How to Set Up Bitcoin Bank Deposits

The Japanese government is still in the process of discussing how to regulate the Bitcoin network. Yesterday’s answer to Member of Parliament Okubo’s questions was just a starting point for this discussion.

In the opinion of the Japanese government, Japanese banks right now are not allowed to offer bitcoin denominated accounts. That’s because they think that bitcoin is not yet a currency.

I think that question is open to debate. Actually, bitcoin is the most successful currency of the World, appreciating massively against everything else. It is the only worldwide currency everybody with an Internet connection can use. It means Internet with peer-to-peer payments. It is money in the cloud. And it is the only honest money, with absolute protection against inflationary money-printing built in.

But Japanese banks will listen to what the government says. And if the government right now still says that they can’t offer bitcoin accounts, they won’t.

So with this primitive state of Japanese financial information technology regulation, how can one work around these restrictions?

One use case for having bitcoin accounts would be a legal person (a stock company) holding bitcoin.

Any company can open a bank account denominated in traditional currency. That means that the funds in that account are property of the company, and not of its directors.

In contrast, with the MtGox mess, there was no way the company MtGox could hold bitcoin in a bank account. So they didn’t. Their directors held bitcoins, which diluted the boundaries between company and private property.

“Holding bitcoins” means knowing a private key. But actually, most people (me included) don’t know any keys.

With large amounts, the safe way to hold bitcoins is to print a paper wallet. And then keep that paper wallet in a safe place, just like some gold or jewels.

And one such safe place is a safety deposit box rented from a bank.

That in turn means that one can have a company form a contract with a bank about a safety deposit box. Then print paper wallets, and deposit them in that box.

That’s the closest thing possible now to depositing bitcoins in a bank account.

Eventually, all banks will offer bank accounts denominated in bitcoins (and other cryptocurrencies), just like all banks have Internet homepages as a matter of course. Japan won’t take forever to figure out the necessary regulatory framework for that.

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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