
Bitcoin Companies and Entrepreneurs Can't Get Bank Accounts - mrb
http://www.forbes.com/sites/kashmirhill/2013/11/15/bitcoin-companies-and-entrepreneurs-cant-get-bank-accounts/
======
dx4100
Welcome to the world of the banks.

I worked at a currency exchange for years, and this was a constant problem. I
wrote software that would allow us to easily switch banks and accounts,
because it happened at times once per week.

At one point, we had spent 6 months negotiating with a bank to get a solid
account that would supposedly never go away. They spent that time auditing us
and assessing all risks. They gave the green light, then mysteriously one week
in, they closed our account. They wouldn't tell us why immediately, but we
found out later through back channels that 'someone from the government called
us, and we were at risk of losing (some license, certification, whatever), so
we can't do business with you'. We just accepted that we'd have banking
problems indefinitely, and kept going.

The gov't and the bank don't like the competition with USD. They're under
pressure from the Treasury, the Fed, and FinCEN to make difficult transactions
for exotic currencies (we bought and sold the Iraqi Dinar).

I'm not surprised BTC consumers and traders are seeing this. I'm hoping that
it'll help put pressure on the government to change its policies.

~~~
ceejayoz
> we bought and sold the Iraqi Dinar

I recall a _lot_ of extremely scammy sites doing that a few years back.

[http://www.dfi.wa.gov/consumers/alerts/iraqi-dinar-
scams.htm](http://www.dfi.wa.gov/consumers/alerts/iraqi-dinar-scams.htm)

[http://www.mint.com/blog/investing/iraqi-dinar-
scam/](http://www.mint.com/blog/investing/iraqi-dinar-scam/)

~~~
oleganza
A lot of scam only proves that there is a lot of genuine demand. Instead of
respecting consumers and really protecting them from scammers, government
simply says them to fuck off. It's like with bad parents: child wants to ride
a bike, but instead of helping him with safety, he's denied to have a bike.

~~~
ceejayoz
> A lot of scam only proves that there is a lot of genuine demand.

There's lots of demand for Nigerian princes' fortunes, too.

Not many people wind up with one, though.

------
mwally
>He made a dozen trips to U.S. Bank because they wouldn't give him more than
$30,000 at a time.

This is illegal. Checking accounts are legally known as "Demand Deposit
Accounts," and you are allowed to show up (at any time) and demand as much
money as you have available, in cash, and the banks are absolutely obligated
to deliver. They cannot close their doors without first paying you, even if
you show up moments before closing trying to withdraw millions of dollars.
(They are, however, allowed to stay open late, if needed, should an armored
car delivery be required.)

~~~
bunderbunder
From the Federal Reserve's Consumer Compliance Handbook, section II,
Regulation CC ("Availability of Funds and Collection of Checks"), pp 11-12:

    
    
      Some small financial institutions do not keep cash on 
      their premises and do not offer cash ￼withdrawal services 
      to their customers. Others limit the amount of cash on
      their premises, for reasons related to bonding, and as a
      result reserve the right to limit the amount of cash a
      customer may with­ draw on a given day or to require advance
      notice for large cash withdrawals. Nothing in the 
      regula­tion is intended to prohibit these practices if 
      they are applied uniformly and are based on security,
      operating, or bonding requirements and if the pol­icy is
      not dependent on the length of time the funds have been
      in the customer’s account, as long as the permissible
      hold has expired.  However, the regulation does not
      authorize such policies if they are otherwise prohibited
      by statutory, regulatory, or common law.
    

(source:
[http://www.federalreserve.gov/boarddocs/supmanual/cch/efaa.p...](http://www.federalreserve.gov/boarddocs/supmanual/cch/efaa.pdf))

In other words: Unless they're violating some technicality in the law
(probably a state or local law), it's probably entirely legal. Probably safest
to talk to an attorney before coming to any conclusions on the matter.

------
contingencies
I work at such a company. In real life, I have also lived in a whole lot of
countries and thus have experienced the joys of attempting to get both
business and personal accounts opened, even those wholly unrelated to Bitcoin,
across many countries.

The current global situation is essentially an unspoken global monopoly on the
world financial system that has been standing since at least the 1970s through
the unholy triumvirate of SWIFT, ISO, and SIX Interbank Clearing. Credit cards
are an adjunct to all this, essentially representing systematized usury and
privacy loss as a requisite convenience, but they do not stand at the core.
Western Union and so on are similarly edge case, but guilty.

