Why Banks See Bitcoin as Their Number One Enemy

March 3, 2016

10:10 am

Bitcoin has created waves in the world of finance. Look back to 2013 when Bitcoin first came onto the horizon. Its value rose by 6000 percent in a single year. This is an incredible rate and it brought up the idea that the virtual currency could really succeed.

But Bitcoin is a currency that has gained a lot of enemies. Companies that want to operate using the virtual currency struggle to create bank accounts, as a result. I spoke to Michael Gastauer, founder and CEO of WB21 to discuss this issue that companies have.

What is WB21?

Gastauer: WB21 is a real-time online account opening and payment platform for Private and Business Customers from 180 countries. We offer the account opening in 18 currencies. We currently have 180,000 private and about 40,000 business clients using our banking platform. Our customers can send money to third-party bank accounts in over 195 countries for a 1 percent flat fee.

Why do companies using Bitcoin experience such problems when it comes to opening bank accounts?

Gastauer: Bitcoin is a digital asset and can be described as a decentralized digital currency, where users can directly transact on a peer-to-peer basis without an intermediary. The use of Bitcoin by black markets have attracted the attention of media and financial regulators though Bitcoin is nothing illegal most banks don’t see it that way. Many refuse to hold it in the same light as actual cash or see it as an asset, and so they won’t touch Bitcoin.

And is there anything companies can do about this?

Gastauer: There are a few banks that are sympathetic to Bitcoin. I see Bitcoin for what it is, the largest digital currency of its kind in terms of total market value. Some banks already figured out that there might be vast opportunity in the blockchain space. But instead to research the new technology on their own, they could partner with blockchain companies to get a foot in the door when new blockchain based products come to market.

I believe that in the coming years we are surely going to see a huge amount of retailers allowing Bitcoin payments.

That will force the banks to acknowledge Bitcoin and accept it on the same terms as hard currency. To put it simply, their customers will demand it.

Why are banks so hostile to this virtual currency?

Gastauer: Most Banks are notoriously conservative when it comes to money. They want nothing to do with something that they can`t fully control, and Bitcoin is something they can`t control because the system works without a central repository. Banks have little idea as to how they are going to make money from it, and so they reject the idea entirely.

It’s also a disruptive force in the industry. Banks don’t want to see virtual currency succeed because it’s not something under their control. If the world suddenly started to pay with Bitcoin, it would cut out the banks because it’s not a business they have any involvement in.

What do you think is the future of Bitcoin?

Gastauer: Bitcoin has seen an incredible amount of growth. On the other hand, it would be wrong to say that it has or will experience a smooth ride. Bitcoin will come under increasing scrutiny as governments think about how to regulate it.

Bankers should really give it a closer look or they might sooner or later find out that it’s too late to jump on the train. The banks will also change, including accepting Bitcoin as valid currency. It won’t be long before banks accept companies and virtual currency. But it won’t happen without a fight and I do think it will take one or two big organizations to take a leap in the dark first.

Should companies operate using Bitcoin?

Gastauer: From a consumer standpoint, I think it makes a lot of sense for companies to allow Bitcoin. But they need to know how to convert it into hard currency in the meantime. You can sell Bitcoin for cash, and that’s how many companies deposit their money into the banks.
It’s a roundabout way of doing things, but I’m confident that companies operating with Bitcoin will see the benefits of doing so in a few years. But for now, companies will have to accept the way of things until the banks decide to play ball.

I would caution against functioning exclusively with virtual currency, however.

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AJ Agrawal is an entrepreneur, speaker, and writer. He is the CEO and Co-Founder at Alumnify Inc.

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