BitSpend Business Indefinitely Closed Because Their Bank Doesn't Like Bitcoins

[justusranvier]

BitSpend only needed a bank account to restock the dollars on the payment cards they use for making the purchases as part of their service.   If they used a bank account debit card, then obviously that was at risk of the bank taking an action like this.     But if instead they had a credit card or prepaid debit card even which could be reloaded as needed, they simply only need a way to convert bitcoins to the funds for reloading.  One labor-intensive approach is to convert bitcoins to cash and use the cash to buy Moneypak, which is then used to reload the card.   No bank account is necessary.

I think you're missing the potential of decentralization.

If the operators of BitSpend can find 20 trustworthy individuals who are each willing to buy $1000 worth of bitcoins per month (probably because they already are), they could organize them into a network capable of processing a quarter million dollars worth of purchases annually by having these 20 individuals buy items with their own personal debit/credit cards and ship them as gift orders. It would basically be impossible to shut down. There aren't any particularly difficult technical or organizational barriers to making this happen that motivated individuals could not find ways to overcome, and talented and passionate people who are tired of having their ambitions arbitrarily thwarted for illegitimate reasons are some of the most motivated people around.

[1714740224]

1714740224

[RoadTrain]

Yeah once again a) there were no issues and b) the closure had nothing to do with Bitcoin (in our case).  The model based on account transaction volume predicted the account was high risk and the closure was absolute.  Our local banker was actually pretty upset given we were a high grossing account for the local branch.

If you never reach that point then your "relationship" with local branch manager is meaningless you wouldn't be closed anyways and if you do reach that point your local branch manager isn't going to stop a closure.

As it relates to the OP like I said they will get all their funds back and they have absolutely no grounds to sue.  A bank can close an account for any reason at any time even without a reason and there is no grounds for a suit.

And how you got through this?

[Megatherium]

Banks are private property.

I know this is talking from an idealist POV but banks are infrastructure and that should merit a different set of mind.
This case is basically like saying "We're gonna cut your power and water supply because we don't like that you're producing giant purple dildos."

[samson]

Someone should form a new bank or buy a smaller existing private bank in a more friendly geographic location.

Fund it with Bitcoin and use it as an entry / exit point for the crypto ecosystem.

Some kind of Bitcoin based IPO would be a good way of raising money to do this.

[DeathAndTaxes]

Banks are private property.

I know this is talking from an idealist POV but banks are infrastructure and that should merit a different set of mind.
This case is basically like saying "We're gonna cut your power and water supply because we don't like that you're producing giant purple dildos."

No I was speaking from a practical application of the law point of view.  You have no right to a bank account, your account, any account can be closed at anytime for any reason without recourse.  The sole exception being that the bank violates a protected class (race, religion, etc).

If you think that is unfair, start a Bitcoin friendly (or neutral) bank.  No seriously I will be your first depositor and I WANT to pay you thousands of dollars a month in banking fees.

[DeathAndTaxes]

And how you got through this?

Luckily there are over 1,100 national banks in the United States.

[Bitcoin Roll]

Banks can do just about anything they want. They are in charge of the world and that's exactly why bitcoin was invented, to change that

[caveden]

Luckily there are over 1,100 national banks in the United States.

I read somewhere that before 1929 and the Great Depression that number was at least an order of magnitude higher.

[painlord2k]

Luckily there are over 1,100 national banks in the United States.

I read somewhere that before 1929 and the Great Depression that number was at least an order of magnitude higher.

The Fed needed to cull the herd to a manageable level.

[justusranvier]

An Open Letter to the BitSpend Team

[Bitcoin Oz]

Time to use the airbnb or crowd sourced taxi route.

[Nova!]

my bank manager knows me, we have shaken hands many times. he understand bitcoin, understand my business model so i have no issues continuing to do what i do. and no fear of sudden crazy actions from the bank

Yeah and if the bank's computer model says you are high risk the account will be closed by corporate and there is absolutely nothing your local banker (who has no real power) can do.  We did $20M in transactions, generated nearly $50K in banking fees, never had a single complaint, never had a single case of fraud, were registered as an MSB, provided both bank anti-fraud team and local banker a 20 page document outlining our business model and the account was summarily closed by corporate due to high risk nature of our business.

Who the hell were you banking with if you don't mind my asking?
Every major bank I've talked to about my own bitcoin & crypto plans has been so excited they nearly humped my leg.
I've talked with local branch managers and at some of the bigger banks I've dealt with regional finance managers.  Pretty much everyone agrees that if you're complying with FinCen and other relevant laws, then they love you and won't freeze your accounts.
Initially I did talk to some of the smaller local "community" banks and they really didn't feel comfortable with high volume accounts.  But the bigger banks love the high volume accounts as long as you're willing to maintain the liquidity requirements (i.e. Don't move in 1Mil on Monday just to move it all out on Tues unless you have 20Mil sitting on deposit).  However if you have that kind of volume, it's probably best to just start your own bank.

[DeathAndTaxes]

It doesn't really matter the big 5 all work the same but Bank Of America and PNC Bank specifically.  Speaking with other Bitcoin related companies Chase, Wells Fargo, Citi all have arbitrarily closed accounts in good standing.  I am not going to name names but the odds are just about Bitcoin related company (not to be confused with companies which accept Bitcoins for payment) that you have used has had at least one bank account closed for "no good reason".   The same thing occurs with international banks as well, not a single exchange anywhere in the world hasn't had at least one bank account closed (Canada, Japan, Germany, France, UK, it doesn't really matter).   It is just part of the business.   High transaction volume without a corresponding high asset base is "risky" in most banking models.  They are worried about regulatory oversight, fraud, criminal activity, money laundering, cybercrime, etc.  Right now "oh this is Bitcoin so a huge number of transactions to a huge number of individuals is normal" isn't a good enough answer.  The simplest "solution" is just to close high risk accounts and make them someone else problem.  Maybe in time that will change.

Now what you described (leaving millions in deposit) is laughably an entirely different scale.  I am sure if you are willing to leave $20M on deposit they likely will bend some of their own rules.  I was talking about SMALL BUSINESS.  A Bitcoin startup even if they had $20M in cash couldn't really justify leaving idle to keep their bank happy.

[MPOE-PR]

my bank manager knows me, we have shaken hands many times. he understand bitcoin, understand my business model so i have no issues continuing to do what i do. and no fear of sudden crazy actions from the bank

Yeah and if the bank's computer model says you are high risk the account will be closed by corporate and there is absolutely nothing your local banker (who has no real power) can do.  We did $20M in transactions, generated nearly $50K in banking fees, never had a single complaint, never had a single case of fraud, were registered as an MSB, provided both bank anti-fraud team and local banker a 20 page document outlining our business model and the account was summarily closed by corporate due to high risk nature of our business.

Pretty much explains why it's not worth bothering.

Every major bank I've talked to about my own bitcoin & crypto plans has been so excited they nearly humped my leg.

You're new here, the chief symptom of which being that you take yourself way too seriously. Tone it down by about two degrees of magnitude, it's getting annoying.

[Nova!]

You're new here, the chief symptom of which being that you take yourself way too seriously. Tone it down by about two degrees of magnitude, it's getting annoying.

I'm confused by that statement for a couple of reasons.  Not sure if I missed your sarcasm or you missed my humor.  Also, I'm not new, been here a while but had to change accounts after a payment service launched that had the same name as my previous account (was simpler than asking for a name change).

Still I have yet to talk to a major bank that wasn't extremely interested in banking a bitcoin enterprise.