Do Banks Accept Bitcoin? Institutional Hurdles to Bitcoin Adoption

by Jake Wengroff

Thanks to increasing interest and requests from their customers, financial institutions have begun to take a closer look at accepting Bitcoin and other cryptocurrencies. 

Of course, “accepting” can mean different things to different organizations. USAA, for example, allows its customers who also have an account with cryptocurrency wallet provider Coinbase to check their Coinbase balances from their USAA app. Similarly, online-only Ally Bank allows its customers to link their accounts to Coinbase for buying and selling cryptocurrencies.

As Eva Lawrence in CoinDesk writes, “If bitcoin is anti-establishment, what happens when the establishment joins the party?”

Why Financial Institutions Are Hesitant to Accept Bitcoin

Is it a currency? Is it a security? Is it an asset? 

The very classification of Bitcoin and other cryptocurrencies continues to spark debate. Bitcoin is not a (fiat) currency because it is not issued by a government. The Commodity Futures Trading Commission classifies bitcoin as a commodity, and the Internal Revenue Service classifies it as an asset. Goldman Sachs recently called Bitcoin a new “investable” asset.

Regardless of its classification, financial institutions have been hesitant to accept Bitcoin and other cryptocurrencies because of their price volatility and security issues

Another reason for banks’ hesitancy to accept Bitcoin, especially as a method of payment, is that the industry has grown accustomed to charging consumers and businesses certain fees, including credit card charges, ATM withdrawal fees, or overdraft fees, all associated with regular financial products, and all of these would be challenged with the wide scale use of cryptocurrencies.

“Participation of financial institutions might not be a requirement for the success of bitcoin. In fact, decentralization is one of bitcoin’s key advantages,” adds Lawrence in CoinDesk. “Still, institutional involvement will accelerate the adoption and accessibility for the masses.”

What the Future of Banking with Bitcoin Might Look Like

While several futurists have weighed in on what a cryptocurrency future might look like, it might be helpful to consider how banks currently treat securities and investment products as compared to their everyday consumer financial products, such as checking and savings accounts and payment options. This might be more helpful when considering what the future of banking with Bitcoin and other cryptocurrencies might look like. 

For one, price volatility — as low as $9,000 to as high as $63,000 just in the last year — makes Bitcoin unsuitable for everyday purchases like groceries. 

As Bitcoin gains wider acceptance among merchants, banks might likely allow customers to keep their crypto assets in one account, and then when small purchases are expected, customers can transfer the crypto to another account and convert to dollars or another currency in order to complete the transaction.

In this way, Bitcoin would be in a “savings” account, and then the transfers for day-of or one-the-spot purchases would occur in a “checking” account.

Institutions, payments providers, technology companies and other organizations continue to roll out products to facilitate transactions with Bitcoin and other cryptocurrencies. The market, in addition to the regulatory environment, continues to evolve.

Building the Infrastructure Needed for Wider Acceptance

Aside from price volatility, one of the biggest hurdles to wider acceptance of Bitcoin and other cryptocurrencies, especially for use in payments and everyday legal tender, is security. 

This is because cryptocurrency is a bearer asset: Whoever holds the private key to a crypto asset is considered the owner, making it extremely difficult to demonstrate proof of ownership should a private key be lost or stolen. 

As such, if cryptocurrency is stolen, it is almost impossible to prove ownership and recover those stolen assets. While heightened security measures, such as stronger passwords, mobile authenticator apps, and vaults, can be utilized, they still do not provide 100 percent protection against theft or compromise.

Instead, infrastructure is needed to verify the rightful ownership of cryptographic assets. TransitNet has created the first offchain title registry of record for digital wallets, creating an additional layer of protection and record-keeping for cryptocurrency assets. 

TransitNet’s platform empowers individuals and businesses with the option to create a record of title for their crypto.  

Request an exclusive registration for TransitNet’s title registry when it launches today!

Jake Wengroff writes about technology and financial services. A former technology reporter for CBS Radio, Jake covers such topics as security, mobility, e-commerce, and IoT.


CoinDesk – How Institutions Will Take Crypto Mainstream

Investopedia – Why Do Bitcoins Have Value?

Yahoo Finance – Bitcoin is officially a new asset class: Goldman Sachs