Why isn't there a true global bitcoin bank?

To a skeptic, this sounds like a rhetorical question, as Bitcoin is destined to become the foundational hub of a new global financial system. Bitcoin’s vision is to create a global distributed currency network with users at its edge.

This is a difficult question to answer because the central idea of Bitcoin is distributed, while banks emphasize centralized management of relationships. However, a global bank without national borders and transaction restrictions is very attractive to users who want to be able to conduct convenient transactions from anywhere in the world.

Sadly, however, this fictional global bank will never exist because there is too much local regulatory resistance.

There is no incentive for existing startups or banks to become this “super” bank. Uber (the ride-sharing service) faces a global cab alliance, but that pales in comparison to the intricate regulatory and legal hurdles inherent in a global financial services system.

Do you know why HSBC is not really the world’s leading global bank in 72 countries? Do you know why Bitcoin Inc (Coinbase) is not truly the leading “global” Bitcoin exchange, despite being the only exchange in 27 countries?

There is a universal answer to both of these questions: regulatory constraints. This means that the functionality of your account is limited to the country you belong to, just like a traditional bank account. As a user, you don’t really get a global feel.

HSBC and Coinbase are global companies, but their customers don’t have the privilege of borderless service.

Fortunately, in a purely bitcoin world, if you have a digital currency wallet, then you are this potentially global bank. A local digital currency wallet can get around some of the laws that existing banks as well as digital currency exchanges need to comply with. And it’s not illegal.

You can take your “own bank” with you wherever you go, and as long as your wallet is connected to the real world of non-digital currencies, you’ll feel like you have a global bank in your pocket.

This evolutionary context of consumer-based digital currency transactions is important because it shows that we can create another form of connection just through the blockchain itself, thus achieving the same effect as SWIFT.

The approximately 50 digital currency exchanges that exist around the world are not visibly connected, but they are seamlessly connected through the blockchain. It is extremely important to note that the blockchain is a global network with no national borders. Many banks disdain Bitcoin and the blockchain, but they should see the tremendous power this will show when you turn the blockchain into a global network.

Arguably, the digital currency network created by the blockchain will be more important than the currency itself. The new distributed network also allows for the trading of any digital asset, financial instrument or real asset that is connected to a digital currency-based blockchain proxy. Whether using a general wallet, or an economic type of account, users are already starting to use the currency in various ways: buying, selling, paying, transferring, saving or lending. By the way, PayPal offers the same functions.

Maybe one day we can become our own virtual bank. Advanced digital currency wallets will turn into a new portal to the world of crypto-financial networks, as well as to cryptocurrency transactions. As long as users are not behaving badly, paying taxes legally, and are not acting illegally, then we hope regulators will not over-regulate.

Gaining global banking status will not be easy. History reminds us that online banking is not enough to become a global bank.

Between 1995 and 2000, there were attempts to build Internet-only banks. This started with Security First Network Bank (SFNB), the world’s first Internet bank, but each attempt was limited by local jurisdictional issues. Others were CompuBank, Net.B@nk, Netbank AG, Wingspan, E-LOAN, Bank One, VirtualBank, etc., but none of them survived the Internet bubble of 2000.

Some online/mobile banking or financial services startups (e.g. Atom, Tandem, Mondo, ZenBanx, GoBank, Moven, and Number26) offered a new generation of service offerings that thoroughly challenged traditional banks. But if all of these services are intended to be global, they will still need to overcome local financial regulatory hurdles.

Typically, we use traditional banking networks to transfer any type of money. In the future, we will see us using blockchain facilities to transfer funds, including digital currencies as well as sovereign currencies. This means that traditional currencies will move more quickly into digital currency wallets and trading brokerage accounts as opposed to the process of digital currencies being accepted by internal traditional online bank accounts.

The future may look like this: banks act as the back end, while we will be trading and transferring money directly through our smartphones, applications, digital currency accounts, or web services. While at no point will a truly global bank or exchange be created, we need to experience global banking.

In this plan, banks will become access points and exit points, but they will no longer be at the heart of your wallet.

The more we connect our bank accounts to external services and applications, the better we will find ourselves living in a world of distributed banking. This trend has already started, and is by no means a casual one, as it happens regularly and with increasing impact.

Here are a few examples.

1. If you are in the ticketing business, then you can link the ticket payment process to your bank account, which
   will make it easier to pay. For example, link Eventbrite to your account through PayPal.
2. If you connect your digital currency transaction account to your bank account, you can transfer funds worldwide in less than 10 minutes and with very low fees. After that, you (or the recipient) can transfer the funds to a bank account. Most exchanges offer multiple ways to deposit or withdraw funds, including wire transfers, money orders, cash orders (money odeles), Western Union, checks, debit cards, Visa, PayPal, and virtual Visa, many of which are free. Some of these exchanges even offer real-time forex trading services between digital currencies and major currencies, such as the U.S. dollar, Canadian dollar, euro, British pound, and Japanese yen. Today, there are even more financial services features.
3. If you are planning a crowdfunding campaign (e.g. Kickstarter), you will need to connect your bank account. When the funding is complete, the campaign proceeds are automatically deposited into that account.
4. Within seconds of you using your Apple Pay account to settle and pay, the funds are actually transferred directly from your bank or credit card account.
5. When you use Uber, it will automatically transfer charges from your credit card account.
6. A Venmo account allows you to receive money from a friend instantly, or it allows you to return the balance to your bank account. Of course, the reverse is also true.

These are fewer examples, but they are important. These scenarios illustrate the point that we, as consumers, are using these new complementary services to do interesting things, rather than using our bank accounts directly. More importantly, the banks themselves do not allow us to make these connections, which is why we must go through these new intermediaries. These new services free us from the limited functionality of a traditional bank account.

Retailers are already experiencing the effects of this bilateral separation: cash is earned at the point of sale and automatically deposited into the bank account. This is the retailer’s version of connected services, but now these services will be extended more broadly to consumers.

Meanwhile, the hand of God swings between local and global connectivity. Traditionally, banks had a more local focus because that’s where they evolved from. Later, they became globally connected through networks.

Such proprietary networks require huge costs to maintain. But with the creation of Bitcoin and blockchain, we have a robust global network that can seamlessly cross borders. And we can further improve the network by adding local bank accounts. Suddenly, your traditional bank account is just one node on a global cloud of financial networks.

With too much emphasis on local operations, it is difficult for banks to join the more open global network of financial services, and they are no longer the primary monetary highway. If banks continue to allow more digital currency access points and access points, they will be much less risky. Otherwise, they will become an island.

While regulation already provides some personal protection for consumers, (due to competition) it is more about building higher barriers for local, which will lead to more users using global seamless services.