RE: Honesty Bank: Steem's New Banking Solution for Viral Mainstream Adoption (Business Plan)
I am interested, but I have some questions:
When you speak about incorporation, what country do you plan to incorporate in?
In that same vein, I understand you are an anarchist, but I wanted to find out if you have looked into the tax and regulatory structure of running a bank in the place you plan t incorporate and are those costs assumed in your budget? For instance in the US, just being a money transmitter (not a bank) comes with a host of regulations (Know Your Client, Suspicious Activities Reporting, etc) and a substantial financial cost to operate in 50 states (about $25 million in regulatory and registration fees). The designation of a bank opens the institution up to BASEL III regulations (60,000 pages last I heard).
How is this model different from the failed Bitcoin bank Neo & Bee which was formed (and failed) in Cyprus?
I see you discuss checking accounts and interest payments in your proposal. I see the checking account valuation is in dollars. First, if this bank will not engage in fractional reserve lending, how do you propose to pay the interest rates mentioned for the various products (bank accounts at 4% - 6%, CDs at 8% - 12%) without going bankrupt?
How will honesty bank generate its fees?
I have a host of other questions as well. I think the idea is great and could follow a direction similar to microlenders like Kiva and possibly grow into something like Prosper or Lending Club in the US. In the Bitcoin space two microlenders you may want to look at to compare business models are BTC Jam and BitLendingClub.
One of the things which kills many crypto "banks" is failing to plan for serious downside volatility in the crypto they choose as their default currency. I think if you can solve this problem, then the rest should be fairly simple to solve in comparison. I am very interested to both see your response and investing if the opportunity is right.
What is the plan for getting Steem into the bank in the first place? Is there a credit card component to this or do you plan on strictly accepting Steem generated on the network?
@rgeddes Honesty Bank will solely accept USD into a designated checking account, where we will convert USD into Steem Dollars & Steem.
@lpfaust Your questions have sparked an addendum for Honesty Bank's beta phase. I'd ideally like to have a US based bank to save the American people when the economy crashes & hundreds need crypto currency in a rush to save them from a hyperinflating currency. However, the Investor's Meeting may sway the final decision.
Profits can be made on the Steem Dollar's financial instrumentation. If you do not understand how a profit can be made, I'd encourage you to do more research before investing.
@honesty I'm glad to see an addendum is being considered. Personally, I don't believe the US regulatory environment would make the United States the best choice for a crypto bank. That being said FATCA regulations would still overshadow a foreign bank with customers in the US in most cases.
Regarding the comment about not understanding how a profit can be made, I would suggest to you that the plan you currently have outlined weighs heavily upon SBDs maintaining an annual return of 10% APR. I do not believe it adequately addresses potential negative swings of STEEM or STBs, nor how it will impact real returns of loans whose real value could be impacted by cryptocurrency swings. It does not address fees which will arise for foreign currency translations into other currencies, nor does it address costs of insuring depositor funds (unless there will be no insurance). I don't see an adequate projection of what sort of loan loss provisions need to be in place, regulatory fees, nor a host of other normal operating expenses a bank would incur (even virtual banks) which will be deducted from the bank's gross profits before any profit will be recognized.
I would suggest you may want to look into Neo & Bee and understand why that Bitcoin bank failed in Cyprus despite having the perfect environment to succeed once the EU refused to bail them out.
I wish you and your investors luck on your future endeavors.
Bravo my friend. The regulations & fees are the most toxic element of this business proposition. I will look into all the valuable information you've provided. In the meantime, our MVP will sidestep banking and enter investing for now.
Thank you.
Curious if Honesty is still viable?