Bitcoin Forum

I have been playing around with the idea of a (non-investment) Bank offering BiTCoin custody and payment services. Some of the key benefits I see:
- Bank standard IT security; same IT security as for your cash/debit/savings accounts.
- Integrated with your non-crypto accounts; one stop shop.
- Under regulatory framework; consumer protection and yearly (tax) statements.
- High level of familiarity for the less BiTCoin experienced user (from the user perspective it works, more or less, just like any other bank account).
- BiTCoin addresses are legally linked to owner; no anonymous accounts. Together with the regualtory framework, I believe this would be very valuable for merchants, as it provides a vehicle through which they can 'guarantee’  their accounts and BTC holdings.
- Proper, audited and regulated accounting (if anything, Banks generally run tight accounting; very unlikly a MT Gox scenario could unfold at a bank).

I do have some premises though:
- On the basis of a custody account like structure only (e.g. like a equity deposit account). Added benefit is that, if the bank defaults, your holdings are guaranteed (at least this is how Dutch Law works).
- No lending activities, secured or unsecured.
- No speculation by both the Bank and the Consumer.
- No termed business.
- More or less the same qualifications and identifications needed to open a BTC Account, as for (e.g.) a regular Checking account.
- Banks opt as a Broker only for USD/BTC conversions. A central clearing organization may be needed here to support.

One key downside i see is that you will likely not get any interest. That’s the price you pay for prohibiting lending and termed business.

So what do you think?

read all of the bank announcements. they only deal with fiat directly. not bitcoins, not baked beans not gold.

if you want bitcoins go to an exchange/localbitcoins
if you want baked beans go to a grocery store
if you want gold go to a pawn shop.

if banks included bitcoins as on of their 'financial products' then regulation will own bitcoins

thanks for the reply. Understand that most banks are staying away from BTC. But what if a Bank would offer such services, that is my question.

Edit: and I do mean a respectable, traditional Bank.

Isn't the whole point of bitcoins that we don't need any bank?

Remember Cyprus.

No thanks, I'd rather look after my own money. Plus, these banks arent going to do this for free.

that was not really a bank, now was it. I am talking more about banks such as: Barclays, Bank Of America. Standard Bank, etc.

in reality banks are under contract to only touch FIAT directly, by the mint/fed/government.

but in a hyperthetical / political fiction story.
anyone can get bitcoins more easily, and businesses can pay bills/taxes more easily.

but that wont happen in reality. its far easier to make bitcoin grow to a point that bank accounts are not needed for daily living. rather then getting banks to distribute bitcoins.

not as far as the network itself is concerned.

I don't care how much regulation you throw at them. If you let them bitcoins in custody we'll have one billion bitcoins in circulation before a year. They simply can't be trusted.

Thats not possible; Banks can't just create more bitcoins, just like a bank can not produce more gold or simply issue more stocks of a certain company. (that is the beauty of the Bitcoin)

The money wasn't stolen from piggy banks and matresses, was it?

And no bank can be trusted.

Banks Face a Storm of Investigations and Litigation

http://www.businessweek.com/articles/2013-11-14/2014-outlook-banks-face-investigations-and-litigation (http://www.businessweek.com/articles/2013-11-14/2014-outlook-banks-face-investigations-and-litigation)

I can store my Gold at a bank, or even the deed to my house. I can deposit my stocks and transfer them in and out.
Mind you, I never said that BTC should be treated as a Currency. Most tax authorities see it as an asset anyway. Very tradable asset though ;-)

yes, very true. Good thing to I would say.

Still, Banks can't operate like Mark Karpelès did. He does seem to have a nice appartment though  ;-)

its been over a decade and a half but here is my rebuttle anaolgy based on that past experience (to get on the same level as most viewers)

i can store my sweaty shoes in a school locker. i can store .. anything in a school locker.. does not mean the school is selling me sweaty shoes or anything else. they are just providing a storage box.

you will not see a bank teller swap FIAT for sweaty shoes, baked beans or bitcoins..

actually, if banks did hold bitcoins as a financial product they offer. it wouldnt be to much of a stretch for them to try off-chain transactions.
by giving people a SQL bank database balance of bitcoins and let people trade the database (leading to fractional reserving) where there are only 21million real bitcoins, but the banks showing 1billion bitcoins on their SQL database..

