Should banks offer Bitcoin custody and payment services?

[spinf]

In my view, no issue for banks to have/give access to bitcoin, as long as the protocol stays open.
The risk is that they put huge resources on the code and migrate it to some versions very complicated, still working fine but so that the normal user cannot handle it by himself. Basically they would want to be the only one with the expertise to manipulate(...) bitcoin.

[DannyHamilton]

A lot of "bank hate" in this thread.

Of course, bitcoin is open source and available to everyone (including banks).

I strongly expect that some sort of audited, regulated, insured custody accounts will exist in the future.  Nobody will be forced to use them, but many people will choose to use them.  It will be very profitable for the institution that is holding the custody accounts, and many people who fear their own technical ability to secure their bitcoins will make use of such institutions.

[mgoldfinger]

A lot of "bank hate" in this thread.

Of course, bitcoin is open source and available to everyone (including banks).

I strongly expect that some sort of audited, regulated, insured custody accounts will exist in the future.  Nobody will be forced to use them, but many people will choose to use them.  It will be very profitable for the institution that is holding the custody accounts, and many people who fear their own technical ability to secure their bitcoins will make use of such institutions.

Custody could be very cheap I believe (perhaps even as little as 50 USD per year).  I personally think that the profitability would come from exchange/broker services. Banks usually charge a fee when (e.g.) you buy stock, or foreign currency.

Edit: payment services usually also charge a fee, to the merchant

[DeathAndTaxes]

A lot of "bank hate" in this thread.

Of course, bitcoin is open source and available to everyone (including banks).

I strongly expect that some sort of audited, regulated, insured custody accounts will exist in the future.  Nobody will be forced to use them, but many people will choose to use them.  It will be very profitable for the institution that is holding the custody accounts, and many people who fear their own technical ability to secure their bitcoins will make use of such institutions.

Agreed.  I PERSONALLY will not want to put my Bitcoins in a bank but I can also recognize that not all 7+ billion people on the planet think the same way.  I think sometimes people respond from a point of view that "X wouldn't be useful for me therefore X isn't useful for anyone on the planet".  

Cryptocurrencies won't end the banks.   If (and this remains to be seen) they are widely adopted they could change the banks but there will always be banks as long as there is money.  There have been banks longer than there has been fiat currencies.  Sometimes I get the feeling that people think fiat currency has always existed.  It is a relatively new invention with significant adoption only in the last three centuries.   Modern commodity money (i.e. standardized precious metal coins minted and certified by a national authority) has been used for almost three thousand years.  The first "banks" were essentially gold vaults with a ledger of account balances kept by the bank.   Merchants received gold, merchant was afraid gold would be stolen, at the end of the day merchant deposited his gold with the "bank".  Eventually banks starting issuing receipts and merchants began trading the receipts directly because it was cheaper and easier than removing the gold every day.

If Bitcoin becomes large enough it is only a matter of time before a bank offers the ability to exchange Bitcoins for fiat currency and offers depository services.  As for banks being prohibited from dealing in anything other than fiat well that is just nonsense.  Most banks already offers the ability to buy and sell shares of stocks and mutual funds.  Some banks in China sell Gold (yeah the actual physical metal).  The customer pays by bringing in cash or by drawing against their account and the bank delivers the purchased gold on the spot.  I don't know if any of them offer depositor services or rebuy the account holders gold but that wouldn't be much of a leap.

Another angle that is at least plausible, involves one or more exchanges becoming a bank to reduce compliance costs.  It may sound crazy but nationally chartered banks are exempt from state money transmitter laws.  It is much easier being regulated by a single entity than being regulated by fifty or more entities.  It may not be a bank which has a branch in every major city, it may not even have a single customer accessible branch but it would still be a bank.  Credit card issuers are a good example of this.  Technically one doesn't need to be a bank to issue credit cards however as money transmitter laws sprung up in various states, most issuers found it easier to reorganize as a nationally chartered banks and have one regulator than be classified as money transmitters by multiple regulators.  Today all major credit card issuers in the US are banks although many of them have no "branches", hold customer deposits, or offer any other banking services.  CapitalOne, American Express, and Discover are all nationally chartered banks in the US.

[jc01480]

A bank can own BTC.  A bank can sell BTC.  There is no obligation to adhere to the same regulations that apply to fiat aside from what is already established for you and I just because it is a bank.  A bank can buy and sell cars, snow cones, or goats if they want (and often do in the case of recovered collateral).  There is no way to stop banks from entering BTC.  If we can say BTC cannot be owned by entity X, then the same can be said for person Y.

