AUD to BTC exchange - legalities and methods?

[CCCMikey]

G'day all

Well, I'm still in talks for setting up a BTC to AUD exchange - possibly similar to the britcoin.co.uk one - and probably call it http://CoinGaroo.net.au

I invite your advice and commentary.

There's a few ways that it could work - each with their own pros an cons, and possible legal implications.

Method 1 - Customers trade with EFT Deposit

In this method - a customer will deposit either BitCoins or AUD with CoinGaroo. (Via EFT to a bank account or transfer of BTC.) A customer selling BTC receives the AUD, and vice versa. (I think this is what BritCoin does, but with 10 hours time difference I can't get clarification right now.)

Pros: No serious risk of fraud.
Cons: CoinGaroo holds customer funds in a bank account - possible legal issue [1]
.. therefore, might have to establish a Trust Fund - see legal issue [1]
Cons: 1 in 20 (estimate) will forget to include Payee Reference.

Method 2 - Customer trade with Direct Debit

In this method, a customer has to accept a direct debit authority in order to have the AUD withdrawn from their account and deposited into the BTC seller's account when the BTC are transferred from CoinGaroo BTC pouch.

Pros: CoinGaroo does not hold any customer's AUD at any time.
Cons: Wouldn't you freak out if I asked you for a DD agreement?
Cons: Have to confirm DD success before transferring BTC.
Cons: Have to write up detailed policies I expect.
Possibility: Investigate BPAY system

Method 3 - Simplified trade - CoinGaroo to buy and sell BTC

In this method, CoinGaroo would receive payments via EFT and send BTC directly to the sender.

Pros: Almost trivial to set up.
Cons: CoinGaroo only has 120 BTC. I'd have to find a way to buy them first in order to sell them.
Cons: I don't currently know how to set this up securely - probably a zoho DB would suffice.
Cons: Might affect reportable turnover - not sure.

Global

The entire system is of course at risk as to what future rulings happen re BTC.
Any computerised system would be semi-manual at this stage adding delays.
Likely need to purchase an SSL cert.
Likely need to develop robust terms and conditions document.
Possible need to be able to cease trading if adverse event occurs - fraud, BTC system collapse, etc.
Possible risk of associating with Bitcoin brand due to anonymity capabilities
Possible risk of zero-day bug in automated system or hack of server.
Possible search warrant if illegal use of AUD or BTC traced to CoinGaroo supply.

Since you can't really buy much with BTC in Australia yet, I'd probably initially market it as an easy way to get money overseas with lower fees than those imposed using other methods.


Taxation and Legal Issues

[1] A local financial advisor states that if I hold money for other people it needs to be in a trust account or I could be thrown in jail. Another disagrees saying it's like selling gift cards. I don't know the answer yet...

[2] Good news on the taxation front is that currency trades do not attract GST.

[3] Good news on the taxation front is apparently these trades to not count towards my turnover (at least not in method 2, not sure 1 and 3) and I only need to consider any profit as counting towards my turnover. (This is an issue as Cool Country Consulting - parent of CoinGaroo - currently runs on turnover around 65kAUDpa, thus not needing to account for GST and having a competitive advantage in residential IT support pricing.)

[4] No response yet from the ATO re legality of trading in virtual commodities.

[1714020510]

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[deadlizard]

commentary - this is relevant to my interests

advice - get an ssl cert even if it's not a legal requirement.

[genjix]

Just want to chime in and say that me and CCCMikey are discussing opening an AU exchange where I'll maintain/run/design his site using the software at Britcoin. I originally wrote this software so that there could be many Bitcoin exchanges, and we can develop a solid piece of exchange site code for Bitcoin. Hence why I'm running Britcoin for free, at a loss.

We are doing method 1. There's a company so far that has given me various resources, and they plan to take over in a month after gaining the required licenses and legitimisation. Then they'll be able to integrate other payment services, the site will start charging and I'll relinquish control. One of our stipulations was that the site's sourcecode is released for free (and so I'm not receiving any payment from them).

Anyway, converging all of our resources to build a secure, customisable, easy to setup exchange site should be a priority. I want to get it so any Joe Sixpack can open a new exchange site in an afternoon eventually and allow people to trade Bitcoins. This is our strongest weapon- diversification.

[Anonymous]

I look forward to this. 

[eMansipater]

Excellent work CCCMikey and genjix!  Looking forward to it.

