Bitcoin Forum

Give all the FINCEN Regulation and lack of clarity - where can a US entrepreneur go to start an exchange?

The U.S.

ie: Make an exchange that accepts U.S. domestic wires and bank deposits

switzerland?

there is no lack of clarity, as a matter of fact it is precisely clear, although sets high bar to enter:

"The guidance requires certain intermediaries that handle virtual currency to register with Fincen as money services businesses, which entails recordkeeping and reporting responsibilities. And it says some of those businesses may additionally be money transmitters, which would mean fingerprinting of directors and officers and compliance with a patchwork of state licensing requirements. "

basically to run a legit US bitcoin exchange one would need to be setup similarly to Paypal

Panama? Uruguay?

Yeah right. Where the big banker's puppets government can seize your bank account and close down your business at whim.

No, the U.S. sounds like a very bad option. You'd need a country where the government lets you alone doing your business as long as you don't mess with them. The Seychelles perhaps?

Yes it seems that CampBx is the only US exchange although I suppose Coinbase is sort of one.  But being able to get your money in and out easily is great.  CampBix makes it very easy with Dwolla which is why I like them, even with low trading volume.

Tor.

+1

Basing yourself in the U.S. and registering with Fincen just renders you as less stable in our eyes, somewhere in south america would be my choice, I wouldn't however purchase coins from a south american based company unless they had already established a reputation.

Any US based bitcoin business should be viewed with the utmost skepticism. The regulatory environment there is very aggressive and anti-thetical to free enterprise in the financial space.

I wouldn't put any bitcoins into a US-based exchange, not because I do not trust the operators (most who are stand-up guys) but because the govt. there is very unpredictable and capricious. The rules are left purposely vague with all the power resting with the regulators and little to no chance for businesses to recompense for losses in the event of an illegal move by the authorities. Basically, there is no rule of law, just the appearance of one that leaves all the power with the govt. and the encumbent big players (most of whom are technically insolvent and harbouring known criminals). Your bitcoins will more than likely get tied up in endless legal battles with govt attornies who just escalate the legal action using the tax-payer funds after every case they lose until the opposition is financially exhausted.

Singapore? Iceland?

if you want to set up an exchange have these three things

1. get the licences / regulation requirements fr dealing with large amounts of fiat
2 have alot of your own investment in the project EG paying for licences yourself
3. set up the code to be secure and reliable to do many many trades per millisecond.

WHY you may ask?
1. it shows your within the law so fincen cant shut you down for breaking the law
EG don't be dumb working from china accepting dollar for instance, thinking they are immune due to foreign location
EG don't avoid regulation thinking that its regulation that gets your bank closed (actual fact its lack of meeting regulation that gets bank accounts closed)

2. having a lot of money shows that (A)you are good at money management. (B) more positive signs that you probably have experience in Forex markets to know what your doing professionally

3. nice code that works well will get you great reputation as a stable service and many people will trade with you.

for all those guys with just 4BTC to their name thinking that they can be the next billionaires by starting up an exchange. forget about it, do something small scale like trading locally, using OTC.

we don't need run of the mill script kiddies opening 300 clones of MTGOX for just 1BTC worth of labour and domain registration, We need proper forex experienced coders with large investments to do the job right, and then set up multiple branches where each bitcoin/FIAT is based on average incomes of the locations not based purely off of a central exchange price.

india

Anywhere you can set up an exchange that can freely accept cash from other countries without difficulty and won't have your bank account suspended.

anywhere that has cheap international FIAT accepting licences. as it seems the only reason peoples accounts get suspended is that they try to be money transmitters but don't bother buying the licences.

What about Tradehill?

Singapore or HK

What about Japan? Fast network+lenient government regulation. HK also sounds good but shouldn't say it as if it's a country.

Japan.

Are there any countries besides the US, Canada and the UK that have attempted to regulate, or have mentioned, Bitcoin at all?

Anything in Europe? China? Japan?

Your best bet would be to convince these guys:

http://www.nasdaq.com/symbol/slv

to create a bitcoin ETF

http://en.wikipedia.org/wiki/Exchange-traded_fund

They are required to purchase the same number of ounces of silver for each share

So if that SLV is trading at 25 dollars,  Silver is roughly worth 25 dollars.

Now if that happened for Bitcoin,  everyone's 401k plan could buy into that,  and force that ETF to buy massive amounts of bitcoins to keep it funded.

That's how you go from $130 to $130,000

Starting an exchange now is like putting a gun to your head.   There are so many regulations designed to keep you out of that type of business.

Malta. For the win!  ;)

Russia, North Korea or Nigeria.

Start in your own country which for a United States entrepreneur means the United States. Pick a large state say for example California and register there, and federally. Then limit your market to that state. This keeps the initial compliance costs low to start. Then expand first to other states and the internationally as the business grows.

