Should banks offer Bitcoin custody and payment services?

[mgoldfinger]

I have been playing around with the idea of a (non-investment) Bank offering BiTCoin custody and payment services. Some of the key benefits I see:
- Bank standard IT security; same IT security as for your cash/debit/savings accounts.
- Integrated with your non-crypto accounts; one stop shop.
- Under regulatory framework; consumer protection and yearly (tax) statements.
- High level of familiarity for the less BiTCoin experienced user (from the user perspective it works, more or less, just like any other bank account).
- BiTCoin addresses are legally linked to owner; no anonymous accounts. Together with the regualtory framework, I believe this would be very valuable for merchants, as it provides a vehicle through which they can 'guarantee’  their accounts and BTC holdings.
- Proper, audited and regulated accounting (if anything, Banks generally run tight accounting; very unlikly a MT Gox scenario could unfold at a bank).

I do have some premises though:
- On the basis of a custody account like structure only (e.g. like a equity deposit account). Added benefit is that, if the bank defaults, your holdings are guaranteed (at least this is how Dutch Law works).
- No lending activities, secured or unsecured.
- No speculation by both the Bank and the Consumer.
- No termed business.
- More or less the same qualifications and identifications needed to open a BTC Account, as for (e.g.) a regular Checking account.
- Banks opt as a Broker only for USD/BTC conversions. A central clearing organization may be needed here to support.

One key downside i see is that you will likely not get any interest. That’s the price you pay for prohibiting lending and termed business.

So what do you think?

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[franky1]

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

if you want bitcoins go to an exchange/localbitcoins
if you want baked beans go to a grocery store
if you want gold go to a pawn shop.

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

[mgoldfinger]

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

if you want bitcoins go to an exchange/localbitcoins
if you want baked beans go to a grocery store
if you want gold go to a pawn shop.

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

thanks for the reply. Understand that most banks are staying away from BTC. But what if a Bank would offer such services, that is my question.

Edit: and I do mean a respectable, traditional Bank.

[Jesu]

Isn't the whole point of bitcoins that we don't need any bank?

[Bagatell]

Remember Cyprus.

[Mr Tea]

No thanks, I'd rather look after my own money. Plus, these banks arent going to do this for free.

[mgoldfinger]

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.

[franky1]

thanks for the reply. Understand that most banks are staying away from BTC. But what if a Bank would offer such services, that is my question.

in reality 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 bank accounts are not needed for daily living. rather then getting banks to distribute bitcoins.

[mgoldfinger]

Isn't the whole point of bitcoins that we don't need any bank?

not as far as the network itself is concerned.

[fernando]

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

if you want bitcoins go to an exchange/localbitcoins
if you want baked beans go to a grocery store
if you want gold go to a pawn shop.

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

thanks for the reply. Understand that most banks are staying away from BTC. But what if a Bank would offer such services, that is my question.

Edit: and I do mean a respectable, traditional Bank.

I don't care how much regulation you throw at them. If you let them bitcoins in custody we'll have one billion bitcoins in circulation before a year. They simply can't be trusted.

[mgoldfinger]

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

if you want bitcoins go to an exchange/localbitcoins
if you want baked beans go to a grocery store
if you want gold go to a pawn shop.

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

thanks for the reply. Understand that most banks are staying away from BTC. But what if a Bank would offer such services, that is my question.

Edit: and I do mean a respectable, traditional Bank.

I don't care how much regulation you throw at them. If you let them bitcoins in custody we'll have one billion bitcoins in circulation before a year. They simply can't be trusted.

Thats not possible; Banks can't just create more bitcoins, just like a bank can not produce more gold or simply issue more stocks of a certain company. (that is the beauty of the Bitcoin)

[Bagatell]

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.

The money wasn't stolen from piggy banks and matresses, was it?

And no bank can be trusted.

Banks Face a Storm of Investigations and Litigation

http://www.businessweek.com/articles/2013-11-14/2014-outlook-banks-face-investigations-and-litigation

[mgoldfinger]

thanks for the reply. Understand that most banks are staying away from BTC. But what if a Bank would offer such services, that is my question.

in reality 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 bank accounts are not needed for daily living. rather then getting banks to distribute bitcoins.

I can store my Gold at a bank, or even the deed to my house. I can deposit my stocks and transfer them in and out.
Mind you, I never said that BTC should be treated as a Currency. Most tax authorities see it as an asset anyway. Very tradable asset though ;-)

[mgoldfinger]

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.

The money wasn't stolen from piggy banks and matresses, was it?

And no bank can be trusted.

Banks Face a Storm of Investigations and Litigation

http://www.businessweek.com/articles/2013-11-14/2014-outlook-banks-face-investigations-and-litigation

yes, very true. Good thing to I would say.

