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Bitcoin Companies and Entrepreneurs Can't Get Bank Accounts

120 points by mrb 13y ago

dx4100 13y ago
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 13y ago
  > 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 13y ago
    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.
    - OGC 13y ago
      "What consumers are not told is that the Dinars can be redeemed only in Iraq, as most of the established currency exchange houses and banking institutions cannot convert the Dinar to US dollars. Since no exchange exists for the Iraqi Dinar, dealers can charge whatever they want to sell and buy back the Dinars. " So, it's not "a lot of scam", it's ALL scam.
    - ceejayoz 13y ago
      > 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.
- gaadd33 13y ago
  Was your company a Retail Foreign Exchange Dealer or Forex Dealer Member? It seem strange/unlikely that the government is regulating self regulating bodies, since that usually results in the self regulating body giving up and any semblance of regulation going away.
jchysk 13y ago
Coinsetter has a US bank account. ^_^
notdrunkatall 13y ago
What's the risk of coinbase being shut down?
- jedunnigan 13y ago
  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/msbstateselector.html http://www.fincen.gov/financial_institutions/msb/msbstatesel... 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 13y ago
    False. Coinbase does not have any state licenses. It hasn't even applied in California. http://www.dbo.ca.gov/Licensees/money_transmitters/money_transmitters_directory.asp http://www.dbo.ca.gov/Licensees/money_transmitters/money_tra... http://www.dbo.ca.gov/Publications/summaries/default.asp http://www.dbo.ca.gov/Publications/summaries/default.asp
    - jedunnigan 13y ago
      Ah yes, my mistake. I had assumed that was the case but I read too far into my FinCEN link.
  - gamblor956 13y ago
    Coinbase is only licensed as a money transmitter at the federal level. In order to legally provide money transmission services in any state, it must also acquire a license in that state. (Under international and federal legal conventions, digital services performed by software are treated as rendered in the customer's location, so Coinbase would need a money transmitter license in each state in which it wants to do business.)
    - thinkcomp 13y ago
zebra 13y ago
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 13y ago
  What previous attempts has the US Government made to destroy Bitcoin?
  - tedunangst 13y ago
    The previous attempts were so futile it's not really worth it to go into detail.
    - krapp 13y ago
      Humor me. Give me three cases.
bickfordb 13y ago
What are the banks actual risks in these cases? Why aren't banks showing up and being created to fill this market need?
- jedunnigan 13y ago
  Well, MSBs are held criminally liable for any illegal activity their platforms help facilitate. Banks can be fined heavily (see: HSBC, Wells Fargo) for such behavior. It's ironic their customers can be held criminally liable but they cannot... that's another conversation though. But yea it's all a game of risk and how much of it they are willing to take. Bitcoin businesses are in the highest of high risk categories and they currently don't bring in enough money for the banks to justify the potential downsides. At this point any US based entrepreneurs should consider looking elsewhere for banks. I know of a Caribbean country planning to be a haven for cryptocurrency businesses. Things will be announced soon.
  - D9u 13y ago
    I seem to recall several big banks (Wachovia, et al) being found to have facilitated money laundering of billions in drug cartel profits, yet these big banks were punished by fines amounting to tiny fractions of the amounts laundered... No one spent a day in prison for these acts, no bank was disbanded as a result, no bank officials were reprimanded, which seems to be blatantly unequal when the big picture is taken into consideration. Then there is the fact that the USD is backed by nothing other than military might...
    - gaadd33 13y ago
      Military might and the world's largest economy, but yea other than that, nothing.
- ganeumann 13y ago
  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.
cjaredrun 13y ago
“The real question is why Bitcoin businesses think they need banks”
- krapp 13y ago
  They may not want to do business exclusively through Bitcoin and Bitcoin exchanges?
  - cjaredrun 13y ago
    Couldn't shell companies that had no direct relationship with bitcoins in theory be used, if that were the case?
    - krapp 13y ago
      I suppose, but that seems (I don't actually know) like a lot more trouble than just not dealing with bitcoins and having a bank account.
      - ngd 13y ago
        A large number of bitcoin businesses are exchanges of some sort - ones where people are looking to exchange dollars to/from BTC. Going BTC all the way down is going to take a long time.
      - maaku 13y ago
        Less trouble than convincing the state and utility companies to accept bitcoin settlement for taxes and bills.
- fennecfoxen 13y ago
  To pay employees, taxes, and utility companies.
  - ye 13y ago
    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.
contingencies 13y ago
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.
master_shake 13y ago
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 13y ago
  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 13y ago
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.
- sounds 13y ago
  I'll take you at your word that you have something that can literally work as online cash. So you understand that this is a hard problem, lots of people have tried, etc. etc. etc. I can't decide yet whether to like bitcoin or hate it, but like it or not, there is now pressure on the banking industry to get their act together. It seems like karmic justice to me that after the 2008 bubble the banks are now facing renewed competition.
  - tomasien 13y ago
    Big Bitcoin fan, I'm not going to edit my comment for the sake of being authentic but I wish I could. I just never considered that being an alternative to cash online was ever the point. An alternative to cash online needs 3 things, IMO (besides being something anyone can use). 1. Has to be secure enough for the person accepting the money to know they're getting "good funds", or money that actually exists. 2. Has to be fee-less. 3. Has to be convenient enough for anyone to use fast. We're doing that. I can demo what we're doing if you'd like, shoot me an email tommy@thecityswig.com, would LOVE your thoughts!
- ye 13y ago
  I doubt you will be able to create anything significantly better than BTC and altcoins. If your solution is not decentralized, you can stop right now.
  - tomasien 13y ago
    It's entirely decentralized, but it's not a new currency, just a way to transfer it. You do have to have your money in a bank, but it can be roughly any bank (we support 70% of US banking customers now, working toward 90 by the years end). I'm sorry if my first comment came off like a criticism of Bitcoin, I love Bitcoin - I just never considered that being the online version of cash was part of its appeal. To me, it was being an alternative to government currency that was always what made it special.
sakunthala 13y ago
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.
Smrchy 13y ago
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 13y ago
  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 13y ago
    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 13y ago
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 13y ago
  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-high/ http://money.cnn.com/2013/11/12/investing/bitcoin-record-hig... [2] https://cryptocointalk.com/topic/226-cctv-bitcoin-documentary-china/ https://cryptocointalk.com/topic/226-cctv-bitcoin-documentar... [3] http://www.scmp.com/news/china/article/1330873/chinese-state-media-calls-de-americanised-world-after-us-shutdown?page=all http://www.scmp.com/news/china/article/1330873/chinese-state...
mwally 13y ago
>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.)
- andr3w321 13y ago
  I dunno about the legality of this or not, but banks absolutely will refuse to give you over a certain amount in cash at any given time unless you notify them ahead of time of your withdrawal. They don't actually keep that much cash on hand. If you go to your local bank and try to take out $20k chances are they'll tell you here's $10k, come back in two days for the rest and call us ahead of time next time.
- maxerickson 13y ago
  http://www.consumerfinance.gov/askcfpb/953/what-difference-between-checking-account-demand-deposit-account-and-now-negotiable-order-withdrawal-account.html http://www.consumerfinance.gov/askcfpb/953/what-difference-b...
- bunderbunder 13y ago
  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.pdf http://www.federalreserve.gov/boarddocs/supmanual/cch/efaa.p...) 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.
lowkeykiwi 13y ago
I'm surprised bitcoins are legal at all.

