The advances with Bitcoin these last 18 months have been impressive.
If you measure the advancement of a new technology by the range of services that spring up to support it – the ‘picks and shovels’… Bitcoin is doing very well. Even the most ardent Bitcoin ‘bear’ would have a hard time dismissing the significance of the proliferation of services that have sprung up surrounding Bitcoin these last 18 months, and the vast amount of VC money that have poured in to their development ($410 million at last count – as of Dec 2014)
That nearly half a billion dollars have poured into the development of infrastructure and services to support Bitcoin, from arguably the smartest people in the room, is inarguable proof that this has moved a long way from being a renegade, shadowy, concept. Bitcoin is moving into the mainstream with huge investment muscle behind it, slower than some would have hoped, but faster than most could have (reasonably) expected.
One area that hasn’t seen development yet, which is somewhat surprising, are any moves by the traditional banks to enter the Bitcoin world. You could say that Bitcoin threatens traditional banking at its fundamental level, and these are precisely the kind of conditions where an industry needs to generally wake up, take notice, and at least begin making some investments.
Why has no traditional bank begun offering Bitcoin denominated bank accounts, debit cards, or even credit cards? There would be huge first mover advantage to do so – media coverage, adoption etc.
If an HSBC, Bank of America, NatWest or TD Bank, suddenly announced they were to offer Bitcoin denominated bank accounts, complete with conversion to and from existing accounts (where they would make their money on commission), the effect on Bitcoin would be substantial. Throw in insured storage, a major worry for large holders of Bitcoin, and individuals (and businesses) would sign up in droves.
Currently the major problem for anyone wanting to buy Bitcoins, is how to do so. If you buy Bitcoins, you also need to store them.
The buying and storage problem are the biggest impediment to widespread mainstream adoption of Bitcoin, and trust is a large factor. Like it or not, most of us do trust banks to look after our money, and while research and common sense suggests a VC backed ‘bitcoin exchange/bank’, like Coinbase, Circle or Xapo, represent a pretty safe bet for buying and storing Bitcoin, a ‘real’ bank getting in on the game would be game changing.
I see no reason why a real bank could not offer the ability to store Bitcoins, and the option to convert Bitcoin to and from other currencies/accounts. Coinbase, Circle and Xero are already doing so, after all. Arguably banks are the best positioned to offer this service, as looking after our money, and making money on exchange, has been their business for centuries.
With a Bitcoin denominated bank account, a bank could easily offer a linked debit card that converts (sells) your Bitcoin each time you make a regular purchase, but upgrades to a Bitcoin-to-Bitcoin transaction if the merchant involved has their own Bitcoin account.
For most people, and for as long as the price of Bitcoin remains volatile, simply the option to store Bitcoin safely, secure in the knowledge that it’s fully insured at their bank, they can add to their holdings over time, track it in their existing online account etc, with the same security and authentication methods they are already using, would be hugely beneficial.
The closest to this idea right now is Xapo – who offer insured storage, a debit card and the ability to buy Bitcoins, for a 0.12% annual fee. If I were a bank I would be seriously looking at an acquisition of one of these companies, and when the news breaks that a bank has indeed invested or acquired one of these essentially ‘startup Bitcoin banks’, that will be the sign that things are really shifting into the mainstream.
Libertarians might scoff at the idea of a traditional bank entering the Bitcoin world, but for mainstream adoption and practical use, it would be a huge step forward and a massive shot in the arm to Bitcoin’s prospects.