“We need a Bitcoin bank!” (because disruptive technology is scary)

One of the comments I hear a lot is that we need a “safe place" to put all our Bitcoin. Or that it would be innovative to create a bank on Ethereum or some other blockchain.

If you can already send a Bitcoin directly to anyone you want without permission, and you are the only one who has access to your Bitcoin – you already ARE a bank.

The idea of a cryptocurrency bank is an example of Skeuomorphic design (keeping the familiar past in your current design). The steering wheel was invented 3 decades after the introduction of the automobile. Before the steering wheel, they used 2 leather straps that they would pull left or right to steer the car. So because of that attachment to the past, they steered this new invention – the automobile - with horse reins for 30 years!

And just like the early car designers were failing to see the new dynamic of their technology and were just replicating the past, so are people who are selling the idea of cryptocurrency banks. In all of the history of finance and regulation, one truth tends to arise: When someone holds other people’s money, chances are they will run away with - or mishandle that money at some point. It happens with banks, hedge funds, brokerages...(ever heard of Bernie Madoff?). The entire system of regulation was invented to stop that from happening, and yet it still happens all the time.

With Bitcoin, you have the introduction of a currency that finally isn't centralized and belongs only to you, and the first thing people say is "We should build a bank and enact regulations for cryptocurrencies". This is not the answer. The answer is to stop trying to centralize decentralized currency, and stop trying to replicate the past into the future of money.