The Netherlands, birthplace of the world's first stock exchange and the pioneering Dutch East India Company, is now home to banks with an unusually open mind about bitcoin.
While big banks in China and the U.S. are reluctant to do business with ventures focused on virtual currency, Dutch banks are embracing them as potential customers. National regulators aren't cracking down as they are in other nations and major bitcoin startups are setting up shop in Amsterdam.
Alert to the possibility that bitcoin might simply be a modern version of another historic Dutch moment the 17th-century bubble in tulip bulb prices bankers also say they are following the lead of new clients. Customers want change, and that change could be bitcoin, said Mark Buitenhek, ING Groep NV's global head of transaction services.
"We are very expressly looking at what it is, what it can do and, mostly, what the message behind it is," Buitenhek said at a recent conference. "And that tells us: Banks, take action."
The Dutch financial industry's relative respect for bitcoin ING is the Netherlands' largest bank by total assets contrasts with the U.S. and China, where skepticism about viability and potential misuse for money laundering has made business more difficult for bitcoin startups.
Dutch regulators have warned about the risks of trading bitcoins, which surged in price from less than $13 at the start of last year to more than $1,000 before sliding to about $574 currently. Yet the authorities also have scrutinized bitcoin for its potential, said Jeroen Blokland, a Rotterdam-based strategist at Robeco, an asset manager.
"They are willing to let this technological experiment unfold," he said in an interview. At the same time, authorities are warning anyone who wants to use it as an investment to "be careful, be very careful."
Some bitcoin businesses have chosen Amsterdam over Europe's more traditional tech hot spot of London to base their European operations. Atlanta-based BitPay, a payment processor for merchants accepting bitcoins, opened an office in the Netherlands. BitFury, a startup that manufactures equipment for the bitcoin network, plans to base major operations there too.
The Netherlands' benign environment for bitcoin doesn't stem from its potential as a currency that Dutch citizens might use to buy their bitterballen, a sort of deep-fried meatball that is a national dish. Instead, bankers and regulators are curious about its potential as a payment system.
The bitcoin software protocol uses a public ledger distributed among many computers, known as the blockchain, to verify transactions in the digital currency and ensure that the same virtual coins are not spent twice. The system, first described five years ago by an anonymous programmer named Satoshi Nakamoto, allows for lower transaction costs than those involving a financial institution like Western Union Co. or Visa Inc., which charge for functioning as the trusted third party between people making and receiving payments.
When it comes to bitcoin, the Netherlands shows big numbers for its size. It is home to about 5 percent of the bitcoin "nodes" a source of computing power for the network that authenticates transactions. That is not far off the rates for Germany, Britain, Canada and France, and more than China, home to more than a billion people. The original bitcoin client software, which lets users conduct transactions, has been downloaded in the Netherlands nearly 130,000 times, one of the highest rates in the world on a per-capita basis.
Kim Gunnink, a policy officer for innovation and cybersecurity at the Dutch central bank, said the regulator believes companies could stand to "learn something from virtual currencies" such as bitcoin-based products that might improve customer service.
"Technological innovations in the financial industry and in payment traffic can entail huge opportunities and large benefits for society," Gunnink said.
In an official statement on virtual currencies on May 8, the central bank downplayed the notion that bitcoins could replace or even challenge the country's legal tender, the euro, and cited repeated thefts of bitcoins as a serious risk to consumers. At the same time, neither the central bank nor any other official body has required any bitcoin-related businesses to obtain a license or face any type of official scrutiny.
The willingness of banks to participate in the bitcoin experiment allowed Jouke Hofman and two friends to found Bitonic in Baarn, southeast of Amsterdam, an exchange for obtaining and selling the digital currency, in 2012. Early on, Hofman forged and sustained relationships with ING and ABN Amro Group NV, the third-biggest Dutch bank.
"We spend two man-days a week convincing the banks not to kick us out," Hofman said. "It was a struggle to get there."
The refusal of banks to give bitcoin businesses access to the existing payment system is one reason some companies have been shuttered or unable to get off the ground in the U.S. The collapse of an exchange in Japan, Mt. Gox, and the use of bitcoins for illicit purposes, notably on the alleged drug bazaar Silk Road, has made banks wary of becoming unwitting parties to money laundering or consumer fraud.
ABN Amro, by contrast, decided to take the risk, said Paul Iske, head of the bank's innovation center. Iske said virtual currencies are "to some extent a Black Swan," using a term popularized by the author and investor Nassim Taleb to denote unexpected events with transformational effects. Companies experimenting with bitcoin deserve a chance, Iske said.
"We're not excluding them," and the bank will assess each proposition separately, he said. "That's the kind of bank we want to be."
Still, Iske stresses that bitcoin enthusiasts face some resistance even in the Netherlands. The country is already part of a European payment system, and banks power a popular and cheap online direct-debiting system.
ING's Buitenhek said that the low cost of information technology means that trying a new infrastructure for payments is easier than it has been in the past. And the openness of the Dutch to new ideas in payment systems means the digital currency experiment will be allowed to run its course.
"The Netherlands is among the absolute front runners," he said. "I think we will be and remain pioneers, just as bitcoin is rising very rapidly here compared to other countries."