Still, Banks can't operate like Mark Karpelès did. He does seem to have a nice appartment though  ;-)

[franky1]

I can store my Gold at a bank, or even the deed to my house. I can deposit my stocks and transfer them in and out.
Mind you, I never said that BTC should be treated as a Currency. Most tax authorities see it as an asset anyway. Very tradable asset though ;-)

its been over a decade and a half but here is my rebuttle anaolgy based on that past experience (to get on the same level as most viewers)

i can store my sweaty shoes in a school locker. i can store .. anything in a school locker.. does not mean the school is selling me sweaty shoes or anything else. they are just providing a storage box.

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

[franky1]

I don't care how much regulation you throw at them. If you let them bitcoins in custody we'll have one billion bitcoins in circulation before a year. They simply can't be trusted.

Thats not possible; Banks can't just create more bitcoins, just like a bank can not produce more gold or simply issue more stocks of a certain company. (that is the beauty of the Bitcoin)

actually, if banks did hold bitcoins as a financial product they offer. it wouldnt be to much of a stretch for them to try off-chain transactions.
by giving people a SQL bank database balance of bitcoins and let people trade the database (leading to fractional reserving) where there are only 21million real bitcoins, but the banks showing 1billion bitcoins on their SQL database..

... just like the current FIAT debt crisis
... just like karpals let people trade his SQL database while hiding the real coins.

[jonsi]

No, let the crumble and burn like everything that's Dark Ages old. If they will deal with bitcoins the population will never have a real bitcoin in their wallets, just some unlimited tokens that banks would create to give in return, just like they did with gold.

[mgoldfinger]

I don't care how much regulation you throw at them. If you let them bitcoins in custody we'll have one billion bitcoins in circulation before a year. They simply can't be trusted.

Thats not possible; Banks can't just create more bitcoins, just like a bank can not produce more gold or simply issue more stocks of a certain company. (that is the beauty of the Bitcoin)

actually, if banks did hold bitcoins as a financial product they offer. it wouldnt be to much of a stretch for them to try off-chain transactions.
by giving people a SQL bank database balance of bitcoins and let people trade the database (leading to fractional reserving) where there are only 21million real bitcoins, but the banks showing 1billion bitcoins on their SQL database..

... just like the current FIAT debt crisis
... just like karpals let people trade his SQL database while hiding the real coins.

sounds almost like we will be screwed either way.... no ethics left anymore....

[fernando]

I don't care how much regulation you throw at them. If you let them bitcoins in custody we'll have one billion bitcoins in circulation before a year. They simply can't be trusted.

Thats not possible; Banks can't just create more bitcoins, just like a bank can not produce more gold or simply issue more stocks of a certain company. (that is the beauty of the Bitcoin)

actually, if banks did hold bitcoins as a financial product they offer. it wouldnt be to much of a stretch for them to try off-chain transactions.
by giving people a SQL bank database balance of bitcoins and let people trade the database (leading to fractional reserving) where there are only 21million real bitcoins, but the banks showing 1billion bitcoins on their SQL database..

... just like the current FIAT debt crisis
... just like karpals let people trade his SQL database while hiding the real coins.

Exactly. Banks "create" fiat every day. They would try to do the same with Bitcoin because that's what they do. That's how they profit. That's why I would not trust them with my btc. And, as you've said, the changes they would need to do to sell btc or beans make this scenario unlikely anyway.

[franky1]

I don't care how much regulation you throw at them. If you let them bitcoins in custody we'll have one billion bitcoins in circulation before a year. They simply can't be trusted.

Thats not possible; Banks can't just create more bitcoins, just like a bank can not produce more gold or simply issue more stocks of a certain company. (that is the beauty of the Bitcoin)

actually, if banks did hold bitcoins as a financial product they offer. it wouldnt be to much of a stretch for them to try off-chain transactions.
by giving people a SQL bank database balance of bitcoins and let people trade the database (leading to fractional reserving) where there are only 21million real bitcoins, but the banks showing 1billion bitcoins on their SQL database..

... just like the current FIAT debt crisis
... just like karpals let people trade his SQL database while hiding the real coins.

sounds almost like we will be screwed either way.... no ethics left anymore....

ethics.. are not regulations..
business ethics are about consumer protections. such as activision cannot pre-sale the next call of duty, unless they have a proper release date that is reasonably close. if activision breached this they could get sued.. ButterFlyLabs should have been sued sooooo many times by now, and thats nothing to do with banking regulations.

im all for consumer protections.. but not regulations (a whole different kettle of fish). bitcoin users/customers need to learn their consumer rights to ensure businesses they use their coins on, are ethical. if not, report them.

bringing knowledge of consumer rights will ensure wallet/exchanges do not do fractional reserving, do not steal, and not offer false promises. or they will get sued.