How to prove Bitcoin transactions to a bank?

[the joint]

I have an issue.  I'm buying a home thanks to BTC (good).  The bank wants proof of BTC ownership (somewhat bad) and wants proof of USD going into and out of BTC (insanely bad).

First, keep in mind that, although I have a sizeable and easy-to-prove stash of physical BTC, I liquidated the vast majority of my digital holdings.

Second, while I use Coinbase almost exclusively for purchasing Bitcoins, and while I use BitPay almost exclusively for cashing out (except for Coinbase, but that doesn't matter since it's inherently linked to my bank account), the BTC that's cashed out through BitPay comes from multiple sources including mobile wallets, desktop wallets, and Coinbase withdrawals to an external account.  Accordingly, the bank is having a fit that the money leaving my bank account to Coinbase doesn't match the money coming back in.

I told my realtor that I believe the bank has several options:

1)  Learn more about BTC, quit asking for dumb, irrelevant stuff, and accept the fact that providing absolute, definitive proof of ownership would require providing private keys, and this would essentially make the bankers owners as well (not happening).  And, even in this case, I don't know how I could ever prove that the coins weren't loaned to me at some point.

2)  Let me provide them with every iota of transaction data available including all bank statements, all transaction histories from all mobile, desktop, and paper wallets, screenshots of every transaction and every .csv export I can find, etc., leaving them with a mountain of paperwork that they can try to piece together.  This would total hundreds, perhaps thousands of pieces of evidence.

3)  Be fucking reasonable and understand the idiocy of the length that someone would have to go to fabricate the evidence I have already supplied them (which includes pictures of my physical coins, mining hardware, in-progress mining snapshots of CGminer, countless bank statements, .csv exports from both BitPay and Coinbase, screenshots of particular screens on both Coinbase and BitPay showing corresponding email addresses, deposit addresses, etc.

Given the obvious fact that Bitcoin and other virtual currencies fluctuate in value against the dollar, I don't even understand how the bank would expect the money going in to match the money going out.  Throw in cashouts from mined coins amidst coins that were purchased and deposits from multiple sources and you get one hell of a knot to untie.

Anybody else have any better suggestions on what I can provide to the bank?  

[gnode]

So you are trying to get a mortgage from a bank and the bank wants proof of assets and most of your assets are in bitcoins?

Wow that is a going to be a difficult sell. Your best bet is to sell some bitcoins to cash and put them in an account in the bank. Then when you have closed on the house, convert back to bitcoins.

[Beliathon]

Wow that is a going to be a difficult sell. Your best bet is to sell some bitcoins to cash and put them in an account in the bank. Then when you have closed on the house, convert back to bitcoins.

This sounds like a recipe for potentially destroying tens of thousands of dollars in wealth. If at any time during the process BTC spikes upward, OP has lost money. Not worth it imho.

[Soros Shorts]

Wow that is a going to be a difficult sell. Your best bet is to sell some bitcoins to cash and put them in an account in the bank. Then when you have closed on the house, convert back to bitcoins.

This sounds like a recipe for potentially destroying tens of thousands of dollars in wealth. If at any time during the process BTC spikes upward, OP has lost money. Not worth it imho.

Not to mention that you have to explain to the banks where the large amount of cash came from. They need to know that the money was not borrowed, which leads you back to square one - having to prove that the coins you sold were yours.

[the joint]

So you are trying to get a mortgage from a bank and the bank wants proof of assets and most of your assets are in bitcoins?

Wow that is a going to be a difficult sell. Your best bet is to sell some bitcoins to cash and put them in an account in the bank. Then when you have closed on the house, convert back to bitcoins.

That's part of the problem.

Fortunately, I have the assets regardless of the BTC (i.e. cash, precious metals, investment accounts, etc.), but since bitcoins still represent a very significant percentage of my assets, it's harder.

