Blockchain is the technology that drives the Bitcoin banking system. At its core, blockchain technology enables the decentralized storage of information. Multiple ledgers, or blocks of information, are chained together in one continuous stream that builds on itself with every new transaction. While blockchain has wide applications, the financial sector and cryptocurrencies, specifically, are bringing blockchain into the spotlight.
Blockchains biggest cheerleaders laud the technology for its encryption process that makes it virtually impossible to hack. This is particularly appealing to cryptocurrencies like Bitcoin since financial fraud is an increasing threat. When currencies are traded using blockchain, transactions are added to the chain using multiple point verification. Transactional errors are removed and the chain is authenticated at each point.
If a person wants to trade their currency, the blocks can be easily transferred between individuals. No bank intervention occurs and the transactions can span the globe. Digital currencies are used to purchase goods and even exchanged for traditional currency. The flexibility, lack of geographic boundaries, and inherent security make blockchain powerful.
Beyond security, blockchain offers freedom in the form of access to a decentralized system. Anyone can partake in blockchain technology as an anonymous user. This inclusivity is discussed further in the next section. Blockchain can be applied to many different processes and it opens them up to new users and has far-reaching implications. Some herald blockchain as the future of democracy and note that it could be used to create a secure voting system. Others are using blockchain to track the movement of agricultural goods through the economy.
The traditional banking system excludes low-income households and those with bad or non existent credit. Bitcoin, on the other hand, is open and available to everyone, regardless of financial standing or income. This illustrates how blockchain technology and decentralized currencies support financial inclusion. Across the world, 2 billion people lack access to banking services. In Organization for Economic Co-operation and Development (OECD) high income countries, 94% of adults report having a bank account in 2014. In low income developing countries, only 54% noted having a bank account.
The 2 billion worldwide unbanked are missing out on access to bank accounts and the banking services that accompany those accounts. These services include the ability to easily deposit pay checks, pay bills, and transfer funds to friends and family. While bitcoin and the blockchain can’t solve every issue surrounding financial access, they can provide a means for storing money and transferring funds. Even the presence of a decentralized system shows promise for a future financial system that brings these unbanked into the fold.
Alternative financial services and payments services are highly regulated by the Financial Crimes Enforcement Network (FinCEN) in the United States. Check cashers, peer-to-peer payment apps, and money service businesses are directly and indirectly affected by rules relating to financial crime and anti-money laundering (AML) efforts. These rules include strict Know Your Customer (KYC) requirements, reporting and record keeping benchmarks, compliance programs, and external audits.
Blockchain technology is a tough nut to crack for financial regulators. Since the system is built on anonymity, identifying your customer or user is impossible. The borderless nature of the blockchain hampers the possibility of tracking funds. Parties can trade funds from anywhere in the world using only a smartphone and their wallet key. If blockchain technologies and the cryptocurrencies that use them want to truly enter the financial mainstream, they will need to build internal policies that address financial regulation standards. This includes understanding the requirements, mitigating risk of financial crime and fraud, and meeting customer identification requirements.
As it stands now, banks are wary of bitcoin-related businesses. In an industry grappling with an ever increasing need for transparency, the secure yet anonymous nature of bitcoin worries regulators. While the multi-point verification system and chain dependencies remove the vulnerability associated with single point access systems, blockchain makes required reporting and record keeping difficult. Regulators are still grappling with the best way to regulate bitcoin, while Bitcoin itself is not interested in joining the traditional (regulated) financial market.
For all of the reasons explained above, bitcoin-related businesses have difficulty accessing the banking system. Bitcoin ATM kiosks and exchanges require a real bitcoin bank account through which they can move funds, make deposits, and pull withdrawals. Since regulators don’t have a framework for regulating bitcoin hammered out, many banks are simply refusing to work with bitcoin businesses. Bitcoin businesses are left scrambling to find a financial institution, many times even across state lines.
The absence of a supportive bitcoin banking system puts bitcoin businesses in a precarious position. BankLine formed to solve this issue and provide a reliable bitcoin banking system. BankLine works with a network of bitcoin-friendly banks to provide real business bank accounts and ancillary banking services. With BankLine, bitcoin businesses like bitcoin ATMs can deposit funds, make withdrawals, and operate smoothly.
In addition to bitcoin bank accounts, BankLine provides nationwide cash logistics for bitcoin businesses. As bitcoin grows in popularity, more and more people in the United States are looking to buy and trade the digital currency. Bitcoin ATMs allow people to exchange bitcoins and cash. An individual can either insert cash into the bitcoin system or trade bitcoin and receive cash in return.These kiosks are essential for promoting access to the digital currency system. BankLine’s partnership with TransGuardian and Rapid Armour allows them to pick up and deliver cash to any bitcoin kiosk in the united states. If the USPS can access the location, the funds can be picked up and delivered.
In an uncertain regulatory landscape, BankLine provides continuity and reliability for bitcoin businesses. If you own and operate a Bitcoin kiosk, reach out to us today to see how we can serve you and your business.
BankLine is the only crypto-friendly banking solution that offers a portfolio of redundant cryptocurrency-friendly depository institutions willing to serve the varied needs of the crypto industry. Our network of crypto-friendly banks and services helps protect from the threat of bank discontinuance.
BankLine provides banking services to cryptocurrency companies operating within the United States and its territories.