... just like the current FIAT debt crisis
... just like karpals let people trade his SQL database while hiding the real coins.

No, let the crumble and burn like everything that's Dark Ages old. If they will deal with bitcoins the population will never have a real bitcoin in their wallets, just some unlimited tokens that banks would create to give in return, just like they did with gold.

sounds almost like we will be screwed either way.... no ethics left anymore....

Exactly. Banks "create" fiat every day. They would try to do the same with Bitcoin because that's what they do. That's how they profit. That's why I would not trust them with my btc. And, as you've said, the changes they would need to do to sell btc or beans make this scenario unlikely anyway.

ethics.. are not regulations..
business ethics are about consumer protections. such as activision cannot pre-sale the next call of duty, unless they have a proper release date that is reasonably close. if activision breached this they could get sued.. ButterFlyLabs should have been sued sooooo many times by now, and thats nothing to do with banking regulations.

im all for consumer protections.. but not regulations (a whole different kettle of fish). bitcoin users/customers need to learn their consumer rights to ensure businesses they use their coins on, are ethical. if not, report them.

bringing knowledge of consumer rights will ensure wallet/exchanges do not do fractional reserving, do not steal, and not offer false promises. or they will get sued.

In my view, no issue for banks to have/give access to bitcoin, as long as the protocol stays open.
The risk is that they put huge resources on the code and migrate it to some versions very complicated, still working fine but so that the normal user cannot handle it by himself. Basically they would want to be the only one with the expertise to manipulate(...) bitcoin.

A lot of "bank hate" in this thread.

Of course, bitcoin is open source and available to everyone (including banks).

I strongly expect that some sort of audited, regulated, insured custody accounts will exist in the future.  Nobody will be forced to use them, but many people will choose to use them.  It will be very profitable for the institution that is holding the custody accounts, and many people who fear their own technical ability to secure their bitcoins will make use of such institutions.

Custody could be very cheap I believe (perhaps even as little as 50 USD per year).  I personally think that the profitability would come from exchange/broker services. Banks usually charge a fee when (e.g.) you buy stock, or foreign currency.

Edit: payment services usually also charge a fee, to the merchant

Agreed.  I PERSONALLY will not want to put my Bitcoins in a bank but I can also recognize that not all 7+ billion people on the planet think the same way.  I think sometimes people respond from a point of view that "X wouldn't be useful for me therefore X isn't useful for anyone on the planet".  

Cryptocurrencies won't end the banks.   If (and this remains to be seen) they are widely adopted they could change the banks but there will always be banks as long as there is money.  There have been banks longer than there has been fiat currencies.  Sometimes I get the feeling that people think fiat currency has always existed.  It is a relatively new invention with significant adoption only in the last three centuries.   Modern commodity money (i.e. standardized precious metal coins minted and certified by a national authority) has been used for almost three thousand years.  The first "banks" were essentially gold vaults with a ledger of account balances kept by the bank.   Merchants received gold, merchant was afraid gold would be stolen, at the end of the day merchant deposited his gold with the "bank".  Eventually banks starting issuing receipts and merchants began trading the receipts directly because it was cheaper and easier than removing the gold every day.

If Bitcoin becomes large enough it is only a matter of time before a bank offers the ability to exchange Bitcoins for fiat currency and offers depository services.  As for banks being prohibited from dealing in anything other than fiat well that is just nonsense.  Most banks already offers the ability to buy and sell shares of stocks and mutual funds.  Some banks in China sell Gold (yeah the actual physical metal).  The customer pays by bringing in cash or by drawing against their account and the bank delivers the purchased gold on the spot.  I don't know if any of them offer depositor services or rebuy the account holders gold but that wouldn't be much of a leap.