Cashing out the BTC won't help the issue because they aren't fully convinced that the cashed-out BTC wasn't loaned to me or something -- they want to see that every penny going to, for example, Coinbase, matches the money coming back into my account.  They basically are saying that they don't necessarily believe the money in my bank account is mine lol.

[the joint]

Wow that is a going to be a difficult sell. Your best bet is to sell some bitcoins to cash and put them in an account in the bank. Then when you have closed on the house, convert back to bitcoins.

This sounds like a recipe for potentially destroying tens of thousands of dollars in wealth. If at any time during the process BTC spikes upward, OP has lost money. Not worth it imho.

Not to mention that you have to explain to the banks where the large amount of cash came from. They need to know that the money was not borrowed, which leads you back to square one - having to prove that the coins you sold were yours.

Exactly.  I have five-figure deposits to my bank account which are BTC cashouts.   They are indeed asking me where the hell that money came from.

[porqupine]

They are capital gains and you have to report / pay taxes on capital gains - that should be clear enough for the Bank once it's done.

The other problem if I have or haven't understood correctly is that you want to get a mortgage? A Bank is likely to see Bitcoins as extremely volatile / untrustworthy, and therefore unlikely to accept the value of said assets in determining what kind of mortgage they can offer you. If you do want to keep those assets in BTC and still somehow need to get a mortage - I would suggest looking into one of the Bitcoin trusts / Banks, that may seem more legitimate in the eyes of the Loan manager at the bank, then again it may not - it is something you should clarify.

[the joint]

They are capital gains and you have to report / pay taxes on capital gains - that should be clear enough for the Bank once it's done.

The other problem if I have or haven't understood correctly is that you want to get a mortgage? A Bank is likely to see Bitcoins as extremely volatile / untrustworthy, and therefore unlikely to accept the value of said assets in determining what kind of mortgage they can offer you. If you do want to keep those assets in BTC and still somehow need to get a mortage - I would suggest looking into one of the Bitcoin trusts / Banks, that may seem more legitimate in the eyes of the Loan manager at the bank, then again it may not - it is something you should clarify.

My realtor is a hotshot millionaire ex-banker who is doing me a favor through a mutual friend; he knows the ins and outs of the banking system and works with multi-millionaire clientele, so he's been able to at least get their attention.  He actually told me that one of the agents spent several hours researching BTC because I told him to tell them to do that so they wouldn't keep asking me for information that has nothing to do with proving BTC ownership.  Lol.  

I consider it a small win

In any case, he seems to know what he's doing.

Edit:  Thanks, I will look into that.

[Beliathon]

The better question is, how can a bank prove its utility in the era of cryptocurrency?

Spoiler: It can't, not anymore that blockbuster rentals can prove their value in the era of the torrent.

[keithers]

I have worked at a mortgage bank for over 11 yrs and can help you with this. PM me

[mysidia]

Cashing out the BTC won't help the issue because they aren't fully convinced that the cashed-out BTC wasn't loaned to me or something -- they want to see that every penny going to, for example, Coinbase, matches the money coming back into my account.  They basically are saying that they don't necessarily believe the money in my bank account is mine lol.

A transaction history of your Bitcoin purchases/sales,  including the market value of 1 Bitcoin at the time of each purchase/sale,  should answer that.

The statements of  Bought/Sold asset at price X/Y,  should be able to prove your trading gains/losses.

As for mining.....


You should separate out additional coins gained from mining; any coins earned from mining should be shewn as business revenue --- with expenses of equipment, power, etc.


You may want to commission a CPA to help you gather the info and organize the paperwork to document mining gains appropriately.

For tax purposes... you should already be able to show what dollars flowing were yours, and which dollars flowing (if any) have become a gain or a loss.

The bank is also potentially going to be less leery about the explanation, if you have unrelated reliable parties backing up your explanation.

[Rampion]

The best advice is cristal clear for me: if you can afford it, forget about asking for a mortgage and buy the house cash. I know this is not the "American style", but why should you pay interests and live in debt if you have enough BTC to convert them to fiat and pay for the house immediately and in full?

