Imagine getting the following notice from your bank, out of the blue, with no explanation:
Your PERSONAL CHECKING / SAVINGS account ending in XXX will be restricted from use in 21 days, and permanently closed 30 days from the date of this notice.
After a careful review of your banking relationship, we’ve made the decision to close your account above. As a reminder, your Deposit Account Agreement, which you received when you opened your account, allows either you or us to close your account at any time. This decision is final and won’t be reconsidered.
There are logical reasons why a bank would close someone’s account. Perhaps their balance fell below a minimum threshold too many days in a row. Perhaps they were bouncing checks. Perhaps they were flagged for suspicious behavior.
But what if none of those reasons applied at all?
This actually just happened to a wealthy and famous investor.
Roelof Botha is one of the most prominent venture capitalists in Silicon Valley. He was the former chief financial officer of PayPal. He is currently a partner at Sequoia Capital, one of the valley’s most powerful firms. He sits on the board for multiple high-profile tech companies, like Square, the digital payments company, and Bird, the scooter version of Uber.
Botha received a letter from Bank of America with the language as described above, and he posted a screenshot of the letter on twitter. (You can see the tweet here.)
“After being a customer of @BankofAmerica for 20 years, I received this notice today that they decided to fire me as their customer!” Botha said. “With absolutely no explanation,” he added.
If this can happen to Botha, a man with an eight-figure net worth, it can happen to anyone.
It’s a reminder of how much power financial institutions hold over their customers. A bank can “fire” you as a customer at any time, for any reason, while providing you with no explanation at all.
This leads to highly unpleasant hypotheticals. For example: What would happen if a person got locked out of the entire U.S. banking system, with no heads up as to why?
What if Bank of America, Wells Fargo, Citibank, and other banks all chose to act on the same mysterious piece of information — without informing you, the customer — and said, “You can’t bank here”?
It remains a mystery as to why Bank of America shut down Botha’s account after 20 years.
Botha is South African, and presumably travels internationally a fair bit, so it’s possible his money transfer habits triggered some kind of flag in BofA’s system. Again, though, we can’t know for sure.
Members of the cryptocurrency community floated another theory: It might have to do with Botha’s involvement in Bitcoin or some other cryptocurrency.
If Botha was involved with cryptocurrency on a personal level — as many venture capitalists are — that, too, might have tripped a red flag somewhere in BofA’s system.
The U.S. banks have been extremely wary of all things cryptocurrency-related. They live in fear of regulators and money-launderers, seeking to appease the first and avoid the second.
As such, they avoid cryptocurrency like the plague. It’s possible this extends to booting crypto users.
Botha’s history as the former CFO of PayPal is a potential ironic twist here. In the past, PayPal has been known for shutting down the accounts of Bitcoin users, due to the uncharitable assumption that Bitcoin usage is suspicious. (That may have been true many years ago, but not anymore.)
But if it’s true that BofA is shutting Botha out because of something to do with Bitcoin — and again we can only speculate here — that would be more of a negative for Bank of America than for Bitcoin, in the way it highlights the frighteningly arbitrary nature of the U.S. financial system.
As ever more algorithms, artificial intelligence programs, and machine-learning pattern scripts are deployed, red flag triggers running amok and causing huge headaches for innocent customers could play an increasing role in 21st century finance.
And again, this is frightening because first, theoretically anyone at all can get locked out; second, a lock-out or shutdown can happen with zero explanation; and third, there is no judge, jury, or court of appeal, with all results potentially final.
Against a backdrop like this, a sovereign asset like Bitcoin is a feature rather than a bug.
One of the biggest benefits of Bitcoin, and a key reason it functions well as a sovereign store of value, is the fact that nobody can keep you from using it. No government can shut Bitcoin down, and there is no central authority to say who can or can’t own BTC.
For these reasons and more, if we had to choose between Bank of America or Bitcoin, we would choose Bitcoin. Any bank that is willing to shut down a long-standing customer account without explaining why, offers reasons for grave concern regardless.
Then, too, having a portion of emergency funds available in Bitcoin — and thus set apart from the official financial system — could be more than just an alternative investment if a worst-case scenario comes to pass.
Unrestricted access to BTC — because governments can’t control it and banks can’t block your access to it — could at some point become a lifesaver.
TradeSmith Research Team