The US regulator Office of the Comptroller of the Currency (OCC) said in a letter last week that US banks are allowed to manage bitcoins on behalf of customers, Reuters news agency reported. This seems to open the door for American banks to include bitcoin in their range of services.
The Office of the Comptroller of the Currency (OCC), a part of the US Treasury that regulates banks, announced in a letter last week that US banks are allowed to offer bitcoin management services to customers.
?ǣFrom bank vaults to virtual vaults, we need to ensure banks can meet their customers’ financial services needs?ǥ ??? Brian Brooks, Acting Comptroller of the Currency
This seems to open the door for banks to include bitcoin management in their services. It may now be a matter of time before the first bank tacks.
However, not every bitcoiner will be equally enthusiastic about this development; handing over management goes against the Bitcoin ethos and detracts from the monetary properties that make bitcoin interesting.
Virtual management
To understand that, you need to understand a little bit about how Bitcoin works. Bitcoins are virtual and only exist on the Bitcoin blockchain. There is therefore no real ‘safe’ with management services, but there is the safe protection and management of the private keys that give access to bitcoins on the blockchain.
Above: Andreas Antonopoulos: “Not your keys; not your coins”
The private keys are perhaps the most important thing when it comes to Bitcoin. A private key is like a kind of access code with which you can send the bitcoins that are at a certain address.
Whoever owns the private keys actually owns the bitcoins at the associated address. Therein lies the financial sovereignty of Bitcoin: power and control lie with the users via the private keys.
However, financial sovereignty also comes with a high degree of responsibility. After all, there is no one who can help you out if something goes wrong, or if the private keys are lost. Safely storing and preserving private keys therefore requires some preparation and discipline from users.
Some people experience this as a barrier and sometimes they prefer to hand over management to others. That can be more user-friendly, but it also has a downside.
Unique properties
After all, financial sovereignty is one of the core concepts from which Bitcoin derives its strength. Precisely because everyone manages it themselves, the network is so decentralized, peer-to-peer, open and censorship-resistant. And because each user owns and manages the bitcoins themselves, there is no need to trust a third party. That makes Bitcoin valuable and interesting.
These unique features and benefits are lost when bitcoins are managed by a third party. After all, a third party can calculate costs, confiscate, censor and block or perhaps even apply fractional banking. In addition, banks require identification and do not offer the same level of privacy.
Keeping Bitcoins at a bank is therefore not very different from the old banking system, but with a Bitcoin logo: all the disadvantages and risks, hardly any advantages.
Hackers are also starting to water at the thought that there are a lot of bitcoins that can be stolen in one place at the same time. Exchanges, to which some people currently entrust the management of their bitcoins, are therefore regularly hacked. Whether the banks will fare better remains to be seen; In any case, a tech company like Twitter will not succeed.
Adoption
Still, it’s not bad news. It may even be an inevitable development if global bitcoin adoption is the goal. In any case, the ruling of the OCC is good for the legitimization and image of Bitcoin. Of course, it is also very special that banks, which have usually always been strongly opposed to bitcoin, may soon come around completely and even hold bitcoins.
There are also situations where outsourcing bitcoin management, or parts of it, might make sense. For example, when it concerns very large amounts or money that is deliberately placed in safekeeping.
It is especially important that people are aware of the fundamental differences between owning bitcoins and handing them over to a third party.
For regular users who want to make optimal use of Bitcoin, we always recommend using a bitcoin wallet with which they can manage the private keys themselves. Only then will you use Bitcoin as intended: be your own bank .
Managing Bitcoins yourself is easier than you might think. Read about it in our short guide: Getting Started with Bitcoin Part 1: Getting Ready . Also check out which bitcoin wallets we recommend!
Footage: Matthew Bisanz, creative commons