I assume you need and like that house and thus it will be a good purchase regardless of what the BTC exchange rate will do after you bought it. You will sleep better without being in debt and your bank will have to stfu.

Finally, I will probably also change bank... Just because I don't like the attitude you described.

[FalconFly]

+1 !

If you can manage it, keep the bank entirely out of the loop and negotiate only with the seller of the house while avoiding the middleman (who always takes some money off you, while reporting everything to your friendly IRS/government etc.).

If your assets are the mix you described, may be hard to do though (I assume most house sellers prefer the "security" and "approval" of a classic bank for the transaction)

If a mortgage is unavoidable, I'd focus on offering classic assets as a security where possible.

[mysidia]

If a mortgage is unavoidable, I'd focus on offering classic assets as a security where possible.

Even if you do have classic assets as a security;  the bank will likely still be interested in the Bitcoin assets and still require proof of their status  and the status of funds being received when you cashed in  -----  they start looking at these cash outs, and they are going to raise a red flag,  particularly if the money hasn't stayed in the same place for  4 to 6 months.

Did the applicant just contract with someone to temporarily borrow all this money, for r the sole purpose of "showing the assets" and constructing a false application?

I know of someone recently applying for some kind of personal loan and bank wanting to scrutinize financial affairs of applicant's employer too, even though these weren't the applicant's affairs.

Ultimately, the bank insisted that the applicant get a statement from "an uninterested party", certifying that the applicant owned no part of their employer's business.

This was problematic, because external advisors were not privvy to the details of the operating agreements and therefore could not certify that -- and  all 5 or so agents of the company bore some relation and would be considered interested parties.

I think....  if you are about to apply for a mortgage:  In addition to not relying on Bitcoin-related assets as part of your personal assets to help you get the loan...  You don't want to be conducting large Bitcoin to Fiat trades  within the past 12 months,  that the bank is very likely to ask about.

[5thStreetResearch]

you should probably unwind that bitcoin position some bud, that chart looks like a disaster right now, heading lower still

[lemier]

You should report and pay taxes on capital gains

[redwhitenblue]

If you are trying to show the bank that you own BTC in order to show you have sufficient "cash" reserves in order for you to qualify for a mortgage then it is unlikely that they will accept this even upon receipt of proof. Money in your bank account and other property can be garnished in the event that you do not repay your loan while it would be impossible for a bank to garnish your BTC.

You should be able to prove that you own the BTC that are in an address by signing a message with the address in question.

As for your proof of Dollars going into and out of BTC then the best way would be to show them account statements (invoices for coinbase) at the exchange that you use. The purpose of this is likely because there is so much money going in and out of your bank account it may look like that you are kiting checks in order to make your account balance look bigger then it really is.

My advise to you is to ask your contact person at the bank what specific documentation they are looking for. It would be very rare that a bank would ask for "proof" of something without giving specific examples of what they will and will not accept.

[the joint]

Overdue update:

Mortgage was approved, and at an outrageous 3.25% interest rate

In the end, a small mountain of circumstantial evidence of ownership was enough.  It basically got to a point where it would be ludicrous for someone to fabricate all the information I provided to them, but I did have to provide specific documentation of money going into and out of BTC for a few of my largest transactions.

Edit: Relating back to the OP, it was mostly #3 with a little bit of #2 and a smidgen of #1

[Harley997]

Overdue update:

Mortgage was approved, and at an outrageous 3.25% interest rate

In the end, a small mountain of circumstantial evidence of ownership was enough.  It basically got to a point where it would be ludicrous for someone to fabricate all the information I provided to them, but I did have to provide specific documentation of money going into and out of BTC for a few of my largest transactions.

Edit: Relating back to the OP, it was mostly #3 with a little bit of #2 and a smidgen of #1

In historical term a IR of 3.25% is extremely low. I am not sure where mortgage rates are now but that even sounds fairly low by today's standards.

To answer your OP I would have simply signed a message with each of your addresses that have coins that you own.