Another angle that is at least plausible, involves one or more exchanges becoming a bank to reduce compliance costs.  It may sound crazy but nationally chartered banks are exempt from state money transmitter laws.  It is much easier being regulated by a single entity than being regulated by fifty or more entities.  It may not be a bank which has a branch in every major city, it may not even have a single customer accessible branch but it would still be a bank.  Credit card issuers are a good example of this.  Technically one doesn't need to be a bank to issue credit cards however as money transmitter laws sprung up in various states, most issuers found it easier to reorganize as a nationally chartered banks and have one regulator than be classified as money transmitters by multiple regulators.  Today all major credit card issuers in the US are banks although many of them have no "branches", hold customer deposits, or offer any other banking services.  CapitalOne, American Express, and Discover are all nationally chartered banks in the US.

A bank can own BTC.  A bank can sell BTC.  There is no obligation to adhere to the same regulations that apply to fiat aside from what is already established for you and I just because it is a bank.  A bank can buy and sell cars, snow cones, or goats if they want (and often do in the case of recovered collateral).  There is no way to stop banks from entering BTC.  If we can say BTC cannot be owned by entity X, then the same can be said for person Y.

In contrast to franky1's dogmatic statements, I agree with you here. Banks getting involved with Bitcoin will probably happen, and will probably get more of the masses involved in Bitcoin.

The danger we need to convey to these masses is that, once banks start holding Bitcoin deposits, their previous experience with fiat will motivate them to loan out more than they hold (i.e. fractional reserves). Somehow, the community needs to get ahead of this and get the message out that a bitcoin-IOU is NOT the same as a bitcoin. Or, as Holliday so aptly puts it: "If you aren't the sole controller of your private keys, you don't have any bitcoins."

Those are not banks either, but rather Vampire Squids masquerading as banks. Bank of America is a toxic mimic of a true bank, just as America is a toxic mimic of a true nation.

I apologize in advance to all the indoctrinated sheeple who will experience uncomfortable or painful cognitive dissonance when faced with the truth of my words.

Bitcoin: Be Your Own Bank.

Banks have their place, but I don't think they will with bitcoin.

Just voted Hell No!

I think this goes against the very principles upon which Bitcoin was created in the first place.

i guess you missed all of the central banking notifications of the world (china, canada, russia, bolivia, etc etc)
all announcing that central banks wont offer bitcoins directly.

banks have contracts with governments, mints, royalty, feds to only handle legal tender. as for recovering collateral. banks sell debt to private companies and these private companies grab physical goods and turn them into legal tender to then give back to banks.. (debt recovery agencies auctioning off property)

the real solution is not banks and regulation.. but insurance companies and lawyers whom would form the consumer protection people need

That is your continual unfounded claim.  Please provide a cite that all banks in the world are prohibited from handling anything other than legal tender.

Just an example of a bank which would appear to be violating this "legal tender only" secret contract:
http://www.icicibank.com/Personal-Banking/investments/icici-bank-pure-gold/index.page

my knit pick beats your knitpick..

Wonderful.

So, with the following nit-pick adjustment, agreement has been reached?



While we're at it, you should probably fix your earlier post to avoid causing confusion:


I'm not even sure what that last sentence even means, but you inability to make sense isn't my problem.

Probably need to fix this previous post as well:


As for the following:


Do central banks have tellers?
???

thats a more fair description yes, i bow down to you :D

financial products. banks call "share dealing" a financial product, "derivatives" is another financial product, "commodity trading" another "financial product"

i prefer the word service.. but the banking world is never straight forward.

back to the translation.. if central banks offered bitcoin services directly then banking regulations would control bitcoin.. and inevitably end up owning bitcoin,

Um you do know central banks also acquire, hold, and sell gold.  Pretty much every central bank in the world does.
http://en.wikipedia.org/wiki/Gold_reserve#Officially_reported_gold_holdings

Also when someone says "should banks offer Bitcoin custody and payment services" did you really think they were talking about central banks?  When is the last time you had a checking account with a central bank?  The topic had nothing to do with central banks however if Bitcoin ever became large enough (money supply worth trillions) central banks would almost certainly acquire and hold Bitcoin reserves for the exact same reason they acquire and hold gold reserves today.

your looking through narrow sighted views in a mind set of knitpicking. trying to turn a topic into an argument for your own ego..

so here is your ego boost.
lord and master, i bow down to your intellect, your handsome beauty, and your large massive......... muscles.

now thats over with, i can as you a question. its rhetorical i dont need to know your reply
but when was the last time you walked into any bank and said, "can i have an ounce of gold please".. ?