[zer0]

I'm doing the same thing, except I'm exchanging everything. Would be good to have an Aus exchanger

Get a technocash.com merchant account then your Australian and NZ customers can go to the post office and pay cash which is in your account by 8pm the same day. Transfer it seamlessly to your bitcoin bank (this is much safer than taking direct netbanking payments, though with technocash you can take them anyways if you wanted)

Then when somebody withdraws you can do the following automatically:

-give them any other digital currency (LR, WMZ ect) as almost all exchangers now have Technocash
-fund their bank accounts with every electronic method in Aus nearly instantly
-directly load any Australian Visa/MC card
-convert to USD easily and automatically send an Anelik wire Xfer almost anywhere in the world for 3.5% fee up to $3k

That way everybody pays in using cash, there's no risks of phished/hacked bank accounts doing fraudulent transactions, and keeps it somewhat anonymous although I'm not sure if you have to show ID at the Aus post office when depositing money

Since technocash integrates so easily and cheap with anything Australian or Kiwi I would use your exchange for the bulk of bitcoin transfers since I also use it. Great success

**note if you run into problems with Australia do this all in NZ where they seem to have no financial laws whatsoever. In fact if you have $15k to invest, you can start your own NZ bank! For 60k you can start your own offshore financial trading brokerage. No lie it's that easy. I would assume any regular business bank account in NZ wouldn't care about holding money in trusts, ect. If they do, register your own offshore corporation in the Seychelles then you have no tax or other worries. A shelf corporation goes for $700-1k right now

***also note if you can't afford a technocash merchant account I would buy you a globalFX trading account, then could use my merchant account to take funds and xfer to you instantly

[CCCMikey]

G'day again

While I'm waiting for legalities to become clearer, I'm wondering if there's any point in me setting up the website using Option 3 from the OP - that is rather than having people trade amongst themselves, I'd be the one buying and selling BitCoins using the MtGox exchange rate, thereby not holding other people's money in trust.

The most likely issue would be finding enough BitCoins as I suspect people mostly want to buy them in Australia - but if I bulk order and shop around it might be possible - don't know.

[Anonymous]

G'day again

While I'm waiting for legalities to become clearer, I'm wondering if there's any point in me setting up the website using Option 3 from the OP - that is rather than having people trade amongst themselves, I'd be the one buying and selling BitCoins using the MtGox exchange rate, thereby not holding other people's money in trust.

The most likely issue would be finding enough BitCoins as I suspect people mostly want to buy them in Australia - but if I bulk order and shop around it might be possible - don't know.

Sourcing them is the only thing holding me back from selling them in Australia. Asking people to pay 7% because you cant get them at retail prices is out of the question.

Minimum you would need is 10 - 20 000 to be a market maker .

[Anonymous]

I'm doing the same thing, except I'm exchanging everything. Would be good to have an Aus exchanger

Get a technocash.com merchant account then your Australian and NZ customers can go to the post office and pay cash which is in your account by 8pm the same day. Transfer it seamlessly to your bitcoin bank (this is much safer than taking direct netbanking payments, though with technocash you can take them anyways if you wanted)

Then when somebody withdraws you can do the following automatically:

-give them any other digital currency (LR, WMZ ect) as almost all exchangers now have Technocash
-fund their bank accounts with every electronic method in Aus nearly instantly
-directly load any Australian Visa/MC card
-convert to USD easily and automatically send an Anelik wire Xfer almost anywhere in the world for 3.5% fee up to $3k

That way everybody pays in using cash, there's no risks of phished/hacked bank accounts doing fraudulent transactions, and keeps it somewhat anonymous although I'm not sure if you have to show ID at the Aus post office when depositing money

Since technocash integrates so easily and cheap with anything Australian or Kiwi I would use your exchange for the bulk of bitcoin transfers since I also use it. Great success

**note if you run into problems with Australia do this all in NZ where they seem to have no financial laws whatsoever. In fact if you have $15k to invest, you can start your own NZ bank! For 60k you can start your own offshore financial trading brokerage. No lie it's that easy. I would assume any regular business bank account in NZ wouldn't care about holding money in trusts, ect. If they do, register your own offshore corporation in the Seychelles then you have no tax or other worries. A shelf corporation goes for $700-1k right now

***also note if you can't afford a technocash merchant account I would buy you a globalFX trading account, then could use my merchant account to take funds and xfer to you instantly

I have a retail technocash account myself. I think all bitcoiners should get one then we should setup a technocash exchange and we would have a trading platform that would put anything else to shame.

