Bitcoin Forum

Dear Investors and Security Issuers,

As some of you may be aware a collective of security issuers and interested parties have banded together to attempt to purchase Burnside's code so that we can continue to operate the exchange, although perhaps under a different name and likely with some restrictions. If you are a security issuer please join the conversation on the recovery board (https://forum.litecoin.net/index.php/board,79.0.html) (in the litecoin forum).

I am urging all security issuers not to make rushed decisions to move to a new exchange right now! Unfortunately some of you have gone to CryptoStocks.com already, which from what I can see is technically inferior and has near-zero liquidity (there are also some oddities like why VirCurEx has not paid dividends there for ages).

At CipherMine we are developing a simple tool to allow an issuer to import the .csv from a shareholder report and use that to distribute a dividend payment manually (ie. you just enter the amount and it sends that much to the shareholders). We intend to give this away to all of you for free.

BTC Trading Co does not shut down entirely for a month yet. You will be able to use the mechanisms there to distribute dividends in the mean time, and then you will still be able to with our tool or something similar.

It is the hope of our collective that we can have something operational within the next couple of months, so hopefully there would only be a short period of time where your securities were illiquid (barring manual trades of course).

To Shareholders, I cannot speak for all but most of us issuers intend to do the Right Thing and are making efforts, including committing significant personal resources, to try to look after you all.

In the mean time, please everyone hang in there and don't make panicked decisions! We will keep you posted as to developments.

Kate.

Burnside, can you confirm??

Wow, this is great but there are many concerns after all the recent events.

1) Steps to be taken to prevent further shut down?
2) Are the those "interested parties" willing to reveal themselves?
3) Timeframe for this to occur? Will BTC-TC go on hiatus?

Best of luck

Kate,
Does this mean that CIPHERMINE.B1 will remain on BTC-TC? And what will this mean for CIPHERMINE and .B1?

Except these aren't plans, they're vague intentions. Why not actually plan something, then post?

Edit:

It's https://forum.litecoin.net/index.php/topic,6156.0.html.

They are more than vague intentions. We are highly organised and between us are investing a significant amount in this gambit (>>$100k). I am currently getting advice from my lawyers and accountants re. avoiding a similar fate to Burnside.

I would share more but I am extraordinarily busy right now, in no small part because I'm getting married a week today. :)

However, this is not guaranteed to work. It appears that Burnside is still favoring the auction approach. We are trying to convince him that as a significant representitive portion of LTC-GLOBAL shareholders (~30% of the shares in public hands) as well as many of the major issuers on Litecoin Global and BTC Trading Co, that he should give us first refusal.

If it looks like we are not going to be able to purchase the code and user base from him at a sane price then Plan B is to use our collective resources to build a new, better exchange which can cater to the collective needs.

In either case I must warn you that we will not be able to simply reconstitute all shareholdings out of the box; there will be work for issuers to do. This is because for legal reasons the database cannot be part of a deal. However, we can programatically re-create securities including shareholdings from the shareholder reports; we would gather all issuers who wish to do this ahead of launching the new exchange(s).


In hand; see above. We are based in the UK which helps, but we have other plans to further insulate us.

I'll request that they do so.


We won't be able to complete a purchase until after the exchanges close at the end of October. This does mean that there would have to be a hiatus, but that's not a big problem in my view; we will provide a simple tool to allow issuers to pay dividends using the shareholder reports .csv files in the interim while the new site(s) are brought online. This does mean that the securities would become illiquid for a time. My hope is that we could get it online for the start of December (ie. only one month of "hiatus").

Kate.

Good news! hope this goes well

Well observing

I just want to point out that the legal aspect of establishing an operation like this in the UK should take special care due to the former history of GLBSE which was also operated within the UK.

observing...

You might want to build it on tor network.

thanks kate,
sounds like you are trying to do the right thing and be a real leader

glad to hear taht！！！how about our cipermine shares??

Not going to happen.

I'm one of the parties involved in discussions.  Nothing is actually agreed yet - and certainly nothing would be agreed by me personally unless a bunch of different elements line up.  One of those elements being that the exchange can legally operate in the UK.

