Not possible. Regulators would need to verify the exact value of BTC held as capital. Why a bank would hold capital in the form of BTC would basically be an admission that the fiat they would regularly deal in is suspect. This is among many issues.

If they believe that the currency they deal is risky enough to not hold the fiat or deal in it, then why bother being a bank in that currency? The only real way for BTC to exist in fractional reserve banking is for it to be held as capital, or as a speculative asset. There are clear problems with both.

Given that banking is a risky business why add to the risk by holding a clearly risky currency which can't really be loaned, or transacted in without the assurances of the law itself? Not to many banks holding currency itself anyway, as it needs to earn carry. Not to mention that there are no current capital rules regarding BTC, so banks would have to hold the same amount of capital as investing in stocks.
Until BTC is integrated into the financial system there are likely to never be capital rules drafted, thus to banks it will always be a speculative asset. While we are on the topic of rules, if you were playing bank regulator and a bank was making a loan in BTC, in the event of default what legal recourse would the bank, or anyone else have to remedy the loss itself? If I could simply walk from a BTC loan the interest rate would have to be astronomically high. In that case why not just take a loan in fiat? Esp with the rise of internet banking.


As a speculative asset BTC would rank as less than penny stocks IMO. Your best case scenario is that you get in early. However any security issues, data problems and security could result in complete loss of capital. Most banks are to risk averse to be making this kind of bet. As if it can't be exchanged for other assets that banks can hold or exchange in to return seeking assets or currency for investments then its worthless to banks.

Not to mention the type of size that would be needed for transactions would mean >10% (very rough estimate) of people would need to hold assets in BTC. Something you just wont get people to do until computer literacy is ubiquitous.



Long story short BTC and online currency need some legitimacy from the system itself to integrate into the banking system, unfortunately this defeats some of the purpose of being a non regulatable entity under no government control.