[jbreher]

If Bitcoin becomes large enough it is only a matter of time before a bank offers the ability to exchange Bitcoins for fiat currency and offers depository services.

In contrast to franky1's dogmatic statements, I agree with you here. Banks getting involved with Bitcoin will probably happen, and will probably get more of the masses involved in Bitcoin.

The danger we need to convey to these masses is that, once banks start holding Bitcoin deposits, their previous experience with fiat will motivate them to loan out more than they hold (i.e. fractional reserves). Somehow, the community needs to get ahead of this and get the message out that a bitcoin-IOU is NOT the same as a bitcoin. Or, as Holliday so aptly puts it: "If you aren't the sole controller of your private keys, you don't have any bitcoins."

[Beliathon]

Remember Cyprus.

that was not really a bank, now was it. I am talking more about banks such as: Barclays, Bank Of America. Standard Bank, etc.

Those are not banks either, but rather Vampire Squids masquerading as banks. Bank of America is a toxic mimic of a true bank, just as America is a toxic mimic of a true nation.

I apologize in advance to all the indoctrinated sheeple who will experience uncomfortable or painful cognitive dissonance when faced with the truth of my words.

[Balls]

Bitcoin: Be Your Own Bank.

Banks have their place, but I don't think they will with bitcoin.

[ThomasCrowne]

Just voted Hell No!

I think this goes against the very principles upon which Bitcoin was created in the first place.

[franky1]

A bank can own BTC.  A bank can sell BTC.  There is no obligation to adhere to the same regulations that apply to fiat aside from what is already established for you and I just because it is a bank.  A bank can buy and sell cars, snow cones, or goats if they want (and often do in the case of recovered collateral).  There is no way to stop banks from entering BTC.  If we can say BTC cannot be owned by entity X, then the same can be said for person Y.

i guess you missed all of the central banking notifications of the world (china, canada, russia, bolivia, etc etc)
all announcing that central banks wont offer bitcoins directly.

banks have contracts with governments, mints, royalty, feds to only handle legal tender. as for recovering collateral. banks sell debt to private companies and these private companies grab physical goods and turn them into legal tender to then give back to banks.. (debt recovery agencies auctioning off property)

the real solution is not banks and regulation.. but insurance companies and lawyers whom would form the consumer protection people need

[DeathAndTaxes]

banks have contracts with governments, mints, royalty, feds to only handle legal tender

That is your continual unfounded claim.  Please provide a cite that all banks in the world are prohibited from handling anything other than legal tender.

Just an example of a bank which would appear to be violating this "legal tender only" secret contract:
http://www.icicibank.com/Personal-Banking/investments/icici-bank-pure-gold/index.page

[franky1]

i guess you missed all of the central banking notifications of the world (china, canada, russia, bolivia, etc etc)

ICICI Bank is India's largest private sector bank with total assets of Rs. 5,946.42 billion (US$ 99 billion) at March 31, 2014 and profit after tax Rs. 98.10 billion (US$ 1,637 million) for the year ended March 31, 2014.

my knit pick beats your knitpick..

[DannyHamilton]

i guess you missed all of the central banking notifications of the world (china, canada, russia, bolivia, etc etc)

ICICI Bank is India's largest private sector bank with total assets of Rs. 5,946.42 billion (US$ 99 billion) at March 31, 2014 and profit after tax Rs. 98.10 billion (US$ 1,637 million) for the year ended March 31, 2014.

my knit pick beats your knitpick..

Wonderful.

So, with the following nit-pick adjustment, agreement has been reached?

A private sector bank can own BTC.  A private sector bank can sell BTC.  There is no obligation to adhere to the same regulations that apply to fiat aside from what is already established for you and I just because it is a private sector bank.  A private sector bank can buy and sell cars, snow cones, or goats if they want (and often do in the case of recovered collateral).  There is no way to stop private sector banks from entering BTC.  If we can say BTC cannot be owned by entity X, then the same can be said for person Y.

While we're at it, you should probably fix your earlier post to avoid causing confusion:

read all of the central bank announcements. they only deal with fiat directly. not bitcoins, not baked beans not gold.

if you want bitcoins go to an exchange/localbitcoins (or anywhere else that's willing to give you some)
if you want baked beans go to a grocery store
if you want gold go to a pawn shop.

if central banks included bitcoins as on of their 'financial products' then regulation will own bitcoins

I'm not even sure what that last sentence even means, but you inability to make sense isn't my problem.

Probably need to fix this previous post as well:

in reality central banks are under contract to only touch FIAT directly, by the mint/fed/government.

but in a hyperthetical / political fiction story.
anyone can get bitcoins more easily, and businesses can pay bills/taxes more easily.

but that wont happen in reality. its far easier to make bitcoin grow to a point that central bank accounts are not needed for daily living. rather then getting central banks to distribute bitcoins.

