Banking Blog

Finance Blogs » Banking » What does Bitcoin mean for banks?

What does Bitcoin mean for banks?

By David McMillin · Bankrate.com
Friday, November 22, 2013
Posted: 11 am ET

As more online merchants begin to accept Bitcoin as a form of payment, the nation's lawmakers and banking regulators are looking to understand what virtual currency means for the future of the free market. The U.S. Senate Committee on Banking, Housing and Urban Affairs hosted a hearing on the impact of payment methods like Bitcoin this week. While the future of online virtual payments remains uncertain, it seems clear that these new currencies will undoubtedly have impact making transactions at banks.

"Bitcoin will not replace the dollar or the euro or gold, but it will certainly disrupt existing financial services and their fee structures," Anthony Gallippi, co-founder and CEO of BitPay, a Bitcoin payment processing company, testified. "Today, banks charge many fees to consumers. With Bitcoin, users can handle many of their daily payments needs themselves and avoid the bank fees, so banks relying on fee revenue could be impacted the most by virtual currencies."

That may sound appealing to many banking customers, but Bitcoin comes with baggage, too.

"Unfortunately, the current lack of regulation of digital currency makes it risky for the average consumer," Mercedes Kelley Tunstall, a partner at law firm Ballard Spahr and another member of the panel at the hearing, said. "There is no protection for people whose digital currency is stolen."

That's a serious stumbling block for anyone who holds and trades bitcoins. Account holders at banks benefit from knowing that, if an identity thief drains all their funds, the institution will most likely be at fault. If someone steals all your virtual money, you're out of luck.

Outside of individual consumers, David Cotney, commissioner of banks, Massachusetts Division of Banks, testified that Bitcoin's lack of regulatory oversight adds even bigger concerns, including money laundering, national security and tax evasion. With that in mind, Cotney stressed the importance of banking regulators and lawmakers working together to determine ways to effectively monitor the emerging world of virtual currency.

What do you think of Bitcoin? Does dealing with virtual funds instead of physical dollars and cents sound appealing to you?

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
2 Comments
Debra
February 07, 2014 at 1:15 pm

I don't see the bankers giving up the $£€ they are making off fees, etc. I wouldn't put anything past the bankers, in order to protect their scheme.

Krusty762
November 25, 2013 at 4:32 am

Banks and governments will not long tolerate ANYTHING that cuts them out of a financial transaction (whether it be cash, or Bitcoins).
While I do not necessarily embrace Bitcoins, I DO greatly prefer
cash transactions whenever possible, as it is the only financial privacy left to us. Banks/Governments will most certainly attempt to curtail anybody else from issuing fiat currency that competes with THEIR fiat currency.

Eliminate cash, and your freedoms will follow.