Topic: US Advisory on Payment App Risks and Bitcoin’s Position as a Secure Alternative (Read 249 times)

What is the reason for that? While it is possible that a government freeze any account for a made-up reason, I think the chance is quite small unless some economic uncertainty happens in that country. I've seen a few cases where banks failed to get the capital to get their operation going, and then they stop the withdrawal process but they still need to pay their users by selling their assets or getting a bailout.

Using Bitcoin to store your wealth is definitely an alternative if you don't mind the volatility.

What's the point of storing funds in a payment app? Payment apps should be used only for payments. They aren't banks or investment funds.

I know it's not safe - but sometimes I also think all options have their own risks. For me it's safer to keep some money in a personal safe than in a bank account for whatever reason - but of course some people are more comfortable saving it in a bank account. After all I don't live in any European countries, so paying for something in cash in any amount is fine on my part.

That's right and another reason why we shouldn't keep big amounts there is, what we've seen from some bank customers in China and I think in Lebanon too when they've got funds deposited on their bank accounts yet the bank won't allow them to withdraw due to government intervention and command.

That is if you have a lot of money in the bank. Tens of thousands of dollars at least. Amounts like $5K you can have in the bank and you won't have any problems withdrawing it and much more depending on the country.

Well, a safe, despite its name don't think it's very safe if the thieves know what they're doing. What it is better for is to have your money at your disposal immediately but I don't know about how much you are referring to as in Europe it doesn't help to have a lot of cash because there are countries with cash payment limits as low as €1.000 ($1.075).

That is if you have a lot of money in the bank. Tens of thousands of dollars at least. Amounts like $5K you can have in the bank and you won't have any problems withdrawing it and much more depending on the country.

Truth can be covered but cannot be hidden forever. The Consumer Financial Protection Bureau (CFPB) is speaking the truth and it's great that it is coming from a US government agency. There is no difference between crypto exchanges and major payment platforms since both of them are not insured by the deposit insurance of the nation. Since you are not protected by any regulatory agencies it will be better to keep your investment safe by yourself which is called self-custody. You bear the risk of keeping your funds which is far better than delegating it to someone or an organisation.

The recent hack of the Estonia-based non-custodian wallet Atomic has brought awareness about using open-source wallets. Banks insure depositors fund against loss but they are not insured against inflation. Bitcoin stands out from the crowd because it is a currency, hedge against inflation and investment commodity.

Bitcoiners have convinced themselves since day 1 of Bitcoin that the government and banks want to get them, but they are bravely fighting against their attacks and winning. Truth is, most governments don't see Bitcoin as a threat, because it's so tiny in terms of use, so it's beneficial for them to allow it to be an collect taxes from trading. Inside the US government there are many different views on Bitcoin, it's hard to tell which one will prevail. But it's impossible for the current status quo to last forever, because right now Bitcoin has no clear legal definition.

Same here - but I don't really trust banks even though they offer annual interest as funder's benefit. I tend to think that my money will only be safer when I keep it private in a safe - this is meant to be a solution to prevent the bank from preventing me from withdrawing all my money when one or two problems occur.

I know asset diversification is a smart option - but banks are becoming less and less trusted as safe depositories for much of our money over the long term. You know that the bank gets very suspicious when we want to withdraw all the funds from the account - so they're bound to ask us a few questions where we want to spend it.

This right here is part of the problem. A lot of people are just lazy and do not want to take their own security up by themselves. They don't trust themselves enough. So they rather keep it with a centralized company that can keep it safe for the.

The Consumer Financial Protection Bureau (CFPB) is speaking the truth and it's great that it is coming from a US government agency.

Of course, it is well-known that you should not be using Paypal as a bank, given their business practices of locking you out of your own account using "limiting".  But the inclusion of the other payment apps inside this advisory is particularly telling. For one thing, it's indicating that these kind of services can basically shut down at any time, or fail, and the result would not be much different to FTX and Celcius.

This being a financial watchdog , naturally they are going to tell us to store our funds in a bank, it being "FDIC insured" and all. But we all here know better than that, right? Non-custodial wallets are the best, should you use them properly.

Yeah seems like giving away funds to “centralised (centralised)” system and believing that our funds are safe. These payment apps are getting smarter these days. Though on one side authorities are warning for not keeping the funds on your payment apps, on the another side these apps are giving away promotional offers so that we could use it more and more. For example, discount offers, coupon codes, X% off on purchases and something like that. These are the ways they are pulling their clients.

I only see one way here, it’s the users who should be aware of this and how their funds are not secure there. They should only add it or have direct withdrawal from bank to the merchant via those app. Which means they won’t be keeping any funds within app.

Yes, non-custodial wallets are the best, but I prefer to have my net worth diversified. Bitcoin in HW, money in the bank, stocks and mutual funds in broker, a small amount of gold and RE. If something happens to one of my assets I still have another.

Users are afraid of losing their money but I know a friend who has more than 100,000 dollars in his bank account and he does not remember the account number. However, he is reassured that the protection provided by banks and all that is needed is to sign a paper and with enough proof of identity to get your money, he feels safe, this A friend will not risk buying a hardware wallet for fear of losing the seeds and thus losing his money.
These same people are lazy and will try to deposit large amounts of money in the PayPal balance because it provides them with ease and the ability to withdraw at any time and buy what they need with a single click.

unless the FDIC moves a step forward and includes these companies in insurance, we may see a collapse like FTX with any major financial crisis.

