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

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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.

 

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Comments (12)
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
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
@SGornick: Thank you for catching that, it's an important distinction. The relevant passage has been corrected.
Posted by Marc Hochstein, Executive Editor, American Banker | Friday, August 24 2012 at 3:56PM 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
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
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