If you are a country, you first need to be recognized by the UN in order to be
recognized by the ISO. Then, you need to have your currency recognized.
Finally, your central bank and national banking system need to play ball with
SWIFT. If you refuse to play ball, then you don't get connected (North Korea),
or get disconnected (Iran).

What do we mean here by play ball? We mean agree to give the US all of the
information about all of the international financial transactions that anyone
within your entire economy either does or attempts to do that cross a border.
If you are a small country, this essentially draws a very accurate picture of
your above board international economy including key players, volume of trade,
key supply chain links, etc. To put it simply, SWIFT is one of the US' most
important global intelligence assets and despite the best efforts of Europe to
rid itself of SWIFT-based surveillance, it has persisted in a complete fashion
(100% of all transactions) since _at least_ 2001 (source: FOIA response,
European Data Protection Supervisor,
[http://www.asktheeu.org/en/user/walter_stanish](http://www.asktheeu.org/en/user/walter_stanish)).
(I would argue since _at least_ the establishment of its first, hush-hush,
'International Operations Center' in the questionable location of CIA-friendly
Virginia, way back in the 70s. But I digress.)

Understanding that this is the general government and international relations
level background, then, let's now turn to the commercial. In order to actually
create a bank account ('financial endpoint'), you basically need to be a bank.
While there are often financial service provider (money transmission provider,
or whatnot) categories that act as extremely limited alternatives, in reality
any form of serious innovation does require being a bank. Unfortunately, to
become a bank within a UN-recognized country and actually innovate, one must
simultaneously face the wrath of both the entire established international
system and the national government and industry of your home jurisdiction.

The solution which we are charting, is four pronged:

(1) to collaborate simultaneously with regulators across multiple
jurisdictions such that a jurisdiction attempting to erect unfair barriers to
innovation simply faces a direct loss of capital (as scaleup occurs);

(2) to establish forward looking financial settlement paradgims which empower
the initiator to enable routing around specific assets or nations based upon
their own priorities ("ethical settlement" as an adjunct to "ethical
business") while using arbitrary settlement systems or assets:
[http://www.ifex-project.org/our-proposals/ifex](http://www.ifex-
project.org/our-proposals/ifex) ;

(3) to democratize the creation of individal financial endpoints ('bank
accounts') by embracing and extending the emerging dominant financial standard
for such, the IBAN, to a nominally familiar and interoperable system that can
be decentrally allocated through a neutral party (IANA): [http://www.ifex-
project.org/our-proposals/iiban](http://www.ifex-project.org/our-
proposals/iiban)

(4) To standardize the intersystem identification of non-ISO approved
currencies (new release of this about to come out; ISO reformatted their
source release so slightly delayed): [http://www.ifex-project.org/our-
proposals/x-iso4217-a3](http://www.ifex-project.org/our-
proposals/x-iso4217-a3)

Regulators as well as banks and a lot of private sector businesses can see
clearly that massive paradigm change is coming within global finance. Nobody
quite knows how it will play out, but there are numerous significant factors
supporting a shakeup: (1) the rise of China and the CNY as a reserve currency
(2) Chinese parallel settlement networks (3) India and Iran's need to trade
oil (4) cryptographic currencies (5) the increasingly globalized 24x7x365
nature of business (6) the inability of established banks to meaningfully
innovate (is there even _one_ globally with no downtime, where downtime
includes evenings, weekends, holidays and scheduled systems maintenance?) ...
we're talking 365 - 52*2 (= 104 weekend days) - 10 public holidys = ~251 days
per year of actual availability, in which 80% of services are unavailable for
at least 1/2 the time (6pm-6am) ... a far cry from five nines. (6) the coming
rise of distributed manufacturing (7) the unsustainable social, environmental
and economic costs of the current global consumer system.

We live in interesting times.

~~~
sounds
So I understand the points you're making and I appreciate your candor, but why
not go all-in on cryptographic currencies?

I am tempted to take apart your proposed solution point-by-point but I'll
wait. Crypto currency apparently is exactly what you want, so can you explain
why you are instead attempting to achieve the same through ISO and a
collaborative bank revolt against the "established banks"?

(Collaborative bank revolt: a vastly simplified explanation of your proposed
solution.)

~~~
jellicle
> why not go all-in on cryptographic currencies?

