Why You Can’t Bank with Bitcoin – Yet

October 28, 2014 17:11 UTC

Many in the Bitcoin community are very impatient. Some “early adopters” want the world to accept “The Future of Money” now, for many reasons. One is they would love to see their precious Bitcoin go from $350 USD to $10,000 USD in a year, like some penny stock they’ve nurtured into maturity. Another is many have grown weary of the current fiat currency stronghold, and the inflation, taxation, ability to generate war, and the general manipulation therein.

History proves every fiat currency man has created has collapsed, and then has needed to be replaced by a “new and improved” fiat currency… that is really the same-old-same-old with a new name that eventually collapses as well. Another is the convenience of using the current infrastructures like banks to more easily use and transfer bitcoins, over foreign exchanges and less-than-ideal websites like LocalBitCoins.com. Bitcoin is still a technological game played in the shadows that may deserve to step into the light, and Bitcoin is making headway, but there are many forces beyond its control.  And also, it is not designed to fit into the establishment’s power structure easily.  It is designed to replace it.

Bank with Bitcoin? Not yet.

Banks worldwide, particularly the smaller and more nimble ones, have started to break from the herd and seek to join this financial revolution, seeking a market advantage through early adoption. Toes are getting dipped into the Bitcoin financial pool with varying degrees of success. 247Exchange signed the largest such deal of its kind. Through Europe’s Sofort financial conglomerate, they would allow mainstream banking customers of over 400 banks throughout Europe to access Bitcoin as easily as they do an international wire transfer. Alas, this experiment seems to have failed, as 247Exchange notes on their website these days that the Sofort banking link is “temporarily unavailable”, which looks more like permanently terminated.

The People’s Bank of China is world-renowned for their interest in quelling any great Bitcoin interest in the homeland, if not outright, making sure the populace knows they rule with an iron hand. It seems the Chinese government aims to keep Bitcoin in the shadows, and not allow it full mainstream access to the world’s largest market. We’ve also uncovered that in burgeoning Bitcoin markets like the Isle of Man, even if your bank is excited by the possibilities for a new wave of business in this niche, and allows you to start an account around Bitcoin, the bank that owns your bank may shut you down. So it is definitely an uphill climb to merge Bitcoin and traditional banking. They seem destined to have an oil and water relationship. Which one is which seems to depend on what side of the ideological aisle you sit on. Eli Dorado, director of the Technology Policy Project at George Mason University’s Mercatus Center, says:

“The real problem in Bitcoin is businesses getting banking at all. Banks are afraid that Bitcoin businesses will fall into the category of being a high-risk activity, the way firearm sales and porn stars’ bank accounts are sometimes viewed.”

The fall of Mt. Gox didn’t help Bitcoin’s reputation in the eyes of financial institutions worldwide, but there lies a basic contradiction. One Bitcoin exchange goes down in 5 years, and it is held up as a poster-child for an inherent flaw in Bitcoin.  In the U.S. 465 banks have failed between 2009 and 20013, and the media and the mainstream simply ignore the fact that a bank fails every four days. The house bank always wins, yes?

It is not all doom and gloom in the Bitcoin banking sector. The battle for control of your global finances is going to be a long war that the establishment will not lose easily. It could be 5-10 years before mega banks like JP Morgan or Deutsche Bank integrate Bitcoin, but the smaller players that are truly independent can seize the opportunity, and the rewards, for early adoption, just like a Bitcoin investor 4-5 years ago did.  There have been some minor victories.

Ripple Labs has recently signed a deal with two U.S. banks to use their open-source payment protocol, allowing for instant international Bitcoin transfers. And The Bank of England, perhaps the world’s greatest banking institution, spent significant space in their Quarterly singing the praises of Bitcoin and what it could do for financial business going forward. This can only be seen as an endorsement, one of many major ones over the past year.

The most important development with regard to banking was made this summer by Circle in the creation of Bitcoin’s first Bitcoin currency-based bank. Bitcoin advocates need to see the forest through the trees. Traditional banking is made for traditional currencies. There is nothing traditional about Bitcoin.  if you want to have the infrastructure the establishment has, made it yourself. All banks started somewhere. At least the Bitcoin community has many successful blueprints to choose from, be it stock exchanges, banking cartels, or the Internet itself.

The moral of the story is that we should learn from history, and take advantage of Bitcoin’s early developmental state to build Bitcoin into exactly what we want it to be. Don’t wait for mainstream approval.  Create your own stream, and watch it grow over time. If your bank doesn’t accept Bitcoin, make one, or invest in one, that does. Bitcoin is designed to make its own community and ecosystem, not to be accepted by the decaying one. See the disdain of the establishment as a badge of honor, and a passing of the torch. Their inability to control it highlights your freedom to create new ventures with it. Their fear of Bitcoin is to your advantage, in the long run. Don’t count on traditional banks when you can replace them.

Do you want you bank handling your bitcoins anyway? Do you trust your bank is not reporting your transactions/finances/balances to a government authority? Is that what you want? Another way to be tracked, taxed, and diluted? As a former banker on Wall Street myself, I would suggest that you don’t look at banks as allies, but find a better way to handle money in the Bitcoin ecosystem. The bail-outs, the bail-ins, the Fractional Reserve Banking practices, and the too-big-to-fail policies should be reason enough to invest in a more ethical way to manage money. I was on the inside, and now I sit on the outside of the system for a reason.

Traditional banks will work with Bitcoin, or will get replaced by Bitcoin, just like Blockbuster was replaced by Netflix. It’s their choice to make. And yours.

Do you want to comingle your bank and your bitcoins? Share above and comment below.

Images from Shutterstock.

Last modified: October 28, 2014 17:11 UTC

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