Bitcoin Banks: Why We Need to Build Them Ourselves

Bitcoin banks are no longer a distant possibility—they’re already here, and more are on the way. Traditional banks are beginning to offer Bitcoin services, while new institutions are being founded specifically around Bitcoin. This trend is unavoidable. Bitcoin’s scalability limitations, coupled with the demand for services like lending and borrowing, make it clear that intermediaries will play a role in the ecosystem. Debt, for instance, is a cornerstone of modern finance that inherently requires trust and third-party involvement.

This is the inescapable reality we face.

Even if we could magically implement every proposed opcode and covenant upgrade overnight, building self-custodial systems capable of competing with traditional banks and credit unions would still take years. Scaling Bitcoin to meet the needs of millions—or billions—of users is not a problem that can be solved trivially. So, what can we do? The answer lies in adopting a localist approach to Bitcoin adoption, focusing on making Bitcoin interactions seamless and accessible. This requires a dual strategy: advancing technical development and, yes, engaging in lobbying efforts.

The Technical Challenge: Building User-Friendly Tools

Software like LNDHub and LNBits already allows individuals to offer custodial Lightning accounts, but we need far more robust and user-friendly solutions. The current tools often require technical expertise—tinkering with command lines, manually installing software, or debugging dependency issues. This is a barrier to mainstream adoption.

What we need is software that “just works.” Imagine a system where users can click a button, sync to the network, and be ready to go. It should be simple enough for power users with limited technical skills to operate safely, without risking others’ funds. Beyond basic Lightning accounts, these tools should support features like ecash for privacy, enabling small groups to transact without exposing their spending habits. They should also integrate on-chain self-custody options, such as those offered by Unchained or Nunchuk, allowing users to hold recovery keys without taking on the burden of managing others’ life savings.

The goal is to scale these interactions beyond a niche group of tech-savvy enthusiasts and make Bitcoin accessible to everyone.

The Regulatory Challenge: Carving Out Space for Local Solutions

Regulatory clarity is equally critical. Running small-scale Bitcoin services for friends and family—handling trivial amounts of money without charging fees—should not be subject to the same regulations as billion-dollar banks. The idea that managing a few thousand dollars requires compliance with the same rules as major financial institutions is absurd.

We need a clear regulatory carve-out that acknowledges the difference between informal, non-commercial Bitcoin services and formal banking activities. Helping friends and family interact with Bitcoin safely and freely should not classify someone as a bank. This distinction is essential to fostering grassroots adoption and innovation.

A Path Forward: Decentralized, Community-Driven Solutions

Given Bitcoin’s current constraints and the accelerating pace of adoption, this two-pronged approach—technical innovation and regulatory advocacy—offers a viable path forward. By building user-friendly tools and advocating for sensible regulations, we can create a system that empowers individuals and communities rather than relying on legacy financial institutions.

The choice is clear: instead of depending on traditional banks to address Bitcoin’s scaling limitations, we can depend on each other. This is how we build a future where Bitcoin remains decentralized, resilient, and free from the control of entrenched financial powers.

This article is a Take. The opinions expressed are solely those of the author and do not necessarily reflect the views of BTC Inc or Bitcoin Magazine.