Banks and bitcoin

[danalex]

Will banks worldwide accept bitcoin deposits and insurance soon?
What do you think?

[Dabs]

They could. But not the big banks. Maybe some of the smaller banks will try.

They'll accept bitcoins for deposit, with a very small interest. They will also issue loans for bitcoins, with a much bigger interest rate. So they make money on the spread.

Just like any other regular bank account, but in 3rd party currency. You'll keep your money with them because if you don't do anything, it's supposed to earn a little interest.

The rate would be very small, but it's got to be higher than zero otherwise you'd just keep it in cold storage.

[dissipate]

Soon as in when hell freezes over, sure.

[dissipate]

They could. But not the big banks. Maybe some of the smaller banks will try.

They'll accept bitcoins for deposit, with a very small interest. They will also issue loans for bitcoins, with a much bigger interest rate. So they make money on the spread.

Just like any other regular bank account, but in 3rd party currency. You'll keep your money with them because if you don't do anything, it's supposed to earn a little interest.

The rate would be very small, but it's got to be higher than zero otherwise you'd just keep it in cold storage.

Would not work. The banks would have no protection against a run on the bank. There is no central bank of Bitcoin to give out emergency overnight loans etc. CDs would be legit though.

[BkkCoins]

The banks also have no way to do fractional reserve, ie. lend out more btc then they receive in deposit. Hence, at any given interest rate their profit would always be much lower loaning btc than loaning $$. And if they bought btc with $$ expressly for loaning they would always be open to exchange exposure and would have to increase their btc interest rate to match. So either way any interest rate in btc ought to be something like 10x higher than in $$ (where by $$ I mean any fiat+fractional-reserve currency).

[markm]

I expect with bitcoin and the similar coins manufacturers are in a better position to provide loans than banks are.

Want to buy a 2013 Ford for bitcoins? No problem, Ford loans you enough bitcoins to buy their 2013 model, on condition that you use it specifically and only for buying that item. It is a secured loan and does not require them to have any bitcoins on hand initially themselves at all...

That is how General Mining Corp and General Retirement Funds did startup loans: wanna buy our stuff then fine we will loan you the money to buy it. Wanna buy someone else's stuff go talk to them about a loan.

-MarkM-

[BkkCoins]

I expect with bitcoin and the similar coins manufacturers are in a better position to provide loans than banks are.

Want to buy a 2013 Ford for bitcoins? No problem, oOrd loans you enough bitcoins to buy their 2013 model, on condition that you use it specifically and only for buying that item. It is a secured loan and does not require them to have any bitcoins on hand initially themselves at all...

That is how General Mining Corp and General Retirement Funds did startup loans: wanna buy our stuff then fine we will loan you the money to buy it. Wanna buy someone else's stuff go talk to them about a loan.

-MarkM-

The problem with this is that they are taking exchange risk. ie. if they denominate the loan as X btc then when the exchange later goes down and you repay them X btc they have actually less $$ as a result, perhaps not even enough to cover the car mfr. cost in $$. You can argue that the price could also go up but the point is they assume risk by offering a loan in btc. And just like the carry trade you would have people gaming them to make a profit.

Having futures and options markets would allow hedging these risks but this doesn't seem to be there yet. I know there is an options market but I'm not sure if it has liquidity and whether pricing is useable.

[SuperHakka]

Will banks worldwide accept bitcoin deposits and insurance soon?
What do you think?

You got more chance of seeing a pig fly past your window  No seriously, this is never going to happen, the banks have too good a thing going in debt-based fractional reserve money to ever risk jeapordising it.

[markm]

Re manufacturer extending loan:

Sure its a gamble, but then too interest rates are, accordingly, high.

So hey, if you want to buy a 100 bitcoin virtual mansion on 2%/week credit, hosted on my own server so I can repossess it any time you miss a payment, what the heck...

