If the Bitcoin convention held this weekend in San Jose, CA proved one thing, it's that the community is surprisingly diverse. Putting aside the appalling gender gap, you simply had no idea who you would bump into. A fashion photographer from Milan. A curious kid from Edmonton, Canada. An Australian anarchist recently transplanted to New York City.
The one person that no one expected to see in all this flurry was the head of a bank or credit union, and you certainly didn't expect to find him trying to make friends. So all in all, Jordan Modell might have been the most peculiar of all the peculiar people I met at the conference. There was, it turns out, an explanation for his crypto-tech-friendly stance.
He had arrived together with Brewster Kahle, the founder of the Internet Archive, to find out whether there was anything they could do to support Bitcoin entrepreneurs during this rather crazy time.
In March, the market value of all bitcoins in circulation reached one billion dollars, attracting new investors, but also closer scrutiny from regulators. Last week, Dwolla shut down an account which funds MT Gox, the most popular online bitcoin exchange, after the Department of Homeland Security served the payment processor with a warrant. (It was hardly the first problem exchanges have seen. Back in 2011, PayPal didn't wait for the regulators to act when it proactively closed the account of Coinpal, an individual who used to accept PayPal for bitcoins. In the early days, this service was one of the best ways for people to get their hands on bitcoins.)
At the conference, Kahle explained that he was there to help. A few years ago, he had convinced his long time friend, Jordan Modell, to start a credit union with him. In 2012, the Internet Archive Federal Credit Union began serving low-income families in New Bruswick, N.J. In some ways, the move came out of left field, and it seems that even Kahle was unsure how this new endeavor would fit into his role as public steward of Internet.
During a presentation on Saturday Kahle said of his credit union, "I think we've now finally discovered why we need one."
As Modell, explained: "Most of the threat to the bitcoin world seems to come from regulators and banks. For lack of clear guidance, we do not know why banks are closing accounts. Banks may have decided that bitcoins for now are not worth the hassle of filings necessary or the associated taint," he says. "If there are no regulatory issues that prevent our doing work with bitcoin firms, then to us the bitcoin wolf looks like a playful puppy."
In the U.S., credit unions are required to verify the identity of the people they do business with (so-called "know-your-customer" laws), especially if they are acting as money service businesses. They're also required to file suspicious activity reports (SARs) to the government. But, Modell argues, this doesn't mean they can't lend a hand.
"We understand the need for SARs," Modell says. "And of course every activity over $10 000 is reported. But, subject to what regulators and council tells us, we do not think this added burden is enough to keep us from helping the bitcoin world."
After talking with people at the conference, Modell says he's identified some of the needs of the community. Assuming they get approval from their lawyers and regulators, Modell says the Internet Archive Federal Credit Union would like to help both the people who are setting up bitcoin exchanges and those who want to do business with them, navigating them through the regulatory landscape by setting up accounts that follow know-your-customer laws.
Modell would also like to work to set up low-cost, overnight transfers between bitcoin exchanges and the bank accounts of their customers. This would be a much cheaper alternative to wire transfers, which can cost more than forty dollars each.
Finally, Modell says the credit union may extend credit lines up to $5000 to individuals that are investing in bitcoin through these exchanges.
His hope is to help the bitcoin players who want to come into compliance do so at a low cost. "Honestly, I'm excited. And I think bitcoins can immediately co-exist now in a fiat-centric world," explained Modell in an email. "I just worry that those wishing to push boundaries too far and too fast might break the system by bringing on a backlash of regulation. Most regulators that I have met on my journey are real people with an understanding and care for the industry. But there is a saying: No regulator ever got called before Congress for saying no. I always want to work with, not try to bulldoze anyone on either side of the equation."
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