Actually, if you'd just stick to the topic at hand and make an effort to actually make sense, you'd have a lot less issues with people trying to keep others from listening to your nonsense.


I don't care for gold, so I've never asked for gold anywhere. I did get a toaster from my local bank last week.  Does that count?

Never but that doesn't mean banks are prohibited from selling gold.  I doubt I would ever use the services of a bank to acquire Bitcoins either but that doesn't mean they are prohibited from doing so. 

ok i wont be subtle.. and get back on topic

banks prefer to hand joe public bits of paper called bank notes. its not in their interest to let people walk away with real value such as gold. if a bank, central or private was to offer bitcoin services, it would be offchain transactions and paper wallets where they keep the privkeys.. as for the ICICI they dont hand out real gold ounces, just certificates. (bits of paper)

Now there's something we can agree on.

Banks will only start to offer BTC services if/when they can figure out a way to make serious money off of it.   That, or if the market evolves so much that customers stop leaving certain banks that are not offering BTC services.

You can lead a horse to water ... but you can make him read the link.  They do "hand out" real gold.

Banks are already looking at bitcoin more than we can imagine, and I know it for sure.

Most people will always need banks, and banks need to make money with bitcoin.

Interesting link:

http://www.doge-coins.nl/news-2/dutch-bank-abn-amro-reportedly-experimenting-bitcoin/

I also read several articles that suggest banks are mostly interested in the underlying technology.

The banks in that country had to restrict the amount of money their deposit holders could transfer to banks outside of the country and essentially gave deposit holders a haircut because the banks as a whole were in such bad shape.

There's a thread about it

My bank account's got robbed by European Commission. Over 700k is lost. (https://bitcointalk.org/index.php?topic=160292.0)

use Bitcoin as a payment has not been stable. Meanwhile, the use of e-money, credit card, or bank transfer as a payment instrument is attractive and easy to do by anyone. Well, if Bitcoin could eventually become a global currency that is recognized as a credit card? We'll wait!

I agree with you. I have also found that BTC are illegal in few countries.

Why I can't vote?

why let central banks offer bitcoins which will add alot of red tape, regulation and make central banks the main holder of bitcoins.

thus playing into the hands of the current broken FIAT system. instead we should get out of the basement dwellers badly coded wallets. and get PRIVATE businesses with proper financial experience to replace the broken central banks, by making wallet services that have bank-level security infrastructure and proper liability insurance.

if mtgox had liability insurance. mtgox would not have caused as much damage as it did.

Maybe they should, but now they sometimes are doing the opposite http://www.reddit.com/r/Bitcoin/comments/1inixa/bank_of_the_west_is_shutting_down_our_bank/

Banks would probably not do this as it would be very difficult to force someone to pay them back in bitcoin. The closest thing they could do to this would be sue them for fiat and then use that fait to purchase bitcoin on an exchange.

Another issue is the interest rate they would need to pay to get people to deposit bitcoin (and the interest rate they would need to charge borrowers). Interest rates in terms of bitcoin are just too high for this to make sense for them to try to do.

try refreshing the page

good old bump!

But that does not rule out the possibility. A bank could offer the service and those who chose to can take advantage of that service.

So do I.

They won't be traditional banks though - they will be new entities which are audited and regulated by cryptography.

http://opentransactions.org/wiki/index.php?title=Category:Voting_Pools

In China, you will not see Bitcoin in a bank. All banks just deal with fiat money.

I wouldn't be surprised to see some kind of "audited" and "regulated" custody service, however I think that it would be very unlikely that it would be insured.

The fact that whoever knows the private keys of an address can control the unspent inputs of that address makes it too difficult to measure the amount of risk of potential loss.