-MarkM-

[SuperHakka]

Peeps are only going to give out loans in btc when btc has become mainstream its volatility has died down and stayed low for many years. GM and Toyota not going to sell you a car for 2000BTC when there is a risk that next year, that loan is going to be worth $100. Peeps get fired for that kind of nonsense 

[markm]

Okay, sure, GM and Toyota might not, but Henry Ford is a visionary. Maybe after faking his death he studied at a tibertan monstery to learn the secrets of personal longevity then re-emerged as Satoshi Nakamoto and can well afford to loan people enough bitcoins to afford a new car.

-MarkM-

[Realpra]

Largely I do not see banks survive in a Bitcoin world.

Banks do two things:
1. Store large amounts of money securely.
2. Transfer money.

Bitcoin does both.


Loans and interest is called "investing with risk" and that is what hedgefunds/bonds/stocks are for. If a bank guarantees you any kind of return on investment/(deposit) without telling you HOW they are making that money, it is a scam.

BTC interest is simply not happening while BTC itself is increasing 100% in value per year, its insane. There is no way anyone could make that in the long run or without huge risks - as soon as they moved the capital into the real world trying to earn that interest their fiat would loose value faster than the BTC doing nothing.

Maybe when the BTC deflation is at ~1-3%/year in 10-20 years interest on BTC deposits could realistically happen.

In short banks came into existence because of the inherent problems with gold and fiat money and now they will all disappear again as their business case is GONE.
Only loaning and investment firms will remain - though of course such may choose to call themselves banks for branding reasons.


Also, danalex, for your information:
Your "anonymous" BTC address next to your name and forum id (whose IP the forum admins can look up) is in fact NOT anonymous.

[SuperHakka]

Largely I do not see banks survive in a Bitcoin world.

Banks do two things:
1. Store large amounts of money securely.
2. Transfer money.

Banks do not only do those two things, you left off the most important thing and that is banks are businesses out to make as much profit as possible and they have a legal licence to print money as well, beat that. They will catch any runt that tries to take their stash away and put a gun to their head. Bukka! Over innit.

[robbonz]

Banks do two things:
1. Store large amounts of money securely.
2. Transfer money.

Bitcoin does both.

Bitcoin 100% does not do #1. You personally are the guy in charge of security of your bitcoins, just like you are in charge of your own regular wallet

#2. In a way. Bitcoin proposes the protocol for exchanging "money" (bitcoins) or "value" or whatever you want to call it. Again, this is slightly different from your point. Actual clients (or implementations) of the bitcoin protocol are a means of transferring the bitcoins

Cheers
Rob

[QuantumKiwi]

I dont think banks will want to take it on at all, they have no control over it.

Its more of a citizen to citizen payment system. Keep bankers out of it, look at the current finance systems going down the drain - all due to bankers greed.

[matthewh3]

When the market is big enough and the banks smell the money there'll jump all over it.  Probably with fixed deposit terms to help negate the possibility of 'bank run' problems.  You may also be able to use them as a source of credit to get loans valued against them but prices would have to have been stabler for a long time first.

[Realpra]

Banks do not only do those two things, you left off the most important thing and that is banks are businesses out to make as much profit as possible and they have a legal licence to print money as well, beat that. They will catch any runt that tries to take their stash away and put a gun to their head. Bukka! Over innit.

Okaaaaay.... your argument is that A: they WANT to make money and B: they can PRINT money.

I think that we all want to make money, so that is HARDLY a viable business plan in and of itself.

... since they cannot PRINT BTC no matter the amount of guns they have your argument is basically... retarded.

Bitcoin 100% does not do #1. You personally are the guy in charge of security of your bitcoins, just like you are in charge of your own regular wallet

Semantics; you are also in charge of picking the bank to keep you safe and carefully reading the terms so the two are exactly the same.

#2. In a way. Bitcoin proposes the protocol for exchanging "money" (bitcoins) or "value" or whatever you want to call it. Again, this is slightly different from your point. Actual clients (or implementations) of the bitcoin protocol are a means of transferring the bitcoins

"Bitcoin" refers to the network/protocol/client-swarm, "bitcoins", BTC or "BTC" refer to the unit of exchange. (wiki definition)

Now I REALLY REALLY don't care about stupid ass pretentious semantics/grammar, but as I said "Bitcoin does both" using the word for the network and NOT the word for the currency I was in fact saying it exactly correct:

The Bitcoin network blockchain stores wealth and the Bitcoin network blockchain transfers wealth.

