Bitcoin.de: Euro bank integrates with bitcoin exchange
Tuesday 03 March 2015
A new development has markedly increased the safety and convenience involved in using Euro-area bitcoin exchange bitcoin.de. Integration with the existing banking system means that customers now have the best of both worlds, enjoying fast trading and excellent security.
Despite the recent claims of Coinbase, the bitcoin exchange world is still unregulated. Like many aspects of the bitcoin ecosystem, exchanges are still in a ‘Wild West’ phase where you take, if not your life, then at least your money in your hands when you use them. Quite apart from the volatility of virtual currencies and the knack that some 80-90 percent of traders have, anecdotally, of losing money, these vital elements of the bitcoin world are accountable to no one. In some cases it’s not even clear where they operate, and so to which legal system they are subject. And, of course, plenty of bitcoiners like it that way – not because they are engaged in illegal activity but because different jurisdictions have different views on virtual currencies and not all are entirely friendly.
The lack of truly reliable and safe exchanges has doubtless hampered bitcoin’s adoption. When Bitstamp was hacked in January and lost some 19,000 coins worth $5 million, it did an excellent job of getting back up and running as quickly as possible. Nevertheless, this was by no means a given. More recently, a string of altcoin exchanges were hacked in what appears to have been a co-ordinated attack. The worst affected was BTER, which lost 7,170 bitcoins, worth $1.75 million at the time. Unlike Bitstamp, BTER has no way of covering its losses in full. At the very least, BTER’s bitcoin depositors are looking at a severe haircut, and have no comeback against the exchange. (Altcoin deposits were unaffected.) These kinds of problems quite simply put off potential depositors – as they rightly should.
Bitcoin and banks
Banks and bitcoin have traditionally had an ambivalent relationship, to say the least. Bitcoin was conceived as a solution to the problems of centralised, government- and bank-controlled money. As a result, banks in many countries have been wary of
touching bitcoin. Even in the UK, where the government has proclaimed its pro-cryptocurrency stance and pledged light-touch regulation, the banks themselves have other ideas. Many, many nascent UK exchanges have gone out of business when their banks abruptly withdrew services.
That’s why bitcoin.de’s latest development is such a coup. Euro banks seem to be a little more relaxed about bitcoin than banks in the UK or US (one reason that Bitstamp’s bank is based in Slovenia, even if their HQ is in the UK). Thanks to negotiations lasting 18 months, customers of Fidor Bank can now begin trading with funds held in their bank accounts immediately. Gone are the days of waiting for money to arrive whilst the buying or selling opportunity passed.
This is more than instant transfer: it is integration with the banking system. The difference might seem trivial, but it is anything but.
Security and speed
For most exchanges, customers transfer their money to the bank account of the exchange. Only when it arrives can they begin trading. This process is often time-consuming and expensive. Delays of several working days and fees of 5 percent are not unusual.
It is also insecure. If an exchange is hacked, goes insolvent or simply disappears (as has happened more than once), then customers’ funds are gone. Bitcoin or fiat, they can expect never to see them again. Bitcoin.de has side-stepped this problem by creating an ‘Express Trade’ system, which uses money held in customers’ bank accounts. The level of integration with the banking sector is unprecedented. As well as speed and convenience, it brings security: customers are covered by the banks’ guarantee of protecting up to 100,000 Euros per depositor. Fiat funds are not held by the exchange, which simply acts as a way to match buyer and seller: when the trade is executed, money is sent directly from one bank account to another.
Where the future lies
This development is a huge step forward for bitcoin, not just in terms of adoption but in terms of image. The close relationship with that bitcoin.de has forged with Fidor is unprecedented – pointing to a new era of cooperation between the traditional finance sector and new cryptocurrency businesses that have previously been shut out of banking relationships or had to deal with vastly inferior arrangements.
We can only hope that other countries will take notice and step up to the plate. If they don’t, then bitcoin commerce will naturally gravitate towards those locations where access to virtual currencies is most ‘frictionless’. That means other finance and technology hubs – including those in the UK and US – will inevitably be left behind.
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