[2015-07-24] San Francisco Federal Reserve Director Warns Community Banks ...

[tyz]

San Francisco Federal Reserve Director Warns Community Banks about Bitcoin Risks

Wallace Young, the director of the Federal Reserve Bank of San Francisco, has published an article suggesting community banks should be cautious about Bitcoin firms and consumers. He also pointed out the digital currency’s pros and cons.

http://coinyoo.com/2015/07/24/san-francisco-federal-reserve-director-warns-community-banks-about-bitcoin-risks/

[TraderTimm]

I hope he pointed out the risks of holding paper money when the Fed does another round of Quantitative Easing, or in basic terms "fire up the printers, we need to stand well back and shuttle money to primary dealers".

Such irony in warning about Bitcoin. But naturally he'll defend his stilted little empire until it comes crashing down from the AIIB,Sino-Eurasian and Russian BRICs investment bank deals. The dollar is being shunted around, its "world reserve currency" status is being undermined as we speak.

[odolvlobo]

Contrary to the coinyoo article's FUD, the article by the Federal Reserve is relatively positive.

Here is the original article published by the Federal Reserve:

What Community Bankers Should Know About Virtual Currencies

Summary:

Launched in 2009, Bitcoin is currently the largest and most popular virtual currency. However, many other virtual currencies have emerged over the past several years, such as Litecoin, Dogecoin, and Peercoin. Meanwhile, even more virtual currencies are being developed; one of these is Dash (formerly Darkcoin), .... Another new and specialized virtual currency is DopeCoin, ...

Accordingly, opportunities abound for community banks to provide services to entities engaged in virtual currency activities. Eventually, it is also possible that community banks may find themselves holding virtual currency on their own balance sheets.

Compliance Risk

... The most significant is compliance risk, a subset of legal risk. ...

Reputational Risk

Another important risk for community banks to consider is reputational risk. ...

Credit Risk

How should a community bank respond if a borrower wants to specifically post bitcoins or another virtual currency as collateral for a loan? ... In this case, caution is appropriate. Bankers should carefully weigh the pros and cons of extending any loan secured by bitcoins or other virtual currencies

Operational Risk

... Holding virtual currency presents some operational challenges for a financial institution. ...

Conclusion

... Banks need not turn away this business as a class, but they should consider the risks of each individual customer. ...

[Kprawn]

Strange how a entity that are actually owned by banks, are warning other banks against Bitcoin. It's fine when they control money flow, and when something disruptive like

Bitcoin comes around, they want to jump up and warn everyone. Where were the warnings when the banks recklessly loaned money to people who cannot pay it back?

It's these same people who bailed out the banks, with "Magic money" during the economic crisis in 2008.