The is in fact the model that Virtex in using very successfully in Canada. They limit their market to Canadian Citizens living in Canada this keeps the cost of regulatory compliance under control.

If you want to trade USD in this exchange it doesn't matter where its physically located you will need to comply with all the same regulations you would have being located in the US.

What is needed is exchanges in all countries that arbitrages between them. If one exchange goes bust or something else happens, there are still a network of exchanges. You might use your local exchange only to put fiat in/out of the system if you don't trust them too much, and keep your BTC's in your wallet or at another exchange that you trust more.

This is not true. Ever heard of Eurodollars http://en.wikipedia.org/wiki/Eurodollar (http://en.wikipedia.org/wiki/Eurodollar) for example. What does apply is for an exchange doing business outside the US is, US citizens, which is why many financial institutions simply deal with this regulatory issue by refusing to do business with US citizens even if those individuals reside out side of the US.

You're right, I should have added that :)

Doesn't it take 2 years to become a resident in Costa Rica? If you don't have a US citizenship in the meanwhile....what exactly happens?

Also, would just being a resident there be enough to get you a Costa Rica passport? How would you ever leave?

BitBox.mx is another compliant exchange in the US, though they are just now working to get solvent.

The ETF idea is a non-starter... here's a long discussion.

"So hey. I structure ETFs for a very large company.

A couple of three things: 1) The biggest issue you're going to run into is related to the concept of exemptive relief- that is, ETC (formerly a company called Faithshares, kind of funny) does not have the requisite permission from the SEC to launch non-index based products. Don't worry about making a bitcoin index, the SEC will only allow securities-based indices. Bitcoins, like all currencies, are not actually securities. 2) The best route for you would be a commodity pool built through the 19b-4 process, whereby you partner with an exchange to request permission from the SEC. Best case scenario this will take at least six months to get through, but honestly, you would not get through. 3) Seed is the last thing you should worry about. Lead market makers/IBs will put this up, provided you have (very) strong relationships with them. 4) Ok, serious here. The biggest issue is the lack of arbitragibility (not a word, but bear with me) between the ETF and the underlying bitcoins. This market is pathetically small and insanely illiquid. It simply is not a mature enough space to package into a product."

http://www.reddit.com/r/Bitcoin/comments/19hxuv/bitcoin_etf/

There are 2 other approaches to this...

(1)  Start a hedge fund with accredited investors. One exits in Malta. Google it.

(2)  Reverse takeover a junior company on the TSX or London Junior or Ireland...
But the Exchange MUST be reputable...
Use all the invested capital to buy/trade BTC...
But you will have to pay Management + Admin costs in the $500K range...
So you would need $5-10 million for this.

Such as Costa Rica?

http://en.wikipedia.org/wiki/List_of_United_States_extradition_treaties (http://en.wikipedia.org/wiki/List_of_United_States_extradition_treaties)

The swiss do it the best ask Fedor lol

New Zealand!

Solid isolated economy, top ranked for business/entrepreneurness, current prime minister was a very successful currency trader before taking office (even donates his salary to charity). Kim.Com could even back it just to stir things up

In October 2012, the ECB defined Bitcoin as a virtual currency with a bidirectional flow. The ECB investigated Bitcoin in relation to risk for price and financial stability in the Euro zone. However, it underlines the reputation risk of Central Banks, if security incidents involve virtual currencies. For this reason, according to the ECB, transactions with virtual currencies should be under Central Bank responsibility. Despite the ECB definition, European legislation is far from been clear. Maybe Euro countries are waiting for Germany... ;)

Cyprus definitely!  You don't even need to worry about overflowing funds, they do a haircut for you when you reach 100k Euros :)

China

Launch a satellite which anyone can communicate with. Put an exchange server on it. Throw the shut down key away.

Canada have been making friendly noises recently.

Alternatively India, for the business opportunity, beyond black market trading, remittance is really the killer AP ATM.

Finland

I thought i already ended this thread.  ;D

This question was asked to a panel of lawyers at bitcoin2013. They said Malta is their best guess about the best jurisdiction to start an exchange. Followed, I believe, by Iceland. 
They also mentioned places seeking to be financial hubs, such as Hong Kong, Dubai, etc. 

+1

Maybe Iceland.

Well, there is an exchange in Slovenia and it is doing quite well. Personally I find Amsterdam and The Netherlands a very good starting point for Bitcoins related business. Malta is a beautiful island, but....I don't know....Cyprus docet :)

Pakistan - no FinCEN shit!

You would be incredibly easy to portray as someone who is purchasing heroin with BTC though.

Then we only need enough bitcoin to fend off this guy!
http://en.wikipedia.org/wiki/Boeing_YAL-1 (http://en.wikipedia.org/wiki/Boeing_YAL-1)

Liberia or Sealand.  Either polar pole.


Or even better still, in international waters.

I would get in contact with a lawyer specialized in offshore companies and consider the options.

Ireland seems a good candidate too due to the lower than average taxes.