If a Volksbank sets up a Bitcoin machine, it’s a small revolution. In the circle of Bitcoin and blockchain fans, this is considered an achievement. Bitcoins are increasingly arriving in society – even though there is still something mysterious and evil about the cryptocurrency.
So far, Volksbank-Raiffeisenbank Bayern-Mitte is one of the few financial institutions in Germany that dares to address the issue. For two years, CEO Andreas Streb has worked intensively on Bitcoin and found out: “We can support our customers on the subject and also protect them from questionable providers.”
The cyber currency, which runs using blockchain technology, is often associated with criminal providers. Again and again there are reports of hacked exchanges or fraudulent coins.
Housing banks have a trust bonus
But which providers are reputable and which are not? According to a survey by Ipsos published in March, 45 percent of respondents would be interested in cryptocurrencies if their housing bank included them in their portfolio. Young people in particular and especially men were therefore open to such an offer. Ipsos financial expert Robert Kraus believes that the house banks’ confidence bonus pays off: “It could even break the ice for customers to deal with more risky investment opportunities, which are currently trendy.”
Volksbank Bayern-Mitte pushes forward in this hole. To meet the growing customer interest, the bank is offering an hour-long bitcoin information session for 99 euros. “We have trained specialists leading these discussions,” says Streb. In the end, there is no need to sign a contract.
For many lay people, such an information meeting may be necessary. Because with the offer from Volksbank Bayern-Mitte, the customer must take care of the storage of bitcoins, which is a complex matter and also requires some technical understanding. You need to know how to store the coins on a kind of USB stick and store them safely. The necessary technical equipment can be purchased in Volksbank’s online shop. Volksbank has made its own YouTube videos and translated descriptions from English to German to help customers with setup. The paid credit can be credited to various tools: The card (“VR-BitcoinGoCard”) costs 39 euros and is intended for small amounts because backup of data is not possible here. “Bitbox” for 119 euros or “Ledger Nano S” for 79 euros, which allows a backup option, provides more security.
The backup, ie the external security of the key, must be performed by the customer himself, and he must remember a password of 24 words. “It’s best to engrave these 24 words on a steel plate and put it in the safe,” Streb explains. According to Streb, the independent storage is complex, but significantly more secure than at a stock exchange. However, if the card or key is lost, investors can no longer access bitcoins. If the password is in the safe, it may not be at hand when needed. A 2.5 percent commission is charged for each transaction.
Other offers may be easier to use, but Volksbank has managed to do more than just a PR coup. “We are not suitable for traders,” Streb emphasizes. The investment is intended as a grant for long-term wealth building. And older women who already use the service would also get into the bank.
Since July, Volksbank customers have also been able to exchange euros for Bitcoin directly at the ATM at Ingolstadt’s head office. There is a commission fee of 8.1%. The machine comes from the Austrian provider Kurant, which buys the cryptocurrency through Sutor Bank. To use the machine, users must first register and verify themselves with Kurant’s Spot 9 service.
Save bitcoins yourself or leave it to experts? This is a matter of principle
Other Volksbanks are already working with Bison, a subsidiary of the Stuttgart Stock Exchange. Bison even offers an app that users can download to their computers or smartphones. “The registration process takes ten to 15 minutes,” says Bison CEO Ulli Spankowski. So far, 650,000 users have registered. The minimum deposit amount in a Euro account is 20 Euros and you can start with a minimum order size of 0.1 Euros. When buying or selling, a fee of 0.75 percent is charged. For example, if you buy Bitcoin for 1000 euros on bisonapp.com, you pay around 7.50 euros for it.
The cryptocurrencies are kept in trust offline. In addition, there is an insurance policy to limit possible damage to the depositary company in case of emergency. With Bison, investors have the advantage that they can simply re-apply for their password if they have forgotten it. The customer does not have to worry about storage. However, if your own computer or mobile phone is hacked and data for the account is spied on, the systems are not protected against theft.
But what is better for the customers? Do you store the coins yourself, or do you prefer to leave this task to experts? In fact, this is an important decision that investors should make before investing. It is still unclear what will prevail in the market. In the background, hardware wallet providers are struggling with crypto repositories.
The motto “Not your keys, not your coins” circulates in the industry. This alludes to the fact that investors who keep their cryptocurrencies do not actually own the coins. Only those who keep the private keys in a hardware wallet (a digital wallet), for example, are also the actual owner of the coins. After all, Bitcoin was also invented as an alternative to the classic financial system.
So if you are rather suspicious of financial institutions and banks, you will be more likely to download bitcoins to your own wallet, others who shy away from the effort or are not technically familiar with it would rather leave them with the crypto depositor. “An investor who wants to take care of his old age should not care what Bitcoin was originally invented for and whether any philosophical principles have been violated,” says Philipp Sandner of the Frankfurt School Blockchain Center. Researcher Sandner currently still advises private investors not to keep the Bitcoin wallet themselves. Because at the moment this is still too complex and risky.
Certificates and ETPs provide a relatively easy start
There are now a number of bitcoin investments. In addition to deposits, ie a direct investment, securities such as ETPs (Exchange Traded Products) or certificates that have Bitcoin as an underlying are also interesting for private investors. There are similar certificates from e.g. Vontobel or Leonteq. However, the prices are very different. At Vontobel, investors can get started with products on one hundredth of Bitcoin. However, the fee is 3.75 percent per year. The Swiss company Leonteq is significantly cheaper here with 1.5 per cent.
According to Morningstar, 66 crypto-related ETPs have already been launched in Europe. The largest providers include 21 Equities, Vaneck, XBT Provider, Coin Shares, ETC Group and Wisdom Tree. “The Swiss company 21 Shares already has a few billion of cryptocurrencies in custody,” says Sandner.
Bitcoin is very volatile. A total loss can also threaten
The advantage of listed ETPs or certificates is that they are easy to use. Because here the storage risk is not passed on to the customer. “You save yourself work because the issuer itself holds the keys,” says Felix Fernandez, CEO of Swiss investment adviser 21e6 Capital AG. The only thing the customer needs is a securities account – without technical frills.
Then you can simply book the Bitcoin ETP or the Bitcoin certificate in the depot as a share or a gold certificate. However, investors should read the product information sheet carefully and be aware of the costs. ETPs cost between 0.75 and 2.5 percent. Fernandez advises a cheap product with a maximum fee of 1.5 percent. There are also transaction costs from the bank or broker.
Buying from a financial service provider is often cheaper than from a bank. “There are currently many ETPs on the market from financial service providers that are not subject to the same regulation as banking groups. Therefore, these ETPs are usually much cheaper,” explains Heiko Geiger, certificate expert at Swiss Bank Vontobel.
Investors should not buy Bitcoins or similar securities on stock exchanges outside the German legal regime and make sure that the providers have a Bafin custodian license. In addition, you should only invest as much in Bitcoins as you can lose painlessly. Because the digital currency is very volatile. There is no deposit protection. In the worst case, a total loss can threaten. Bitcoin securities are legally bearer bonds. If the issuer, the issuing bank or the issuing financial service provider goes bankrupt, the investor suffers a risk of loss.
According to the Coinmarket Cap, there are currently more than ten thousand cryptocurrencies. However, one must stay away from these coins, says Sandner. The scientist advises only to deal with Bitcoin and Ethereum. Ethereum is the second largest cryptocurrency after Bitcoin.
So far, Volksbank Bayern-Mitte has only been convinced of one coin. “We are very critical of the alternative cryptocurrency sector and offer only the most secure cryptocurrency, Bitcoin.”