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Business/Finance See other Business/Finance Articles Title: Banks Mostly Avoid Providing Bitcoin Services Banks Mostly Avoid Providing Bitcoin Services The Wall Street Journal By Robin Sidel December 22, 2013 4:32 PM Companies trying to cash in on the newfangled bitcoin craze are having trouble getting old-fashioned bank accounts. Lenders are leery of dealing with virtual-currency companies because of concerns that the businesses could run afoul of anti-money-laundering laws or be involved in illegal activities, banking executives say. Regulators and central bankers around the world have raised similar concerns in recent months. The problem has grown so acute that some owners of fledgling virtual-currency businesses are trying to elude bank scrutiny by avoiding the words "bitcoin" or "bit" in their names, according to entrepreneurs and investors who actively track the industry. Patrick Murck, general counsel for the Bitcoin Foundation, a trade group, has been raising the issue in meetings with regulators and bank executives. "This is definitely causing a bottleneck in the industry," he said in an interview. "The ability of companies to get bank accounts is necessary so that they can take the next step in building out the core bitcoin infrastructure." Bitcoin has exploded in popularity since its introduction four years ago. The virtual currency is "mined" using computer algorithms and swapped electronically among users for the purchase of goods and services or as an investment. The price of one bitcoin has been extremely volatile in recent weeks, soaring above $1,100 from less than $20 at the beginning of the year. It has since retreated to around $638, according to a CoinDesk index of three popular bitcoin exchanges. Such gains have prompted big-time venture-capital firms such as Accel Partners, General Catalyst Partners, Lightspeed Venture Partners and Union Square Ventures to pile into bitcoin-related companies in recent months. But bankers don't share investors' enthusiasm. Entrepreneur Jesse Powell said he reached out to roughly 30 banks in the past year when he wanted to open an account for his fledgling virtual-currency exchange, called Kraken. Bitcoin exchanges need bank accounts so that they can receive wire transfers from customers. "I talked with tons of them and got far along, but ultimately it turned out to be a waste of time because the [banks' regulatory] compliance guys would pull the plug," he said. Stymied in the U.S., Mr. Powell eventually found a bank in Germany. Then last month Bank of America Corp. froze the account that funded general operations for Kraken's parent company, called Payward Inc., according to Mr. Powell. He said the bank unlocked the account on Dec. 2 after he responded to a questionnaire from Bank of America about Payward's business. "It was a total nightmare, to put it mildly," said Mr. Powell, who tapped his personal bank when the company account was frozen. Mr. Powell pays employees in bitcoin or dollars, depending on their preference. Bank of America declined to comment on Mr. Powell's situation, citing rules on customer privacy. A spokesman said, "We support clients in a variety of industries and, per regulatory guidance, perform additional due diligence for money-services businesses." "It is really, really hard to get a bank account, because banks don't know if bitcoin is friend or foe," said Meyer "Micky"Malka, a former banker and founder of Ribbit Capital, a venture-capital firm in Palo Alto, Calif., that has invested in three bitcoin companies. Big banks are reluctant to say whether they have a firm policy about providing services to bitcoin-related companies but said virtual currencies require an extra level of scrutiny. "Banks make their own decisions on which customers to accept, but areas like virtual currency that present heightened risk require heightened risk-management and controls," said a spokesman for the Office of the Comptroller of the Currency, which regulates banks. Wells Fargo & Co. considers bitcoin to be a "rapidly evolving area" and "will work to ensure that we meet our due-diligence requirements in providing any banking services to all money transmitters, including the review of federal registration, state licensing, business background and [anti-money-laundering] assessments," a company spokeswoman said. J.P. Morgan Chase & Co. won't provide banking services to any money-services businesses, which include everything from check cashers to bitcoin-related ventures, according to a person familiar with the bank's policies. The bank has come under intense regulatory scrutiny this year and is significantly scaling back in certain areas that could be considered risky. John Reitano didn't even try to get a bank account from a large financial institution earlier this year when he was setting up Coinflash, a San Diego company that aimed to start a bitcoin-trading network similar to airport currency kiosks. "We went to a lot of little banks and explained what we were doing, but we got turned down by them, too," Mr. Reitano said. Ultimately, he didn't need a bank account; the business ran into regulatory hurdles and didn't get off the ground, he said. Silicon Valley Bank, a Santa Clara, Calif., lender with $23.7 billion in assets, is one of the few institutions providing banking services to bitcoin companies. The bank has established a separate due-diligence process to vet such ventures and is being "extraordinarily selective," said Chief Operations Officer Bruce Wallace. Mr. Wallace said providing services to bitcoin companies fits with the bank's business model to support innovative companies and "market disrupters." But he added, "I can definitely understand how some other financial institutions, where this is not a core part of their business, would question the point of taking any risk at all." Poster Comment: The bankers wish to avoid this at all costs. ;) Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest
#1. To: BTP Holdings (#0)
Bankers bet on one horse races only.
My sister lives in Chicago. She told me that she could not vote for Obama, so she voted for McCain. I told her that she still voted for evil since both candidates were members of the CFR. Both were internationalists. ;) "When bad men combine, the good must associate; else they will fall, one by one." Edmund Burke
That or twenty horse fields where they own all the horses. Same thing. They don't bet to lose a nickel, ever. ++++++++++++++++++++++++++++++++++++++ Their scams and lies are wearing me down... “The most dangerous man to any government is the man who is able to think things out... without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, intolerable.” ~ H. L. Mencken
Sad that many people do NOT realize voting for lesser of two evils is what the system wants. I really get sick when people say it is their DUTY to vote. Barf.
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