Banks Could Intercept Your COVID-19 Stimulus Checks — Time for Crypto

Crypto could act much better than banks during the global COVID-19 pandemic: Here are the reasons.

Payments of $1,200 from the CARES Act to Americans in need have begun to be distributed to those who authorized the Internal Revenue Service to make direct deposits into their bank accounts. However, the money may never reach its targets.

Intended to assist families during the COVID-19 crisis, the payments were not exempt from private debt collection, which means banks and other creditors could lawfully intercept the emergency payments. If ever there was evidence that cryptocurrencies were a safer way for people to get their money, CARES Act payment interceptions and garnishments are definitely proof.

Bank and creditor in compassion knows no limits

Twelve years after happily accepting a large portion of the $440 billion distributed through the TARP program amid the global financial crisis they caused, legacy banks are again leveraging a crisis to fortify their balance sheets.

The payments cannot be intercepted by state or federal agencies to service debts except child support payments in arrears. But Congress did not extend that protection to private debt collection.

Treasury Secretary Steven Mnuchin learned about the possibilities for banks to intercept payments a week after the legislation was written and two weeks after the funds started to be distributed. Despite the Treasury having the power to halt the interception and members of the Senate prompting Mnuchin in an open letter from April 9 to enact those powers, nothing has been done to prevent banks from seizing money.

Of course, that is exactly what they did.

The United Services Automobile Association, or USAA, a bank which “proudly serve[s] military members and their families” took $3,400 in CARES Act payments from a disabled veteran to cover past debts in spite of the family’s dire financial situation. The veteran’s wife said that the bank notified her over the phone that they “shouldn’t have gotten into debt in the first place.”

Creed of greed

A recent poll indicates that just over half of Americans under the age of 45 have had their work hours cut down. For those workers and their families, the COVID-19 emergency relief money is the only way to live, and banks stand in that way.

Wells Fargo, JPMorgan Chase, Bank of America, Citibank and U.S. Bank were asked if they would take the money to service past debts. JPMorgan Chase stated that it would not seize monies for closed accounts in trouble. JPMorgan Chase, Wells Fargo and Bank of America agreed to delay repayments for at least 30 days.

Lauren Saunders from the National Consumer Law Center commented on the situation:

“At a time when people are desperate to buy food, the idea that anybody would grab [the $1,200 payments], let alone the banks they trust with their money, is appalling.”

In the meantime, not only banks can leap between people and their COVID-19 relief payments. Lisa Stifler form the Center for Responsible Lending said that “payday lenders in many states have access to bank accounts and can seize that money as well.”

Trustlessness is a bailout for a broken trusted system

Since Bitcoin (BTC) was invented, there has been no need for a trusted third-party intermediary in a transaction between two parties. The need to conduct trustless transactions has never been more acute — especially if the trusted intermediary cannot be trusted at all.

Bank interceptions of emergency payments to families who suddenly, by no fault of their own, find themselves unemployed and unable to buy basic daily essentials is an act of ridiculous cynicism and malfeasance.

The concerns many governments have over crypto’s ability to destabilize their financial systems and reduce the number of levers they can pull to respond to crises, like the one the world faces now, and more appropriately laid at the feet of the legacy banking system.

As the government attempts to prevent a Great Depression-style crash which would ruin millions of households, the banking system and predatory lenders are ready to take advantage of those efforts. The risks they pose to the wider economy could be decreased if a blockchain-based payment system were in place so that no one could prevent households from getting their money.

Cryptocurrency payments transferring directly into people’s self-custody wallets would not be at risk of seizure by any intermediary. The COVID-19 pandemic may yet be a watershed, proving that trustless transactions made with crypto are not only more efficient but assist decision-makers and households alike navigate an economic storm without the threat of banks seizing the deposits.

Little in terms of positivity may come from this global health crisis. But if it proves that banks and the legacy financial infrastructure in general can interfere with a government’s attempts to reduce financial tribulations by confiscating funds which belong to households when they need it most, the COVID-19 pandemic may be the catalyst for wide crypto adoption.