Bitcoin Forum

Bitcoin Banking Will Be Boring

http://www.bloombergview.com/articles/2014-07-17/bitcoin-banking-will-be-boring

Banking be definition is generally boring. The amount they can earn is low, but they use leverage to allow them to make more money

Yeah I once heard a comedian joke about banking, "Why do they call it interest? It's boring." That's banking for you. Sometimes (not often) I feel sorry for the guys who sit at the front desk of a bank. It must be a dull job.

It is apparent that the article is written from a banker's perspective. It is boring because they cannot convert, sell, or loan out the bitcoin. This is actually good for bitcoin! Bankers cannot inflate bitcoin money supply like they do with fiat.

If they truly wanted to take control they will find a way to make more "coin", digital or not, they will always just make more. That is the problem and they are not purists or true to anything.

as long as they dont start doing off chain banking. EG moving mtgox coins around whilst karpeless has them spent elsewhere.. leading to eventual debt crises..

.. oh wait, thats what banks already do by not having bank notes to back the balance sheets..(fractional reserves)

Fractional reserves would not be a problem as long as there is sufficient assets (loans) to back up all of the deposits.

The problem with GOX is that they owed customers bitcoin that they had nothing to back the deposits with.

There is nothing for bank to make anything from with bitcoin. If someone told me I could store all my bitcoin at their bank and it was only going to cost me a small fee of
$15 a month like most banks do now. I would tell them to shove it. I can have cold storage on a spare computer at home for free. I dont see any benefit to keeping your coins somewhere
you don't have entire control over them.

After the 2008 crisis and constant problems since then I would say boring is welcome. I would wager that european bankers that are scrambling to prop up a currency would welcome some boring banking right now as well. 

They can loan bitcoins. They charge interest for the loans and pay depositors for saving with them. That's how honest banks should work.

Don't agree. In my opinion the bitcoin banking will have the "chaotic foundation" and regulative banking system with this type of foundation never makes you bored.

Boring = stability = good

I know lending is part of a bank's services, but the article quoted the press release saying:

"Companies are also prohibited from selling, transferring, assigning, lending, pledging, or otherwise encumbering assets, including Virtual Currency, it stores on behalf of another person"

Unless I am mistaken, crypto banks are not allowed to loan out bitcoin?

Most people are not tech savvy to set up a cold storage securely or keep their computer secure from trojans and viruses and will be losing their Bitcoins to hackers. That's why either: a) no mainstream adoption will happen or b) Bitcoin banks will be organized more and more who will store bitcoins for a fee. And of course, these banks will engage in fractional reserve activities, it's just human nature to exploit these profit opportunities. People will only withdraw a small portion of bitcoins for spending, the rest can be loaned out for banks to make profits on top of them.

"Exciting" banking sure has been great for the U.S. economy for the last 100 years, huh?

I think it's very interesting that the price didn't tank a lot after all the bad news coming from the New York Bit-License implications that effectively hinder the development of bitcoin-holding companies, that aren't interested in pursuing their core business denominated in USD, but bitcoin. They should've allowed this, only for the sake of doing this experiment!

The regulations will only effect companies that act as some kind of a bitcoin exchange. The regulations are to prevent exchanges from operating on a fractional reserve system.

So they really don't hinder a company from say holding funds in BTC to speculate on the price or use them to buy services/goods? If it is meant to prevent a fractional reserve system, couldn't they be better off by just enforcing some kind of liquidity audit for those companies/exchanges?

You are correct that a business can hold/speculate with BTC without issues. Businesses can also use bitcoin to buy goods/services with no problems.

It is only when companies stat to hold bitcoin on behalf of their customers that they will be subject to regulation.

The regulations do have audits to ensure that exchanges have the proper amount of reserves to cover all of their customer's deposits.

In all honesty, I don't care if Bitcoin banking will be boring. I don't want my cash goin kaput because there is a bunch of inflation wrecking it's value.

The Bit Licenses are pretty much there just to make sure that normal folk can't get any control, they wan to sit there and harvest their cash while we work for all of it.

That is why Banking with Bitcoin is going to be boring. We won't be able to do anything, and they'll sit there on top of their cash. They're restricting it so much it's not even funny.

I guess, though, there could always be a underground movement that avoids these licenses, but I can't speak for sure.

As long as we don't go into inflation through banks, I'm ok. Fractional reserve lending is not preferred, at all IMO, but if necessary I can live with it. Just no inflating the limit. And even when you think about it, it would have to be bank-to-bank to inflate it if anything. Bank-to-peer ensures that Bitcoin remains honest, because you can't send "fake" coins to a wallet.