Non-custodial wallets are the best, as long as they're utilized responsibly. The most critical aspect is to store our private keys securely. Let's say it's like owning a house: no matter how strong your doors and windows are, if you leave the keys lying around, it's not going to end well.

This being a financial watchdog , naturally they are going to tell us to store our funds in a bank, it being "FDIC insured" and all. But we all here know better than that, right? Non-custodial wallets are the best, should you use them properly.

What's the point of storing funds in a payment app? Payment apps should be used only for payments. They aren't banks or investment funds.
I don't know about payment apps offering investment plans or paying interest/dividends. Maybe there are apps, which are offering such services.

AFAIK, the risk of a payment app going bankrupt is really small, because those companies invest the funds their gather from the customers in short term treasury bonds. The only way for the payment apps to go bankrupt is the company owner to exit scam. Such risk is really small, but it does exist.

The Risks of Payment Apps
The CFPB’s consumer advisory raises valid concerns about the risks associated with storing funds in payment apps. While these apps offer convenience and ease of use, they do not provide the same level of protection as traditional banks or credit unions. The lack of federal deposit insurance coverage for funds held in payment apps means that if an app were to fail or go bankrupt, consumers could potentially lose their money. This vulnerability has become more apparent in recent times, with several bank failures highlighting the importance of understanding deposit insurance coverage when choosing where to store money.

TL;DR Breakdown

U.S. advisory warns about the risks of storing funds in payment apps like PayPal, Venmo, Zelle, and Payoneer, as they lack the same protections as traditional banks and credit unions.
Bitcoin emerges as a secure alternative due to its decentralized nature, providing users with sole ownership and control over their funds.
Recently, the Consumer Financial Protection Bureau (CFPB), a prominent U.S. government agency responsible for safeguarding consumer interests in the financial sector, issued a warning about the potential risks associated with storing funds in payment apps such as PayPal, Venmo, Zelle, and Payoneer. The advisory emphasizes that funds held in these payment apps may not benefit from federal deposit insurance, leaving consumers vulnerable to financial uncertainty in case of app failures or bankruptcy.

This advisory has sparked discussions about the security of alternative options, with Bitcoin emerging as a potential secure alternative due to its decentralized nature and user control over funds. This article delves into the U.S. advisory on payment app risks and explores Bitcoin’s growing adoption and its position as a secure alternative in the context of cryptocurrencies.


The Risks of Payment Apps
The CFPB’s consumer advisory raises valid concerns about the risks associated with storing funds in payment apps. While these apps offer convenience and ease of use, they do not provide the same level of protection as traditional banks or credit unions. The lack of federal deposit insurance coverage for funds held in payment apps means that if an app were to fail or go bankrupt, consumers could potentially lose their money. This vulnerability has become more apparent in recent times, with several bank failures highlighting the importance of understanding deposit insurance coverage when choosing where to store money.

In contrast to traditional banking systems, payment apps rely on third-party involvement in financial transactions. This introduces an element of risk as users are subject to the policies and operational stability of the app providers. Instances of frozen accounts or issues with app providers can result in restricted access to funds, causing financial inconvenience and uncertainty for consumers.

Bitcoin as a Secure Alternative
The advisory on payment app risks has led to discussions about secure alternatives, with Bitcoin being considered as a potential solution. Bitcoin, as a decentralized virtual currency, operates independently of any individual, group, or entity. Its core principle of self-sovereignty gives users sole ownership and control over their funds. Unlike payment apps, Bitcoin does not rely on third-party involvement in financial transactions, which eliminates the risk of frozen accounts or bankruptcy associated with centralized systems.

Bitcoin’s resilience and immunity to central control have made it an attractive option for individuals seeking financial security. Its decentralization means that it is not subject to the policies and stability of any particular institution or organization. This quality has led Bitcoin to be described as “digital gold” due to its perceived ability to act as a hedge against inflation. The portability, security, and divisibility of Bitcoin further enhance its appeal as a secure alternative to traditional financial systems.

Growing Adoption of Bitcoin
Bitcoin’s adoption has been on the rise in recent years. Major banks, financial institutions, and payment apps like PayPal have started offering crypto-related services, recognizing the demand for cryptocurrencies and the benefits they offer. The involvement of influential figures like Elon Musk, Jack Dorsey, and Michael Saylor has also contributed to the growing acceptance and adoption of Bitcoin.

While it is important to note that Bitcoin is not exempt from price fluctuations, its decentralized nature ensures that funds are not exposed to the same risks associated with payment app accounts. The price volatility of Bitcoin is characteristic of its market and is influenced by various factors, including investor sentiment, market demand, regulatory developments, and macroeconomic events. However, the fundamental security provided by Bitcoin’s decentralized design remains intact.

Bitcoin’s decentralized and trustless nature makes it resilient against single points of failure, ensuring that no central authority or entity has control over the network or user funds. This has instilled confidence in individuals who are concerned about the risks associated with third-party control over their financial assets.

Conclusion
The recent U.S. advisory warning about the risks of storing funds in payment apps has highlighted the need for secure alternatives. Bitcoin, with its decentralized nature and user control over funds, emerges as a potential solution. While payment apps lack the same level of protection as traditional banking systems, Bitcoin’s self-sovereignty and independence from centralized control make it an attractive option for individuals seeking financial security.