Topic: Why not form a Bitcoin Credit Union? (Read 983 times)
What would be in it for borrowers and lenders and how would you stop borrowers becoming scammers?
It is still to early to build a bitcoin credit union. The regulators still struggle to understand what bitcoin is. Let it time until bitcoin gets more popular and relevant in the FinTech sector. Startups will be able to easily open bitcoin businesses in the future.
I'm very far from knowing the ins and outs of this type of thing, but if it's dealing with fiat isn't there the risk of being frozen out by banks? If your credit union is known as the Bitcoin one then they'll gang up and render it useless as transfers, debit cards, checking are all interlinked with other banks. It can't operate very effectively in total isolation.
In the UK there've been tons of attempts to get banking going for crypto businesses with obscure payment providers but as soon as the banking cartels cotton on these providers are threatened with being denied access to the wider system and it's goodnight.
In the UK there've been tons of attempts to get banking going for crypto businesses with obscure payment providers but as soon as the banking cartels cotton on these providers are threatened with being denied access to the wider system and it's goodnight.
Thank you for the links. I looked through them and I still can't find a good reason as to why one doesn't exist. This may not be common knowledge but credit unions can convert into banks (not for profit -> for profit.) This could be quite a profitable endeavour. So why hasn't anyone done it yet?
This has been discussed before:
https://bitcointalksearch.org/topic/would-you-be-interested-in-a-bitcoin-credit-union-810747
https://bitcointalksearch.org/topic/bitcoin-credit-union-128919
https://bitcointalksearch.org/topic/bitcoin-credit-union-7284
https://bitcointalksearch.org/topic/bitcoin-credit-union-893872
https://bitcointalksearch.org/topic/bitcoin-credit-union-new-legal-140061
https://bitcointalksearch.org/topic/would-you-be-interested-in-a-bitcoin-credit-union-810747
https://bitcointalksearch.org/topic/bitcoin-credit-union-128919
https://bitcointalksearch.org/topic/bitcoin-credit-union-7284
https://bitcointalksearch.org/topic/bitcoin-credit-union-893872
https://bitcointalksearch.org/topic/bitcoin-credit-union-new-legal-140061
Do you think startup-funds could be crowd-sourced?
Anyone with the means to afford to start up a Bitcoin credit union is either an early adopter, and thus "opposed to the system man", already running a Bitcoin business, and thus not needing to create another, or a very rich investor, who also most likely would not see the benefit of such a business venture.
I have a background in the banking industry and something I've been curious about is the lack of a bitcoin credit union. I've seen discussions surrounding this topic in the past but they've all degenerated into basically, "screw the system." Past the rhetoric, I've yet to see a good answer.
A common complaint in the Bitcoin community is the lack of flexibility in the financial sector. Bitcoin users often have their accounts suspended or shutdown and many Bitcoin startups struggle to even open a business account. This is because of BSA, Patriot Act, and the overall regulatory burden on the banks. And to be honest, I can't exactly blame the banks for not wanting to work with bitcoin participants. Large financial institutions would have to rework their compliance processs to accomodate the bitcoin industry. This gets progressively harder the larger you are. Small banks have their compliance process built and bought off the shelf from third party contractors and software vendors so they don't have to expertise to modify their compliance process.
So why doesn't anyone in the bitcoin community form a bitcoin credit union with a compliance process that is developed in-house for the purpose of working with the bitcoin community? Treat it like a startup and build the processes out from the bottom up. In execution it is not that difficult. I know because I've done it. Compliance would be difficult for credit products but this bitcoin credit union wouldn't need to offer credit products in the beginning. Instead, it would just serve as a way for bitcoin participants to have a connection to the existing financial infrastructure. Bitcoin startups could now have a place to store their money without worrying about their account closing randomly or their funds being frozen. Without a willing financial partner, I can't see the bitcoin ecosystem evolving at the pace we want it to.
This is not something that can be done through the traditional VC funding method. Why? Well because 1) regulators don't accept VC money for community institutions and 2) credit unions are a not-for-profit. This is my theory as to why this has not been done yet.
However, many people do not realize that credit unions are very different from banks in turns of regulatory burden and difficulty in formation. In terms of a cost perspective, this could be done for $300k. I understand that this is no small sum but in the grand scheme of things, this could grow into the banking house of bitcoin.
Please comment below. I'm in the middle of a credit union formation and I'm seriously considering forming another one for bitcoin. I've learned from experience that the community here always has great insights that I've missed so I would love your input.
*Note: I have legal counsel already. The costs are calculated and the application processes is already planned out. I'm only hesitant because I can't think of a solid reason as to why this has not been done yet.
*Note: Regulator approval is not a big worry because this credit union will not be chartered at the federal level. It will be chartered at the state level (there is a specific state in mind) and the regulators there are willing to accept it as long as no credit products are offerred.
A common complaint in the Bitcoin community is the lack of flexibility in the financial sector. Bitcoin users often have their accounts suspended or shutdown and many Bitcoin startups struggle to even open a business account. This is because of BSA, Patriot Act, and the overall regulatory burden on the banks. And to be honest, I can't exactly blame the banks for not wanting to work with bitcoin participants. Large financial institutions would have to rework their compliance processs to accomodate the bitcoin industry. This gets progressively harder the larger you are. Small banks have their compliance process built and bought off the shelf from third party contractors and software vendors so they don't have to expertise to modify their compliance process.
So why doesn't anyone in the bitcoin community form a bitcoin credit union with a compliance process that is developed in-house for the purpose of working with the bitcoin community? Treat it like a startup and build the processes out from the bottom up. In execution it is not that difficult. I know because I've done it. Compliance would be difficult for credit products but this bitcoin credit union wouldn't need to offer credit products in the beginning. Instead, it would just serve as a way for bitcoin participants to have a connection to the existing financial infrastructure. Bitcoin startups could now have a place to store their money without worrying about their account closing randomly or their funds being frozen. Without a willing financial partner, I can't see the bitcoin ecosystem evolving at the pace we want it to.
This is not something that can be done through the traditional VC funding method. Why? Well because 1) regulators don't accept VC money for community institutions and 2) credit unions are a not-for-profit. This is my theory as to why this has not been done yet.
However, many people do not realize that credit unions are very different from banks in turns of regulatory burden and difficulty in formation. In terms of a cost perspective, this could be done for $300k. I understand that this is no small sum but in the grand scheme of things, this could grow into the banking house of bitcoin.
Please comment below. I'm in the middle of a credit union formation and I'm seriously considering forming another one for bitcoin. I've learned from experience that the community here always has great insights that I've missed so I would love your input.
*Note: I have legal counsel already. The costs are calculated and the application processes is already planned out. I'm only hesitant because I can't think of a solid reason as to why this has not been done yet.
*Note: Regulator approval is not a big worry because this credit union will not be chartered at the federal level. It will be chartered at the state level (there is a specific state in mind) and the regulators there are willing to accept it as long as no credit products are offerred.
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