120 points by mrb 13y ago

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 13y ago
> 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 13y ago
  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.
  - OGC 13y ago
    "What consumers are not told is that the Dinars can be redeemed only in Iraq, as most of the established currency exchange houses and banking institutions cannot convert the Dinar to US dollars. Since no exchange exists for the Iraqi Dinar, dealers can charge whatever they want to sell and buy back the Dinars. " So, it's not "a lot of scam", it's ALL scam.
  - ceejayoz 13y ago
    > 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.
gaadd33 13y ago
Was your company a Retail Foreign Exchange Dealer or Forex Dealer Member? It seem strange/unlikely that the government is regulating self regulating bodies, since that usually results in the self regulating body giving up and any semblance of regulation going away.

jchysk 13y ago

Coinsetter has a US bank account. ^_^

notdrunkatall 13y ago

What's the risk of coinbase being shut down?

jedunnigan 13y ago
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/msbstateselector.html http://www.fincen.gov/financial_institutions/msb/msbstatesel... 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 13y ago
  False. Coinbase does not have any state licenses. It hasn't even applied in California. http://www.dbo.ca.gov/Licensees/money_transmitters/money_transmitters_directory.asp http://www.dbo.ca.gov/Licensees/money_transmitters/money_tra... http://www.dbo.ca.gov/Publications/summaries/default.asp http://www.dbo.ca.gov/Publications/summaries/default.asp
  - jedunnigan 13y ago
    Ah yes, my mistake. I had assumed that was the case but I read too far into my FinCEN link.
- gamblor956 13y ago
  Coinbase is only licensed as a money transmitter at the federal level. In order to legally provide money transmission services in any state, it must also acquire a license in that state. (Under international and federal legal conventions, digital services performed by software are treated as rendered in the customer's location, so Coinbase would need a money transmitter license in each state in which it wants to do business.)
  - thinkcomp 13y ago

zebra 13y ago

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 13y ago
What previous attempts has the US Government made to destroy Bitcoin?
- tedunangst 13y ago
  The previous attempts were so futile it's not really worth it to go into detail.
  - krapp 13y ago
    Humor me. Give me three cases.