Because with an armload of cryptographic currencies, and $5, you can buy a cup
of coffee at your local coffee shop?

~~~
dcposch
No, with 0.01 BTC and nothing else, I can buy coffee at my local coffee shop.
The Coupa Cafe in Palo Alto accepts Bitcoin.

On a more serious note: Bitcoin has steadily gained acceptance as a form of
payment. In 2010, a guy bought a pizza for 10000 BTC. It was a one-off
transaction between two Bitcoin enthusiasts, but a milestone: the first
purchase of real goods. In 2011 and 2012, Bitcoin matured from enthusiasts to
a wider audience, albeit mostly for illegal uses. The biggest was Silk Road.

Now, in 2013, Bitcoin is starting to be accepted by regular, legal businesses.
Shopify, Coupa Cafe, WordPress, Reddit, OkCupid, and new merchants joining
every week. There are startups like Coinbase devoted to making this as easy as
possible. Someone in Vancouver set up an ATM that takes Bitcoin and gives you
cash.

Sure, there's a long way to go. But acceptance has been improving rapidly. And
Bitcoin has features--very low transaction costs, no "chargebacks", etc--that
make it inherently attractive to sellers. Instead of focusing on "where the
puck is", we should skate "where the puck is going to be".

------
Smrchy
It's a good thing that the success of Bitcoin does not depend on US banks or
the US government. The US could try to delay and slow Bitcoin. But stop?

Like trying to ban US citizens to gamble online.

~~~
lingben
this is not some tin-hat conspiracy, banks, unlike the bitcoin bucket shops
have to abide by a metric tonne of regulations, rules and laws (which are
constantly changing)

this is why 3 banks do not go under every week, unlike bitcoin shops

~~~
oleganza
Banks would go under en masse if they were not bailed out with printed money
or bailed in with depositors' money. Regulations heavily protect banks against
competition: safer, nicer banks and new disruptive tech like Bitcoin.

------
dragontamer
This brings up an interesting question...

Is the BTC -> USD rise due to the loss of USD liquidity? Has it become too
difficult for people to exchange BTC into USD?

All this article says to me... is that the BTC -> USD conversion is becoming
harder and harder. Are there any economists out there who can muse upon theory
and tell me what will happen as BTC -> USD conversion becomes harder?

~~~
thisiswrong
No - but your point is a feasible reason for a BTC price rise.

Rather, the current BTC/USD rise is due to a influx of investment from China
[1]. The Chinese government has been indirectly supporting the rise and
adoption of Bitcoin through state-run Bitcoin documentaries [2]. This is seen
by some as China pushing for alternatives to the USD as a world reserve
currency (following US gvt shutdown) [3].

[1] [http://money.cnn.com/2013/11/12/investing/bitcoin-record-
hig...](http://money.cnn.com/2013/11/12/investing/bitcoin-record-high/) [2]
[https://cryptocointalk.com/topic/226-cctv-bitcoin-
documentar...](https://cryptocointalk.com/topic/226-cctv-bitcoin-documentary-
china/) [3] [http://www.scmp.com/news/china/article/1330873/chinese-
state...](http://www.scmp.com/news/china/article/1330873/chinese-state-media-
calls-de-americanised-world-after-us-shutdown?page=all)

------
zebra
This is a good sign - now we know that all previous attempts of US Gov to
destroy Bitcoin were futile. Including attacks on Bitcoin's cryptography (I'm
sure that this type of attacks were tried).

~~~
krapp
What previous attempts has the US Government made to destroy Bitcoin?

~~~
tedunangst
The previous attempts were so futile it's not really worth it to go into
detail.

~~~
krapp
Humor me. Give me three cases.

------
cjaredrun
“The real question is why Bitcoin businesses think they need banks”

~~~
fennecfoxen
To pay employees, taxes, and utility companies.

~~~
ye
You actually can pay employees in BTC, if they prefer that.

Thousands of people work for BTC already.

Utility companies will start accepting bitcoins soon enough, as it becomes
more popular.

Taxes are a bit harder, I admit.

~~~
nikolak
>You actually can pay employees in BTC, if they prefer that.

Most don't.

>Thousands of people work for BTC already.

Hundreds of millions don't.

>Utility companies will start accepting bitcoins soon enough, as it becomes
more popular.

They don't accept it now.

____

Just because you _could_ do this stuff with bitcoin doesn't mean you _can_.
It's only doable in theory and in very very small amount of companies in
practice, that's why "bitcoin businesses need banks”.

