Why it matters
Most bitcoin platforms are built for traders, optimizing for activity and revenue from transactions. Bitcoin banks serve a different client: the long-term holder who wants secure custody, reliable withdrawals, and quiet operations. The distinction matters because incentives shape behavior.
How it works
A bitcoin bank maintains full reserves, meaning every unit of client bitcoin is actually held and withdrawable on demand. Services typically include custody, execution (buying and selling), succession planning, and dedicated relationship support. The business model relies on custody fees and execution spreads rather than lending or yield products.
Example
A holder transfers bitcoin to a bitcoin bank and pays an annual custody fee. They can buy more bitcoin through the bank's execution service, withdraw on-chain at any time, and name beneficiaries for inheritance. The bank never lends their bitcoin or requires it for collateral.
Related terms
- Full-reserve custody
- Bitcoin custody provider
- Third-party custody
- Fractional reserves
- Proof of reserves
- Segregated custody
- Counterparty risk
- Exitability
