US Bitcoin Startups are having a tough time even though the worldwide interest in bitcoin is rising, venture companies in its largest market are facing hurdles in innovation. One such startup is QuickCoin, a San-Francisco based, self financed bitcoin startup, whose much hyped launch in May 2014 caught attention of all due to its integration with social media site like Facebook and integration with the simple bitcoin wallet-technology. The successful launch has helped them capitalize more and on August 11th 2014, it had the first seed finance connected to its official bank account at “Wells Fargo”. But the celebration was short-lived.
Its CEO, Nathan Lands, announced in an interview that at the start everything was fine, but he started noticing problems when some bills began to bounce as the debit cards were declined. He even mentioned that after few weeks of uncertainty, Quick Coin’s bank a/c was closed without any official notice. As a result of which they had to venture out for other alternate options, which also include offshore banking options too.
Lands feel that, the failure for his venture wasn’t unique, since flaws in the banking system restricts to allow and accommodate bitcoin and startups caused this to happen. So, some interesting facts came to light, in search for answers to the banking issues.
Behind the Scenes
QuickCoin CEO, Lands has said that expats of this industry agreed in anonymity that startups in the US face severe restriction when it comes to banking tie-ups and that limited solutions were available to resolve it.
Prominent bitcoin investors feel that startups should burn through few smaller banks before they find a stable tie-up. He also suggested that they should not reveal their business unless found out. He was willing to assist startups but not for free.
Bitcoin industry-wide issue
Everyone agreed to the existence of this issue when talked and discussed with investors and businesses owners. It was further agreed on wider scale that except for few banks the rest of them aren’t keen to work with bitcoin companies and only a small segment of big name venture companies are keen to strike partnerships.
Some feel that banks are biased when it comes to bitcoin companies. Some banks have a policy to suspend operations related to bitcoin, since they are in the learning process about bitcoin.
While prominent bitcoin investors say that they understand their market value however, the current situation poses threat to their firms. Many say they aren’t completely involved yet they are aware of the increasing popularity and its potential, the rewards and risks involved.
Only few of them are willing to fund startup bitcoin companies and it‘s been said that if this continues like this, then survival of the startups is difficult in the US.
Problems beyond bitcoin
Members belonging to the bitcoin community considered a realistic view about the situation, stating that the dissatisfaction shown by startups is understandable and necessary, part of the community’s growth.
Experts stated that there is a kind of division in the community where a segment of startups with strong investors are able to secure banking partnerships.
They feel that companies with less risky business models including product and services that don’t handle customer money were favored in the US.
Banks tied down by regulations.
Some experts said that the regulatory factors of the government are the reason why banking sector is reluctant to assist the startups of bitcoin. They aren’t willing to tie-up with venture companies because of the extensive guidance to be followed and the risks it would incur.
Better opportunities banking abroad
Although the recent banking crunch has been in news, yet it has been believed that bitcoin startups have better prospect abroad, especially in the European countries.
However, some of the startups worry about their long term ability to do business since they are involved in a single tie-up thus the uncertainty of continuing in the business seems bleak if they lose that single tie-up too.
They also stated that the tie-up these venture companies might have abroad too might be temporary too. The reason that was also cited for the recent situation in the US was that the banks related to these new businesses weren’t aware of their involvement in bitcoin or don’t even know what bitcoin was.
Despite the challenges, faced by the US startups, experts agree that bitcoin banking situation in the US is a short term problem and they expect to see a future wherein banks will compete to be bitcoin friendly business. It is uncertain about when this interest will ever turn into action and how many of the entrepreneurs will really be deterred along the way. The problem is bitcoin isn’t really compatible with startups. Startups require permission to operate and must follow certain regulations. This is why beyond exchanging bitcoin to fiat, no startups have been successful.