------
bickfordb
What are the banks actual risks in these cases? Why aren't banks showing up
and being created to fill this market need?

~~~
ganeumann
It's almost impossible to create a bank. When businesses decide they need to
start a bank, they go and buy a shell that already has a banking license. The
several million dollars to buy the shell is far cheaper than trying to start
one from scratch.

Existing banks could, I suppose, go into this business. But the experience of
the IAFCU--being given an excessively hard time by regulators when they
started working with BTC businesses--is why they don't. Banks exist because
goverment regulators allow them to. Unless they are extremely large (and then
the government regulators exist because the large banks say they can,
evidently.)

I am a BTC skeptic. I don't think it solves a burning problem for most people.
But the government, in trying to keep BTC from succeeding, seems to be
creating the very raison d etre, solvable only by crypto-currency, that BTC
was lacking.

~~~
gaadd33
It only costs around 5-10M to create a bank in the US. If BTC is that
profitable, why hasn't anyone done that?

~~~
greendata
B/c the US Gov would shut it down, seize your accounts and you'd be out at
least 5 million USD

As long as the US Gov is against bitcoin, and they should be for their own
sake, they will make it impossible to comply with the regulations. Anyone
involved in creating the bank would probably face criminal sanctions for some
crime. Crypto currencies may eventually threaten the USD's status as a reserve
currency. The US Gov will do anything possible to stop bitcoin from growing to
that level.

~~~
gaadd33
Are there explicit laws against bitcoin? It seems unlikely that the OCC is
going to just seize a bank when its following all applicable laws and
compliance mechanisms.

Some banks (depending on the location and size) keep foreign currency on their
books so you would just need to account for it by the same manner unless there
is some definition as to what constitutes a foreign currency for accounting
purposes.

------
sakunthala
Cindy Gallop has been talking about this very issue, except when starting an
alternative porn site. It seems there's a lot of room for change in payments
infrastructure.

------
master_shake
stealing the top comment from the article~

That’s good news…we’re already in phase 3:

First they ignore you, then they laugh at you, then they fight you, then you
win. Mahatma Gandhi

~~~
Jach
Carl Sagan said: "But the fact that some geniuses were laughed at does not
imply that all who are laughed at are geniuses. They laughed at Columbus, they
laughed at Fulton, they laughed at the Wright brothers. But they also laughed
at Bozo the Clown."

------
tomasien
I've never really internalized this, but is part of the reason people like
bitcoin because it's the online equivalent of cash - No fees plus guaranteed
good funds? This article suggests that, but that doesn't make any sense to me.
If THAT'S why you like bitcoin, man you're gonna LOVE what I've been building,
it's actually the literal online version of cash.

~~~
dwaltrip
Do you have any more information about your project that you can share?

~~~
tomasien
It's a way to transfer money bank to bank exactly like cash - it's able to use
security algorithms to determine whether the funds being transferred are "good
funds" or not, and it doesn't require to know their bank account information,
just their online banking credentials.

It overcomes the two major hurdles that have traditionally existed -
convenience and security of the merchant to know the funds will actually be
there.

~~~
alexwright
So I'm guessing the application logs into a user's online banking interface?
Or is there some WS API the banks are making available?

~~~
tomasien
Kind of, there's absolutely no standard way of doing it, you have to do it
bank by bank, that's been our challenge but we're up to 70% inclusion! It's
the same way Mint works, except we have to do a ton of other stuff to be
compliant and to get the information we need.

------
jchysk
Coinsetter has a US bank account. ^_^

------
notdrunkatall
What's the risk of coinbase being shut down?

~~~
jedunnigan
That depends on a lot of things. They are currently licensed up on the federal
and state level, so they have that much covered:
[http://www.fincen.gov/financial_institutions/msb/msbstatesel...](http://www.fincen.gov/financial_institutions/msb/msbstateselector.html)

If they defrauded their customers, were subject to a serious heist or were
blatantly ignoring the four pillars of a good compliance program they will be
shut down. None of those are things we can easily predict however.

~~~
thinkcomp
False. Coinbase does not have any state licenses. It hasn't even applied in
California.

[http://www.dbo.ca.gov/Licensees/money_transmitters/money_tra...](http://www.dbo.ca.gov/Licensees/money_transmitters/money_transmitters_directory.asp)

[http://www.dbo.ca.gov/Publications/summaries/default.asp](http://www.dbo.ca.gov/Publications/summaries/default.asp)

~~~
jedunnigan
Ah yes, my mistake. I had assumed that was the case but I read too far into my
FinCEN link.

