In the wake of the recent deadly school shooting in Parkland, Fla., there seems to be a more heightened degree of citizen activism to counter gun-rights lobbyists — and their voices are causing more banks and other companies to question their associations with the National Rifle Association and gun sellers.

Over the last few days, a number of companies with NRA affiliations have publicly stated that they will no longer be doing business with the organization, including First National Bank of Omaha, which cited customer feedback as its reason to review and ultimately terminate its contract with the NRA. And Bank of America has begun discussions with its gun manufacturer clients over the nature of their products. “An immediate step we’re taking is to engage the limited number of clients we have that manufacture assault weapons for nonmilitary use to understand what they can contribute to this shared responsibility,” Bank of America told Reuters.

If more banks and payment companies join the chorus, it could create a void in the payment options for legal gun sales, not unlike what legal marijuana dispensaries face. And, just as in other high-risk — but nevertheless legal — markets, alternative options such as cryptocurrencies are already being used.

A philosophical relationship
This discussion gathered fuel last week when The New York Times' Andrew Ross Sorkin suggested in an op-ed piece that card networks, processors and financial institutions should “effectively set new rules for the sales of guns in America." This prompted a rebuttal from American Banker Editor-in-Chief, Rob Blackwell, who warned that if banks take a political stance, it would "set a worrying precedent that could be employed in other cultural flash points."

If banks increasingly cut ties with gun sellers and advocates, the financial institutions may simply be handing their role over to the crypto crowd. There is considerable overlap between Second Amendment supporters and cryptocurrency advocates — both are enshrined in the rights for citizens to be independent of government control.

It is therefore not surprising that a number of firearms retailers in the United States are already accepting virtual currencies. One of the most notable is Central Texas Gunworks, which has a specific page on its website relating to how to pay for items using cryptocurrencies. The process is outlined in several steps and is a little cumbersome, but probably not enough to deter would-be customers.

The owner of Central Texas Gunworks, Michael Cargill, tells CoinDesk that around 45% of its revenue comes from cryptocurrencies. And completing the connection between guns and crypto, his store sells the Ghost Gunner 2, a $2,000 3D printer that is capable of printing metal gun components to make the Liberator 2 pistol — a handgun without a serial number that can be made anywhere using open-source code. The manufacturer, Defense Distributed, was formed by Cody Wilson, a self-proclaimed “crypto-anarchist” who had previously built “dark wallet,” a project designed to obscure internet-based financial transactions. The connections between gun rights and crypto run deep.

Supply and demand
Following any mass shooting, there is often a surge of sales to meet demand for gun owners anticipating a regulatory clampdown.

In research made available exclusively to PaymentsSource, G2 Web Services found that the first two quarters of 2017 showed 21% and 18% decreases in weapons content on e-commerce sites compared with the same quarters in 2016. However, weapons content on websites shot up by 188% in the fourth quarter of 2017 from a year earlier, and sustained its momentum at 108% over the previous year in January 2018.

“Part of the reason for the increase in Q4 and Q1 was the classification of bump stocks as a category of concern after the Oct. 1 Las Vegas shooting occurred, and laws were being proposed to ban them,” said Dan Frechtling, chief product officer of G2 Web Services.

Will more banks holster their support?
Whether the actions of Bank of America are PR overreach in the wake of the Florida mass shooting — or whether it is the first of many large banks to explore limiting its exposure to gun sales — remains to be seen. It's not unheard of for banks to play morality police; just a few years ago, JPMorgan Chase closed the accounts of adult entertainment businesses and the personal accounts of one actress, Teagan Presley, in the wake of the Justice Department's Operation Choke Point. PayPal similarly shut out an individual porn star, and BankUnited in Miami Lakes, Fla., closed the account of a Florida gun dealer after he opened an e-commerce site.

Consider then, hypothetically, that due to a groundswell of public pressure, incumbent payments players take a stance to disassociate from firearms vendors — would this have any material impact on gun sales? The answer is probably no, and could potentially drive the mainstream use of cryptocurrencies among gun enthusiasts.

“It seems like the firearms industry faces growing scrutiny and potentially becoming a prohibited good for credit card processing,” said Danny Klein, chief operating officer of Evercompliant, a company that focuses on transaction laundering. “However, that squeeze in supply is not likely to affect the demand, and so, firearms will find their way to the market.”

So, in the unlikely scenario that financial institutions and networks attempt to control the U.S. gun industry, there is firm evidence that the industry will simply circumvent them with not only the means to disconnect from traditional payment mechanisms, but even the control of who manufactures weapons.

Nick Holland

Nick Holland

Nick Holland is a senior analyst at PaymentsSource. He has previously held analyst roles at Javelin Strategy & Research, Yankee Group and Aite Group.