How to Launder Bitcoin
A rant and a how-to guide.
By the time I bought any cryptocurrency, in June 2016, it was too late. Bitcoin was already teetering on a £400 high, surely an untenable position; all of my smarter friends had cashed out and taken home their winnings. I was in a good mood so I decided to put some money down anyway. You can't win if you don't play the game.
You've probably heard this part of the story before. Bitcoin just keeps on going up.
Rant about how useless Bitcoin is
I don't want to use Bitcoin as a long-term store of value. Forget about the gains against fiat for the moment—it should be a currency, not a commodity. How can I put my money where my mouth is and start paying for stuff?
Coinmap.org purports to show a map of vendors that will allow me to pay using BTC. There are three such places within 25 miles of my house, and one of those is an ATM, i.e. a place to turn my BTC into usable money.
Regardless, even if my local supermarket allowed me to swap BTC for food, I'd currently be paying upwards of 15% of the total cost in transaction fees alone. Other cryptocurrencies offer lower fees, but this defeats the point: they're even less likely to be accepted by stores than Bitcoin is.
Products like the Xapo Card exist to paper over the holes in our banking system while store payment processors catch up, by converting a Bitcoin balance to an acceptable fiat currency at either point of sale or ATM withdrawal. However, these cards have problems. Transactions frequently fail, and recently the biggest provider of these prepaid cards, WaveCrest Holdings, had all their Visa cards cancelled with immediate effect. Besides, these prepaid cards ultimately solve a problem that shouldn't exist.
I don't pretend to have all the answers, but the Lightning Network looks like it might have some of them.
Give up and sell... for now
In the meantime, I'd like my money back, thanks. When I initially bought Bitcoin, I spent little enough to get away with debit card purchases instead of bank transfers, and minimal "know your customer" (KYC) checks. Over time, as my balance grew in GBP value, I was forced into sending identity documents before being allowed to access my money.
This is fine, KYC is there for a reason. It stops ne'er-do-wells withdrawing their ill-gotten gains from whatever nefarious activities they may have been engaging in. It would be unfair to blame The Man entirely for imposing these rules on exchanges dealing in regulated currencies. However, withdrawing GBP profits from Coinbase to my day-to-day bank account proved to be remarkably difficult. At each step, there seems to be another identity verification step or kafkaesque demand. By the end, I had a misplaced sense of guilt because I'd been treated so much like a criminal.
Four steps to freedom
The following is my attempt to move my hostage GBPs from one account to another, and the issues encountered. The solution works, and I'm now transferring in chunks of increasing size because I expect one step of the pipeline to fail at any given moment.
Coinbase only allow withdrawal of Euros via SEPA payments
Fine, my GBP bank account allows me to receive money via SEPA for free.
Coinbase require a Euro deposit before allowing withdrawals to any account
OK, slightly annoying but probably feasible.
My GBP bank account charges steep fees for sending Euros
Thankfully, I have a Monzo bank account. Monzo is a fully-fledged GBP account in all respects bar one: it cannot receive SEPA payments. International payment support is on their public "to-do list" but won't be implemented for a while yet.
After a bit of searching I rediscovered Revolut, which is a similar product to Monzo—free mobile banking with free (wholesale FX rate) currency conversion. Revolut allow free SEPA transfers so I signed up straight away. Downloading the app, registering, and adding a GBP and EUR account took around 10 minutes.
So there you have it: if you want to withdraw GBP from Coinbase (other exchanges may have different demands), use Revolut. I'm not being paid to write about them (yet?). I used three banks in total to get my money, but you can probably do it in two.
Normal Bank => Monzo => Revolut (EUR) => Coinbase => Revolut (EUR) => Revolut (GBP) => Normal Bank
12 January 2018