As for the following:

you will not see a central bank teller swap FIAT for sweaty shoes, baked beans or bitcoins..

Do central banks have tellers?

[franky1]

Wonderful.

So, with the following nit-pick adjustment, agreement has been reached?

A private sector bank can own BTC.  A private sector bank can sell BTC.  There is no obligation to adhere to the same regulations that apply to fiat aside from what is already established for you and I just because it is a private sector bank.  A private sector bank can buy and sell cars, snow cones, or goats if they want (and often do in the case of recovered collateral).  There is no way to stop private sector banks from entering BTC.  If we can say BTC cannot be owned by entity X, then the same can be said for person Y.

thats a more fair description yes, i bow down to you

if central banks included bitcoins as one of their 'financial products' then regulation will own bitcoins

financial products. banks call "share dealing" a financial product, "derivatives" is another financial product, "commodity trading" another "financial product"

i prefer the word service.. but the banking world is never straight forward.

back to the translation.. if central banks offered bitcoin services directly then banking regulations would control bitcoin.. and inevitably end up owning bitcoin,

[DeathAndTaxes]

Um you do know central banks also acquire, hold, and sell gold.  Pretty much every central bank in the world does.
http://en.wikipedia.org/wiki/Gold_reserve#Officially_reported_gold_holdings

Also when someone says "should banks offer Bitcoin custody and payment services" did you really think they were talking about central banks?  When is the last time you had a checking account with a central bank?  The topic had nothing to do with central banks however if Bitcoin ever became large enough (money supply worth trillions) central banks would almost certainly acquire and hold Bitcoin reserves for the exact same reason they acquire and hold gold reserves today.

[franky1]

Um you do know central banks also acquire, hold, and sell gold.  Pretty much every central bank in the world does.
http://en.wikipedia.org/wiki/Gold_reserve#Officially_reported_gold_holdings

Also when someone says "should banks offer Bitcoin custody and payment services" did you really think they were talking about central banks?  When is the last time you had a checking account with a central bank?  The topic had nothing to do with central banks however if Bitcoin ever became large enough (money supply worth trillions) central banks would almost certainly acquire and hold Bitcoin reserves for the exact same reason they acquire and hold gold reserves today.

your looking through narrow sighted views in a mind set of knitpicking. trying to turn a topic into an argument for your own ego..

so here is your ego boost.
lord and master, i bow down to your intellect, your handsome beauty, and your large massive......... muscles.

now thats over with, i can as you a question. its rhetorical i dont need to know your reply
but when was the last time you walked into any bank and said, "can i have an ounce of gold please".. ?

[DannyHamilton]

your looking through narrow sighted views in a mind set of knitpicking. trying to turn a topic into an argument for your own ego..

Actually, if you'd just stick to the topic at hand and make an effort to actually make sense, you'd have a lot less issues with people trying to keep others from listening to your nonsense.

when was the last time you walked into any bank and said, "can i have an ounce of gold please".. ?

I don't care for gold, so I've never asked for gold anywhere. I did get a toaster from my local bank last week.  Does that count?

[DeathAndTaxes]

but when was the last time you walked into any bank and said, "can i have an ounce of gold please".. ?

Never but that doesn't mean banks are prohibited from selling gold.  I doubt I would ever use the services of a bank to acquire Bitcoins either but that doesn't mean they are prohibited from doing so. 

[franky1]

your looking through narrow sighted views in a mind set of knitpicking. trying to turn a topic into an argument for your own ego..

Actually, if you'd just stick to the topic at hand and make an effort to actually make sense, you'd have a lot less issues with people trying to keep others from listening to your nonsense.

when was the last time you walked into any bank and said, "can i have an ounce of gold please".. ?

I don't care for gold, so I've never asked for gold anywhere. I did get a toaster from my local bank last week.  Does that count?

ok i wont be subtle.. and get back on topic

banks prefer to hand joe public bits of paper called bank notes. its not in their interest to let people walk away with real value such as gold. if a bank, central or private was to offer bitcoin services, it would be offchain transactions and paper wallets where they keep the privkeys.. as for the ICICI they dont hand out real gold ounces, just certificates. (bits of paper)

[DannyHamilton]

banks prefer to hand joe public bits of paper called bank notes. its not in their interest to let people walk away with real value such as gold. if a bank, central or private was to offer bitcoin services, it would be offchain transactions and paper wallets where they keep the privkeys.

Now there's something we can agree on.