Securing a Bitcoin Bank Account
Cryptocurrency reached its all-time high aggregate value of $184 billion in October 2017. Bitcoin bolstered this record by shooting above $6,500 (Bitcoin was valued at around $1,000 at the start of 2017). Bitcoin’s market cap, or the price per coin multiplied by the number of coins in circulation, reached another record high of just under $110 billion. As cryptocurrency climbs in value and individuals recognize its benefits, demand for bitcoin banking is increasing.
The Rise of Bitcoin
Bitcoin was “born” in January 2009 when a person or group using the pseudonym Satoshi Nakamoto released the open-source software and mined the first coins. Bitcoin is a decentralized currency that circumvents the traditional central banking system and government regulation. Bitcoin is a digital asset that uses cryptography to function as a means of exchange. Each “coin” serves as a link in a blockchain. Every transaction builds on the previous one and is verified by network nodes before being recorded in the public ledger, known as a blockchain. The bitcoin itself is the reward for the process of verifying transactions and adding them to the public ledger, known as mining.
The first bitcoin transaction took place the day the software was released. Hal Finney downloaded the software and Nakamoto gave him 10 bitcoins in exchange. It’s impossible to say exactly how many people own bitcoin at a given time since transactions happen through bitcoin wallets. One person may own several wallets or a single wallet may be shared by multiple people. Wallets act as a personal bitcoin bank account of sorts and are only accessible by the owner. A public key is used for the exchange of bitcoin. Coindesk estimates that there were 14 million bitcoin wallets in use in 2016.
Bitcoins (BTC on tickers) can be exchanged for other currencies, products, or services. Many merchant and vendors accept bitcoin as payment. As Bitcoin increases in popularity, bitcoin ATMs and exchanges are popping up across the United States. These businesses allow individuals to convert bitcoin into cash and exchange their digital currency with other people. The bitcoin industry has established itself entirely independent from the traditional banking system. For this reason, some naysayers and regulators question its legitimacy. But that’s changing.
Bitcoin’s record values in October 2017 are partially attributed to the fact that CME Group (CME.O) announced the launch of bitcoin futures for the fourth quarter. CME Group is the world’s leading derivative exchange operator. This announcement helps legitimize digital currency and is seen as a big stride towards mainstream financial adoption. CME chief executive Terry Duffy told the Financial Times, “given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract.” Even Goldman Sachs issued a report to help demystify the cryptocurrency for their clients. With this stride also comes increasing regulatory scrutiny.
Bitcoin Banking & Regulation
As a whole, federal regulators are unsure how to handle cryptocurrency. In 2013, the Financial Crimes Enforcement Network (FinCEN) issued a report regarding virtual currencies and their legal status within money service business and Bank Secrecy Act (BSA) regulation. The report classified bitcoin as a virtual currency and cleared Americans using bitcoin of the legal obligations associated with US currency. While individuals were technically cleared, the report stated that American entities who generate virtual currency like bitcoins are money service businesses and therefore subject to regulation. This includes bitcoin exchanges, administrators, and even miners who sell their bitcoin for other national currency while they are within the United States.
After this report, some bitcoin exchanges registered with FinCEN and began following MSB regulation, which includes the generation of Suspicious Activity Reports (SARs), record-keeping, and Anti-Money Laundering (AML) compliance. Many in the bitcoin community were critical of the report and dubbed it an “overreach” of power by the bureau of the United States Department of the Treasury. Since 2013, there has been a continuous back and forth between bitcoin organizations and regulators in the United States.
In the meantime, bitcoin regulation is mostly being hammered out on a state level. As of August 2017, however, the US Congress is planning to introduce a bill that will bring bitcoin into the jurisdiction of US money-laundering enforcement agencies. The Executive Director of The Bitcoin Foundation, Llew Claasen, responded by retaining legal counsel to advise the foundation’s efforts to fight increasing federal and state regulation in the US.
Securing a Bitcoin Bank Account
As a result of widespread regulatory confusion, securing a bitcoin bank account is a difficult task. As banks respond to new rulings, bitcoin businesses are left scrambling to secure a bank account for their operations. A bitcoin kiosk that facilitates transactions needs their own bank account for conducting transactions and rotating their working capital. Without this bank account, a bitcoin kiosk can’t operate.
A bitcoin kiosk sends and receives cash using their bitcoin bank account. If a kiosk’s local or regional bank shuts down their account, they may be forced to travel across state lines for financial services. This is prohibitive for business owners who are unable to drop everything and drive for hours to deposit or pick up cash. A consistent bank account is truly essential for bitcoin ATM operators. Bitcoin businesses also have to stay up to date on the latest regulation affecting their industry. New rulings from FinCEN or state authorities may require previously unregistered bitcoin businesses to register with the state. In this event, a deadline is given and bitcoin businesses can choose to comply or leave the state (or country) affected by the ruling.
BankLine BitCoin Banking Services
BankLine was formed to serve the bitcoin industry with reliable bitcoin bank accounts and banking services. In an industry where banking relationships are uncertain, BankLine is a constant. BankLine works with a network of bitcoin-friendly banking partners to provide redundant banking. This means that if one bank shuts down your account, another is ready to take your business.
In addition to banking, BankLine also provides nationwide bitcoin cash logistics. To provide this revolutionary service, BankLine partnered with TransGuardian and Rapid Armor. The partnership enables door-to-door deposit and cash shipments between a bitcoin business and their operational bank account. Cash is sent or received through the USPS and fully insured by TransGuardian’s insurance underwritten by Lloyd’s of London. The business can send funds to be deposited into their bank account or receive funds from their bank account. Bitcoin-friendly depository services keep your virtual currency business up and running smoothly.