One of the common questions among altcoin investors has been when mainstream banks will get on board with altcoins. Coinbase recently found a tentative answer to that question when, surprising everyone, it managed to arrange a contract with Barclays that’ll give it an advantage in the UK market. But is this a sign of things to come with banks and bitcoin?
The Barclays/Coinbase Deal
As surprising deals go, the actual content of the deal is quite modest. Barclays has simply given Coinbase a UK bank account to do business out of, similar to many other businesses before. Coinbase will have a slight advantage buying and selling altcoins, though, since they can do deals with UK customers “in country.” Before, Coinbase had to work through an Estonian bank to get the job done. But while customers are happy, it’s just a standard bank deal, really.
It’s the implications of the deal that are so arresting. Banks have been hesitant to be involved in altcoins because of the ever-shifting legal and regulatory regimes in countries around the world. So while the deal itself is modest, the implication, namely that Barclays is willing to take the degree of legal risk involved in giving the account in the first place, is fairly significant.
Still, it’s just one deal, and it may yet end acrimoniously. The question for altcoins isn’t whether they’re seen as legitimate. It’s when, or whether, other banks take the plunge, and where the sector goes from here.
Onward And Upward?
Getting the approval, however limited, of a financial institution like Barclays is no small feat for altcoins. But the main question is whether Barclays will see other banks joining the party. That’s still an open question with a few answers.
One of the most important questions is what Barclays saw in Coinbase, in particular, that made it willing to cut this deal. Part of the problem of decentralized currencies is that there are no standards or rules for exchanges—so much so that the first major exchange, Mt. Gox, was originally a website for buying and selling trading cards from the popular game Magic: The Gathering. Really anybody who wants to set up an exchange can do so. And that, as much as the financial risk inherent in a young asset like altcoins, has made banks leery.
If Coinbase has managed to demonstrate to Barclays enough corporate transparency to open an account, this may be helpful for other exchanges to figure out what bar they need to meet in order to better serve their customers. It may also help to establish a voluntary set of standards exchanges need to meet, which may mitigate risks from regulatory or legal crackdowns, and reassure investors.
As we said, the deal is modest. But the implications are enormous. Coinbase may have cracked the code for determining just how exchanges can demonstrate they’re more than a passing fad, which could help bolster the entire altcoin industry.