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Lightning Fast, Dirt Cheap: Bitcoin Shows What Banking Could Be

Dave Birch, the director of Consult Hyperion in Surrey, England, says Bitcoin "is really interesting because it informs other debates, not necessarily because of what it is itself." It's likely that Bitcoin's "technology and techniques will be part of some future means of exchange," particularly the use of cryptography to protect user privacy, Birch says.

Part of? Bitcoin's most rabid fans would beg to differ. "Bitcoin is the virtual currency of the future and will take over," one enthusiast tweeted to me this week.

It's a tantalizing thought. But I think Bitcoin can coexist with the established forms of money and payment. Competition doesn't have to mean winner-take-all.

I can envision a future where people will sometimes charge purchases to Visa to rack up rewards points and earn special offers tailored to their spending history, enjoying the fraud protection of chargebacks, and sometimes use Bitcoin (or something like it or something that evolves from it) for transactions they don't want tracked, incurring the same risks as they do with physical cash today.

Transacting off the grid should remain an option even after we phase out paper bills and metal coins. Just because the world's going digital doesn't mean we have to fulfill Orwell's prophecy of the telescreen.

The problem with Bitcoin right now is that if it were a car, it would come only in stick shift. When the automatic version arrives, though, watch out.

Marc Hochstein is the executive editor of American Banker. The views expressed are his own.



(12) Comments



Comments (12)
Interesting - I went and looked at the site for TrustCash and they have locations in the State of Florida. My understanding is that Money Transmitters in the State of FLorida must be registered (licensed) as a Money Service Business. Is this business licensed with the State of Florida under Ch 69V-560 Florida Administrative Code?
Posted by Bamccull | Friday, August 31 2012 at 6:32PM ET
@dave_fortney, For the record, TrustCash says in its last 10-K: "We are not currently engaged in such business in any jurisdiction that requires licensure, and therefore, we have not filed any registration or licensing applications. However, the future growth of our business may cause us to become subject to such licensure requirements. We intend to apply for and to become licensed as is necessary to comply with the laws and regulations of the states in which we do business."
Posted by Marc Hochstein, Editor in Chief, American Banker | Friday, August 31 2012 at 1:57PM ET
...And I wonder if BofA has any AML attorneys reading this -- if you do, you guys may want to look into a customer of yours called TrustCash that is taking in cash from anonymous sources and passing it along -- sounds like an (UNLICENSED?) money transmitter business to me.
Posted by dave_fortney | Wednesday, August 29 2012 at 10:29PM ET
What banking could be? Doesn't sound convenient at all -- go stand in line at a branch to deposit cash, then copy and paste a bunch of crypto strings, pay a 2% fee, and store your money without FDIC insurance. No thanks
Posted by dave_fortney | Wednesday, August 29 2012 at 10:22PM ET
Maybe some people would rather have the banks monitoring every transaction they make including how much, to who, contact information, etc. .I don't believe I need a baby sitter or mother to make sure I do my due diligence before walking my path in life. Of course we all know rules of the banks set by Congress have worked quite well by protecting our financial stability in this country. If you feel the licensing will put you in a bubble of comfort, trade some penny stocks. The companies that sell them are licensed. I could name dozens of other industries but this text is making me tired and I'm sure I'm not alone. The banks want a cash free society.
Posted by DR MOUTON | Sunday, August 26 2012 at 8:55PM ET
Great article! You can buy Amazon giftcards with Bitcoin, if you like, effectively letting you spend Bitcoins on Amazon:
Posted by BobReardon | Saturday, August 25 2012 at 3:25PM ET
Yeah Marc! I'm glad you finally got it working. I should add that a couple of the issues you raised have already been solved.

It is now possible to deposit cash at any Chase or Wells Fargo branch, and purchase bitcoins with zero fees. For a $100 deposit like you mentioned, you would get 7% more bitcoins for your money!

Also, is taking off, and we are about to cross the 1000-merchant level. Let's talk when you get a chance.
Posted by tonygal | Saturday, August 25 2012 at 9:15AM ET
Hhmmm....sending currency anonymously domestically & internationally too? Sounds like a criminal's dream come true....
Posted by Underpaid | Friday, August 24 2012 at 5:37PM ET
Sounds like they are taking advantage of avoiding the costs that banks pay for AML/BSA compliance and maintaining the security, reliability, and integrity of the payments system. I wonder whether it will outlive the on-line P2P lending services available on the Internet, that work well until they don't.
Posted by WayneAbernathy | Friday, August 24 2012 at 4:43PM ET
@SGornick: Thank you for catching that, it's an important distinction. The relevant passage has been corrected.
Posted by Marc Hochstein, Editor in Chief, American Banker | Friday, August 24 2012 at 3:56PM ET
FinCEN doesn't give any licenses. It is where a money service business (MSB) would register, but that isn't a "license".

Individual states give licenses to money transmitters.
Posted by sgornick | Friday, August 24 2012 at 3:39PM ET
banking could be just like bitcoin, if it wasn't for all of those pesky Govt regulations that are soooo expensive.
Posted by dahlers | Friday, August 24 2012 at 3:29PM ET
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