bickfordb 13y ago

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

jedunnigan 13y ago
Well, MSBs are held criminally liable for any illegal activity their platforms help facilitate. Banks can be fined heavily (see: HSBC, Wells Fargo) for such behavior. It's ironic their customers can be held criminally liable but they cannot... that's another conversation though. But yea it's all a game of risk and how much of it they are willing to take. Bitcoin businesses are in the highest of high risk categories and they currently don't bring in enough money for the banks to justify the potential downsides. At this point any US based entrepreneurs should consider looking elsewhere for banks. I know of a Caribbean country planning to be a haven for cryptocurrency businesses. Things will be announced soon.
- D9u 13y ago
  I seem to recall several big banks (Wachovia, et al) being found to have facilitated money laundering of billions in drug cartel profits, yet these big banks were punished by fines amounting to tiny fractions of the amounts laundered... No one spent a day in prison for these acts, no bank was disbanded as a result, no bank officials were reprimanded, which seems to be blatantly unequal when the big picture is taken into consideration. Then there is the fact that the USD is backed by nothing other than military might...
  - gaadd33 13y ago
    Military might and the world's largest economy, but yea other than that, nothing.
ganeumann 13y ago
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.

cjaredrun 13y ago

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

krapp 13y ago
They may not want to do business exclusively through Bitcoin and Bitcoin exchanges?
- cjaredrun 13y ago
  Couldn't shell companies that had no direct relationship with bitcoins in theory be used, if that were the case?
  - krapp 13y ago
    I suppose, but that seems (I don't actually know) like a lot more trouble than just not dealing with bitcoins and having a bank account.
    - ngd 13y ago
      A large number of bitcoin businesses are exchanges of some sort - ones where people are looking to exchange dollars to/from BTC. Going BTC all the way down is going to take a long time.
    - maaku 13y ago
      Less trouble than convincing the state and utility companies to accept bitcoin settlement for taxes and bills.
fennecfoxen 13y ago
To pay employees, taxes, and utility companies.
- ye 13y ago
  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.

contingencies 13y ago

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.

master_shake 13y ago

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 13y ago
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 13y ago

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.

sounds 13y ago
I'll take you at your word that you have something that can literally work as online cash. So you understand that this is a hard problem, lots of people have tried, etc. etc. etc. I can't decide yet whether to like bitcoin or hate it, but like it or not, there is now pressure on the banking industry to get their act together. It seems like karmic justice to me that after the 2008 bubble the banks are now facing renewed competition.
- tomasien 13y ago
  Big Bitcoin fan, I'm not going to edit my comment for the sake of being authentic but I wish I could. I just never considered that being an alternative to cash online was ever the point. An alternative to cash online needs 3 things, IMO (besides being something anyone can use). 1. Has to be secure enough for the person accepting the money to know they're getting "good funds", or money that actually exists. 2. Has to be fee-less. 3. Has to be convenient enough for anyone to use fast. We're doing that. I can demo what we're doing if you'd like, shoot me an email tommy@thecityswig.com, would LOVE your thoughts!
ye 13y ago
I doubt you will be able to create anything significantly better than BTC and altcoins. If your solution is not decentralized, you can stop right now.
- tomasien 13y ago
  It's entirely decentralized, but it's not a new currency, just a way to transfer it. You do have to have your money in a bank, but it can be roughly any bank (we support 70% of US banking customers now, working toward 90 by the years end). I'm sorry if my first comment came off like a criticism of Bitcoin, I love Bitcoin - I just never considered that being the online version of cash was part of its appeal. To me, it was being an alternative to government currency that was always what made it special.

sakunthala 13y ago

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.

Smrchy 13y ago

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 13y ago
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 13y ago
  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 13y ago

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 13y ago
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-high/ http://money.cnn.com/2013/11/12/investing/bitcoin-record-hig... [2] https://cryptocointalk.com/topic/226-cctv-bitcoin-documentary-china/ https://cryptocointalk.com/topic/226-cctv-bitcoin-documentar... [3] http://www.scmp.com/news/china/article/1330873/chinese-state-media-calls-de-americanised-world-after-us-shutdown?page=all http://www.scmp.com/news/china/article/1330873/chinese-state...

mwally 13y ago

>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.)

andr3w321 13y ago
I dunno about the legality of this or not, but banks absolutely will refuse to give you over a certain amount in cash at any given time unless you notify them ahead of time of your withdrawal. They don't actually keep that much cash on hand. If you go to your local bank and try to take out $20k chances are they'll tell you here's $10k, come back in two days for the rest and call us ahead of time next time.
maxerickson 13y ago
http://www.consumerfinance.gov/askcfpb/953/what-difference-between-checking-account-demand-deposit-account-and-now-negotiable-order-withdrawal-account.html http://www.consumerfinance.gov/askcfpb/953/what-difference-b...
bunderbunder 13y ago
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.pdf http://www.federalreserve.gov/boarddocs/supmanual/cch/efaa.p...) 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.

lowkeykiwi 13y ago

I'm surprised bitcoins are legal at all.