Sydney technology firm Hotwire PE is months away from opening the world’s first Bitcoin-based bank after a year of talks with regulators in the UK, US, Australia and Singapore.
CEO Craig Steven Wright said Denariuz Bank would begin accepting deposits in the second half of 2014 and would eventually offer Bitcoin-based equivalents of conventional savings accounts, term deposits, credit and debit cards, and loans.
One Bitcoin currently buys about $US667 or $A736. Wright said Denariuz would launch with a global pool of more than 100,000 Bitcoin ($A73.6 million) from its backers.
Eventually, the bank hopes to have a million customers globally.
Denariuz will have no physical branches, nor does Wright expect customers to rely on Bitcoin ATMs.
Instead, the company has built an online “eWallet” that, like today’s online banking applications, will let customers access their accounts on their desktop and mobile devices.
Wright, who has worked in information security for 15 years and is a lecturer at the Charles Sturt University, also hopes to strike an agreement with a payments card provider like Visa, American Express or Cuscal to facilitate day-to-day Bitcoin transactions.
A growing number of Australian merchants have begun accepting Bitcoin, but Denariuz will provide currency exchange through its “Coin-Exch” platform when needed, he said.
Wrestling with regulators and politics
Hotwire PE has about 50 staff in Australia and the US, of which about 45 are based down under.
Wright said regulatory discussions had been particularly difficult in Australia, where the ATO has yet to clarify how it will handle Bitcoin-related GST.
But he was committed to opening Denariuz Bank in Australia because “I’m Australian and I’m still here”.
Wright hopes to finalise talks with the tax office in the coming weeks, and with company and banking regulators ASIC and APRA within the year.
The latter has yet to decide on whether Denariuz is eligible for a full banking licence, without which it will “be hanging off a third-party Australian Financial Services Licence” (AFSL), Wright explained.
PayPal also operates on a restricted banking licence in Australia.
APRA’s decision relies on whether it deems Bitcoin a “financial instrument” or money – a definition that international regulators have also grappled with.
Bitcoin is not considered “money” or “currency” under Singapore’s GST act, the country’s Inland Revenue Authority stated last month.
“[Authorities] have to understand that Bitcoin is money, and should be treated as such,” Wright said. “Unfortunately, there’s a lot more political lobbying involved than I would have liked.”
Hotwire PE this week described Denariuz as an effort to “bring about the legitimisation of Bitcoin in Australia and throughout the world”.
In the interim, Wright said the company would adhere to all existing laws and regulations including Basel III and its backers would wear the risk of exchange rate fluctuations.
He expected a stock market listing to be in the pipeline but declined to discuss details.