking, but they seem to get listened to time and again.
No one has put forth a satisfactory explanation for this, in my humble opinion. There's lots of speculation that it has to do with chargebacks, or lawsuits over revenge porn or something. But nothing more than speculation.
High risk business, other businesses are classified as the same when you try to sign up for a merchant bank account, like investment services and marijuana companies.
Our website did not sell anything direct to consumer. Our "customers" were "advertisers" (affiliate programs that supplied us with content and either mailed us a physical commission check or pay out electronically). There was no payment processing of any sort. What we needed to do was clear physical checks and receive deposits from electronic / online banking services like PayPal and Paxum. We had a business credit card which we used to pay for things like web hosting, and we had 3 bank accounts: a chequing account, business savings and US currency. We did not have a merchant account.
It wasn't that the bank refused to process payments for us. They refused to hold our money and handle every day banking transactions like bill payments.
Exactly what brazzy said. Lots of rights for individual persons, but businesses need to be complete open books about their activities (Know Your Customer regulations) and banks have ultimate discretion when it comes to who they want to do business with.
We consulted with a lawyer, not because we thought what our bank did was actionable, but just to explore options. First thing our lawyer said to us is "I want to make sure that you're not expecting that I can waive my magic lawyer wand and force the bank to reverse their decision right?" Of course we didn't expect that, but I did want to know if we had any rights that were being infringed and I had a few ideas about what to do with the business's money should the worst case scenario play out and I wanted to get a legal opinion and advise.
I think that in France it does exist such a right for individuals AND businesses. Any individuals or business that have been denied a bank account should be able to get a designated bank by the Banque de France.
Here's the form for businesses: https://particuliers.banque-france.fr/sites/default/files/me...
Yes it was profitable. That was one of the painful parts. I re-entered the job market in 2018 but my wife and I maintained the business in our free time with my employer's knowledge and consent. The business was feeding into our life savings, had a lot of assets and we had about 500k unique visitors per day (not huge but nothing to scoff at either). Our bandwidth bills were our major expense. All of that was taken from us because of prudish anti-porn attitudes and fear.
Also, from what our visitors often told us, there was a perception that our site was 100% ad-free. This is because the content was all there to promote affiliate programs. I know that it's common for people to ask "why would anyone pay for porn when there is so much free stuff out there?" My 18 year "career" in the industry taught me that it is a symbiotic relationship. The free stuff advertises for the subscription based sites, and neither would exist without the other.
This is fascinating to me, and sad to hear. Have you ever written about the history and starting up of your website from the business side of things, aside from the shutdown? I've thought about starting a similar business and would love to hear more.
Should have accepted Bitcoin or crypto and moved hosting to a more crypto friendly country? Sounds like an ideal use case for decentralized payments if I ever saw one.
I owned and operated an adult website for 18 years. For 15 of those years it was primary source of income. It was completely lawful and above board, no user-generated-content so I never once had any issues with controversial content etc. One day last year we get a notice from our bank telling us that we were deemed "high risk" and they were closing our commercial accounts. For months we tried to find any bank or credit union that would take us but they all turned us down.
Someone actually posted our story to HN but it's not really tech related so didn't get many upvotes or engagement.
So I know how devastating it is for ignorance and stupidity on the part of the others to shut down something that a) you worked hard to create yourself and b) was such a huge part of your life for so long. Extreme empathy.