Bitcoin IS money - because I can buy shit with it and get paid with it, go live under a bridge troll.

[markm]

I think secured loans might work. How does this sound...

1) We take custody of some collateral, such as, for example, some DeVCoins or some shares of DeVCorp or some GMC (General Mining Corp scrip) or some GRF (General Retirement Funds scrip) or some UKB (United Kingdom Britcoins) or some CDN (Canadian Digital Notes)... in general probably most, maybe even all, of the assets listed at http://galaxies.mygamesonline.org/digitalisassets.html would be eligible for use as collateral.

2) That collateral secure, we risk loaning you some percentage of what we think that collateral is worth (see http://galaxies.mygamesonline.org/digitalisassets.html for what we think various assets are worth), for simplicity let us guess, for the sake of the example or argument, 50%. But, and this is possibly the crucial part that makes this possible, we do not loan for random purposes/purchases. Just like Ford might loan you money to buy a car, we would loan you money to buy things we consider to be acceptable collateral for use in step (1) above. This helps us grow our business, as it ensures that your holdings of assets eligible for use as collateral in step (1) would be increased by taking such a loan.

3) Both to avoid the vagaries of the moment to moment fluctuations of the markets and to help us keep our bitcoins in our own hands rather than the hands of others, we sell you the assets you are borrowing bitcoins to buy ourselves if we have them on hand. This helps avoid bleeding out our (necessarily limited, if only by the bitcoin code itself) supply of bitcoins to third parties, or to put that another way, it helps to ensure we can in fact continue to loan you more and more bitcoins the more collateral you commit into step (1).

-MarkM-

[Sage]

To the banks gold or any other non-counterfeitable means of exchange is like sunlight to a vampire.

They hate gold in the hands of their customers (and do everything possible to get that gold in their vaults...including making it illegal).

They can't steal from those holding the currency unless it's fiat.

Central banks are what creates most all that currency (not governments)!

They will fight tooth and nail using every dirty trick in the book to prevent widespread adoption of Bitcoin or any threat to their fiat currency empire.

But the genie is out of the bottle.  Bitcoin may go, but I assure you if it ever does something better is going to spring up.

Fighting market forces is like trying to hold back the tide.

The market will demand it.

There will be "banks" in a sense that fill that demand.  But they won't be sanctioned by current central banking authorities.

[Sage]

I expect with bitcoin and the similar coins manufacturers are in a better position to provide loans than banks are.

Want to buy a 2013 Ford for bitcoins? No problem, oOrd loans you enough bitcoins to buy their 2013 model, on condition that you use it specifically and only for buying that item. It is a secured loan and does not require them to have any bitcoins on hand initially themselves at all...

That is how General Mining Corp and General Retirement Funds did startup loans: wanna buy our stuff then fine we will loan you the money to buy it. Wanna buy someone else's stuff go talk to them about a loan.

-MarkM-

The problem with this is that they are taking exchange risk. ie. if they denominate the loan as X btc then when the exchange later goes down and you repay them X btc they have actually less $$ as a result, perhaps not even enough to cover the car mfr. cost in $$. You can argue that the price could also go up but the point is they assume risk by offering a loan in btc. And just like the carry trade you would have people gaming them to make a profit.

Having futures and options markets would allow hedging these risks but this doesn't seem to be there yet. I know there is an options market but I'm not sure if it has liquidity and whether pricing is useable.

Banks also hold that risk accepting Dollars or Euros or any other currency.  They use the futures markets to cover their risk.

The reason Bitcoin's price is so erratic now is because the pool of people using it is still too small.  The larger that pool gets, the less erratic those swings will be.

It's only a matter of time before Bitcoin would be a much safer bet for banks then holding an inflatable paper currency.