According to the Wall Street Journal article “Bitcoin Firms Get the Banking Blues,” dated December 23, 2013, “[c]ompanies trying to cash in on the newfangled bitcoin craze are having trouble getting old-fashioned bank accounts.” It’s true. Companies dealing in bitcoin and other virtual currencies are having tremendous difficulty getting “banked.” The difficulty sometimes extends even to those companies whose business is not bitcoin, but who may accept bitcoin in payment for goods and/or services. Why are banks, in the U.S. at least, exceedingly reluctant to open bank accounts for players in this burgeoning online space?
Several factors might be at play here. First, bankers are a relatively conservative bunch to begin with. Second, some bankers may lack a clear understanding about how the bitcoin protocol actually works. A fuzzy understanding of the bitcoin protocol certainly is not going to open many doors in traditional banks and certainly not their compliance departments. Third, some bitcoin operators themselves may not have a clear understanding of the compliance regulations they are expected to be operating under. Therefore, if a company wishing to establish say, a bitcoin exchange, approaches a bank and displays ignorance about FinCEN registration requirements, money services business licensing requirements, or AML/BSA compliance mandates, the bank is going to shut the door faster than Barry Bonds’ (in his prime) swing.
The current problem with getting banked, ultimately does not lie with the banks. Currently, bitcoin operators operate at a distinct disadvantage. They are disadvantaged by the fact that clear AML/BSA regulations have not been promulgated by the government. The FinCEN guidance that came out earlier this year, does not give bitcoin operators or banks clear guidance or even “flash light in the fog” guidance on what is really expected of them to comply with AML/BSA requirements as they apply to the virtual currency environment. AML regulations cannot be applied with a “one-size fits all” mentality even in the “brick and mortar” world. Thus, existing regulations are not clear enough for banks and bitcoin operators to really get a handle on what they are expected to be doing with regard to bitcoin operators’ accounts.
Until the government promulgates clear AML/BSA regulations that make sense in the virtual currency environment and that provide virtual currency operators with some sort of regulatory “blueprint,” banks will continue to politely show them the door.