This sounds very encouraging to me. A number of panelists have talked about how banks aren't allowing btc businesses to setup up basic checking accounts and how this needs to be fixed if the US isn't going to be left behind.
Quite a lot of the proposed advantages of bitcoin are things that non-US banks have provided for a while. US banking is a badly functioning market with regulators who aren't interested in modernising the retail experience.
This is great news. As a major bitcoin holder, I still have to keep some cash in a traditional bank to write checks, receive payroll, and use a debit card. A bitcoin bank would allow me to store that last remaining % in BTC.
Can confirm first hand this is a serious issue in the industry. There are finally a couple crypto-friendly banks making it easier for holders and businesses. Source- have run a BTC co since 2014.
One of the exciting things about underground currencies like Bitcoin is a freedom to experiment with new banking techniques, impossible to implement with "real money" like dollars because of the regulations and paperwork. While technically bitcoin et al may fall under guidelines for foreign currencies, the likelihood of enforcement is very low, unless btc gets serious mainstream traction (i.e., in your dreams).
Our current banking platforms are horribly obsolete and disjointed. In the day of ecommerce everyone wants an online store and needs a merchant account. A good demo banking platform with btc can light the way.
The hurdles may be high for a couple of guys in a garage, but since the US courts have agreed BTC is a currency, the hurdles are well known and well understood by existing players in the finance world. I suspect their reticence to get into BTC is a combination of limited customer interest, underworld associations (SilkRoad), and volatility. If those three things would go away (i.e. Lots of people want it to use for mundane things, and the price remains relatively stable) I'd bet Bank of America would be happy to get into BTC.
tldr; Banking regulations are complex, and (for very good reasons) slow to adopt innovation. Bitcoin doesn't fit in yet, and someone is annoyed.
(And honestly, considering that Bitcoin transactions approximate anonymous cash transactions, companies with bitcoin assets will scare the hell out of the US banking regulators and make it difficult to do wire fraud detection and proper auditing)
A lot of this hassle is interfacing with the US banking system, not bitcoin itself. If banking was implemented as a push system vs. the current pull system with no real authentication that we have in the US because of legacy reasons, it would eliminate entire categories of fraud.
I've heard Europe is significantly better in this regard.
A great success for the idea that your BTC is a store of value not dependent on traditional financial infrastructure - now it takes the a whole morning and cooperation of 3 banks for you to get at your money.
Well, I'm not convinced a Bitcoin lending facility could really scale into any kind of inter-bank system that handles a fraction of the volume of our current system (since monetary policy works on lending channels).
This is a good point. I guess what I should say is that I'm looking forward to the day when Bitcoin banks are FDIC backed and we can move on from being paranoid about security.
Wouldn't that just move the problem from dealing with visa and mastercard to dealing with the banking sector?
Isn't it challenging for, amongst others, adult entertainers, the legal marijuana industry and bitcoin/crypto currency businesses to maintain stable banking relationships?
Payment processing and banking in the United States is woefully behind the rest of the world. Globally, the system is complex, obtuse, and fragmented enough to result in a shanty town of technological solutions that are just lipstick on a pig.
The hope here is that the introduction of blockchains and cryptocurrencies into public discourse, and public excitement regarding a digital mechanism to store and receive value might be the kick in the pants that the banks need to roll-out better banking tools and systems. Furthermore, the first bank to run a publicly auditable ledger which can be validated externally will set a precedent for transparency.
I'm not sure what the future of cryptocurrencies will be (though I'm bullish), but those would be huge wins for society.
This is an improvement in my opinion. Normally banks only need a small % of the loan in deposits (see fractional-reserve banking), with BTC we see a bank asking you to have more than 3 times the amount of your loan in collateral.
What's the result of this? For the loaner and borrower, less loans and more careful allocation of resources. For society as a whole, a smaller but more robust banking system not dependent on bogus money.
I worked at a currency exchange for years, and this was a constant problem. I wrote software that would allow us to easily switch banks and accounts, because it happened at times once per week.
At one point, we had spent 6 months negotiating with a bank to get a solid account that would supposedly never go away. They spent that time auditing us and assessing all risks. They gave the green light, then mysteriously one week in, they closed our account. They wouldn't tell us why immediately, but we found out later through back channels that 'someone from the government called us, and we were at risk of losing (some license, certification, whatever), so we can't do business with you'. We just accepted that we'd have banking problems indefinitely, and kept going.
The gov't and the bank don't like the competition with USD. They're under pressure from the Treasury, the Fed, and FinCEN to make difficult transactions for exotic currencies (we bought and sold the Iraqi Dinar).
I'm not surprised BTC consumers and traders are seeing this. I'm hoping that it'll help put pressure on the government to change its policies.
It's almost impossible to create a bank. When businesses decide they need to start a bank, they go and buy a shell that already has a banking license. The several million dollars to buy the shell is far cheaper than trying to start one from scratch.
Existing banks could, I suppose, go into this business. But the experience of the IAFCU--being given an excessively hard time by regulators when they started working with BTC businesses--is why they don't. Banks exist because goverment regulators allow them to. Unless they are extremely large (and then the government regulators exist because the large banks say they can, evidently.)
I am a BTC skeptic. I don't think it solves a burning problem for most people. But the government, in trying to keep BTC from succeeding, seems to be creating the very raison d etre, solvable only by crypto-currency, that BTC was lacking.
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