[genjix]

I did not put any BTC into Britcoin at all and people are trading sucessfully.

[BitPiggy]

Any update on CoinGaroo?  The website says its on hold indefinitely.

[MrAnderson]

I'm looking for the opposite - BTC to AUD

Any advice from Australian (or international) members is helpful!

Thanks to Bitcoin I'm taking tomorrow off. 

[Karmicads]

Yep! I deffinately think this is a badly needed service here in the land downunder. I am just in the processes of trying to cash out 200 BTC and so far it goes something like this: Sell BTC at MtGox; it gets converted to $USD. Withdraw $1000 from MtGox into a Liberty Reserve account and wait 24 hours until $987.11 shows up, then go back to MtGox to withdraw another $1000. [that's the story so far]. Now I have a ballance in Liberty Reserve but I cant cash that for $AUD there either. The easiest option seemed to be the ExchangeZone, where I can sell the LR credit for payment into a paypal account. From there I can convert to $AUD and withdraw back into my bank account. 

Good Grief What a bunch of screwing around that is. I don't know if I am doing it the easiest way but this deffinately takes the shine off the instant, transperant, free transactions of bitcoin. Including MtGox and my bank there are FIVE - count them - FIVE intermediaries between my bitcoins and local currency cash. I have only gone through two of them so far and I am already down $12.89 Everybody is going to want a little piece of the pie for nothing more than handling my funds and passing them on to somebody else.

Is there some way to set up this exchange so that you can simply support $AUD by transferring ballance to and from MtGox; like a sort of $AUD <---> $USD gateway, so that ballance at MtGox can be traded in and out using regular currency while each exchange handles their own $BTC <---> local currency trading? There must be some reliable and secure tools out there already for trading between traditional currencies. Once you can go $USD <---> $AUD instantly and securely, then you can trade bitcoin for either at each end.

It seems that this is where the bitcoin exchanges fall down. They need to be supporting each other in bridging the gap between local traditional currencies and not just between the local currency and bitcoin. Then you will have a very usefull tool to bypass all of these ceteralised online pseudo-currencies and trading systems, that compete with each other, in trying to make themselves the universal midleman.

The exchanges also need direct payment methods to local bank accounts. I mean how hard can it be? the corner shop has a damn eftpos machine. Any business can make direct deposits. Where's the hard part here? I haven't looked into it properly myself, but I don't see why bitcoin exchanges cant just make seemless international bitcoin <---> bank transactions happen.

[w0mbat]

well, there are currently 2 sites listet @ btcxc.info that, according to their owners, trade BTC to AUD.

BITCOIN MARKET and BitPiggy.

[MrAnderson]

well, there are currently 2 sites listet @ btcxc.info that, according to their owners, trade BTC to AUD.

BITCOIN MARKET and BitPiggy.

BTCXC is useless for AUD, Bitpiggy is looking promising.

[w0mbat]

BTCXC isnt a exchange but an info site. so no, its not useless. unless u ment BITCOIN MARKET.

[timmmay]

So what's stopping someone setting up an account with, say xe.com and use that for exchanging the currency in EUR or GBP or USD?

[Karmicads]

well, there are currently 2 sites listet @ btcxc.info that, according to their owners, trade BTC to AUD.

BITCOIN MARKET and BitPiggy.

Thanks w0mbat.  I looked at BM but they are presently only open to new members by invitation (due to some fraudulent transactions). I hadn't even heard of btcxc.info yet, nor did I know about BitPiggy. What a clue I've got huh? 

Next time I might do it the easy way. 

[MrAnderson]

BTCXC isnt a exchange but an info site. so no, its not useless. unless u ment BITCOIN MARKET.

Quite right.. 

[Sultan]

The reason BritCoin took off was because it was a place where buyers and sellers could meet and thus determine the price amongst themselves collectively.

If an exchange is to open in Australia, I reckon the same principle would make it flourish, rather than an exchange that buys and sells, because that is limiting the amount of buyers and sellers. Sure there is additional responsibilities attached to looking after the BTC and Australian Dollars, but as people trade more, the risk is lowered and you prove yourself to be trustworthy.

I woudl very much liek to see genjix and CCCMikey collaborate to produce a marketplace site, definately!