Thoughts on a plane

• While my plane was making our landing approach I reflected on the current banking crisis, and the alternative banking business model proposed by Custodia Bank in Wyoming, a state in the US.
• Custodial banks hold your money for, as in take custody of it, and hold it there, charging you a fee for this service.
• More importantly then what they do is what they don’t do: make loans with your money, or invest it.
• Custodial banks, unlike regular banks, do not consider your money deposited in the bank a unsecured loan or investment.
• • • at this point your probably thinking..what?
• Your money is your property, just like your car, but when you drop your car off at the car park they are not allowed to rent your car out while it’s there because it’s your property. But a bank is different, you are agreeing to rent it out when you sign all the paperwork. I bet this is news to some of you.
• So some people don’t like the fact that most banks give you no choice, if you want an account, you agree to the terms.
• The bank then loans your money out at 1-20% interest and pays you practically nothing, other than you have the privilege of writing checks to pay your bills and store your money there.

• Crazy..

Custody Banks

• But there is an alternative type of bank, which takes custody of your money, but agrees to hold it for you and not to loan it out and not to invest it.
• These banks don’t make money on loans or investments, they make money on fees.
• These banks don’t need loan departments or investment departments, so they have less overhead.
• These banks don’t fear bank runs, and their customers don’t fear bank failures because when they opened the accounts, the bank agreed to keep their funds separate from the banks.
• The banks agreed these deposits were not bank assets and therefore not under the jurisdiction of bankruptcy courts.
• This is a less profitable business model, but an extremely safe and secure model for customers.
• I think if you combine this with cryptocurrency custody, you have a winning combination.
• ‘What do you think?

@shortsegments

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