[IDEA] Direct cash deposits for London bitcoin exchange.

I thought I would just share this idea with you people, as it was something that was on my mind.

Intersango had lots of issues with British Banks, and I don't know about any other exchange that attempted a serious dash on the British market, but anyhow, I understand that the banks are often the problem when running an exchange.

So I got the idea: What about allowing cash deposits to the exchange?

That way, the banks would be circumvented.

The way it would work:

The customer registers with the bitcoin exchange, then he goes off to the exchange's cash office. Here he deposits cash, and his balance gets updated on the exchange. He's now free to trade on the exchange.

Payouts could've been done by a third party that process all the cash and deposits it to a bank, or it could be cash payouts. The business could be expanded to have offices in several places in London and the UK.

Obviously there would be lots of details to work out, and there would be a security aspect that would be important to work out as well.

But the benefits I can see:

The core business, the bitcoin exchange, could not be shut down because it's bank accounts are frozen, confiscated or otherwise non-functioning, because there would be no direct customer deposits to any bank account belonging to the exchange.

So, why not use localbitcoins or p2p trade instead? Well, if you want to day trade, or have funds stored on an exchange waiting for buying opportunities, or if you want to store money as GBP or EUR on the exchange, and only buy bitcoins on a need-be basis, then this could be a good opportunity?

How much would it cost to get started?

Well, obviously, the more serious capital that goes into it, the better, but also, if one could not start with cash offices, also trusted cash agents could be an option. Obviously there would need to be routines for handling the cash, as carrying too much cash could lead to unwanted attention from criminals.

Perhaps it would be possible to deposit money daily or several times a day, in a bank - just like a lot of businesses do, like restaurants, shops etc. Perhaps the 'cash agent' could be an already existing shop that sells phone cards, cigarets, chocklates etc, but there could be a system that's directly connected to the bitcoin exchange, and once the agent received a payment, the system could generate a code that the customer is given, or the customers account could be credited directly.

The aim would be to remove the weak link, which is the direct deposit of customer funds to an exchange's bank account. I won't go into details here about how that can be misused and what's happened in the past, but I'm sure a lot of you know of some cases.

Lastly, I'm not situated in London, so I'm not going to act on this idea - but would this be feasible, and would there be less red-tape for such a business to get started? Perhaps it would even be possible to team up with some money exchanging business that exist to benefit from their existing infrastructure?

What are your thoughts, and is there something you see would stop such a business as this? If someone find this interesting, feel free to 'steal' the idea.