Broadly speaking there are three legal obstacles which have to be addressed:

1.  That holding BTC on behalf of investors/users and transferring it to other users doesn't subject the operators to financial supervision OR to a need to obtain AML/KYC details from users.  This one we're already basically certain we're fine on - due to legal advice received and precedent already set.
2.  Whether, regardless of BTC being used, the 'securities' themselves are illegal and/or subject to regulation.  This is the key one - but there IS a very interesting case to be made that they're fine because of the way HMRC treat Bitcoins.  Legal advice is currently being sought on this.
3.  That having US investors (with the rules in the US being VERY different) is OK.  This one is interesting - but the answer is almost certainly that a UK-based exchange could NOT accept US-based investors as - even if fine to operate in the UK, it would break agreements between the UK and the US.  So there's a very real likelihood that any new exchange would not take US investors - the situation with US companies is less clear.

For those confused how the situation could possibly be so different in the UK to the US, the answer lies in their totally different approach to treating Bitcoins.

The US is moving very much towards them being treated as though they were (similar to) currency for the purpose of regulation.

The UK, in contrast, is saying that they have no face or intrinsic value and thus can't be referred to in accounts and aren't subject to regulation.  They're explicit, in particular, that any conversion from BTC to fiat has to be treated as income tax (for individuals) and revenue (for companies) and can never be claimed as capital gains or investment return.  This actually has very BAD consequences for businesses raising funds in BTC then converting them to fiat to (for example) buy mining hardware - but has very GOOD consequences for those looking to run something like an exchange.

I'm not going to lay out the argument that follows from this - but I believe there IS a strong one and am personally obtaining advice on it in the next week or so (even if I don't end up participating in an exchange it would be very useful information in respect of any BTC securities I operate).

So no - Tor isn't on the table (not as far as I'm concerned - and noone else involved in the discussions has expressed an interest in it).  All of those talking want something openly run in a jurisdiction where there's no likelihood of interference from the authorities - and the UK might be that place.

I believe the OP was made prematurely - and the title is misleading.  As MPOE-PR pointed out, there's no plan yet - though the intentions aren't actually entirely vague (just not detailed in the OP). And noone should read this as BTC-TC coming back with all securities and user-accounts etc - if burnside's code is purchased it's certain the data won't come and that it would be rebranded.  Burnside's code is NOT the only option under consideration - but it would be far preferable to a newly written system because of already having been heavily tested in a live environment.

Don't expect updates from me in the near future - but I felt I should at least confirm that when Kate says various issuers/others are involved then it definitely is the case : and statements of available investment have been made, though not committed to (i.e. I and others have said "I have X BTC I'd consider using for this" not "I have X BTX that is definitely going to be used for this").

Is this just for payments that would count as income/revenue if paid in fiat, or for everything? If for everything, is this a new development? Everything I've read on this in the last few months suggested or outright stated that HMRC would treat trading profits denominated in bitcoin as capital gains.

Source?

The source isn't mine to reveal (as I'm not the one who paid for it) - but is credible (i.e. advice from professionals not some forum user's personal opinion).  My intention was just to give some idea of what was being considered - not to give a conclusive answer on specific points.

On a more general note, my belief is that answering questions about plans - when we don't have any firm plans - is counter-productive.  But you can take it as fact that a group of us with access to funds, technical expertise, experience in BTC securities and a data centre are giving it serious consideration including spending money on legal advice.  And I'm sure if/when anything concrete develops it will be announced.

Good luck with all of this! I am unfortunately not one that is going to wait. I am not willing to watch my coins sit in limbo while people try to figure out a place to trade. I hope this does work out and maybe at a later date I will join and trade again, but until then I have to bow out.

A hasty bit of research suggests my country (Australia) doesn't treat BTC as currency either as it isn't "backed" by anything, though I doubt this has been tested in a court yet.

It will be interesting to see how long the status quo remains if legal persons exploit the lack of regulation by attempting to pay for expenses in BTC, effectively using pre-tax income wherever possible.

You say that you don't wanna go the tor route, because you might be able operate legally in the UK.
Yet you state here that there seems to be some regulations stopping US investors to actually invest and use the site?

That would be a major deal breaker for me. There must be a ton of other countries out there with similar regulations as the US.

+1 To deprived's points
Legal rules here are murked by legislative rules.
The rules depend on the country in question and the approaches they take to address the questions.
You should join in the legal thread discussion deprived I would like your opinion on the impacts of bitcoin securities from the European viewpoint.
Of course it is a place for forum members to discuss it, and I am not saying that legal teams are not up to date but they are seriously lacking precedents and scope so intrinsic evaluation from the user-base may be closer to reality or useful as new rules are written.

Appreciate the interesting insight nonetheless thanks.

Any sale of burnside's code WILL involve the purchaser signing an agreement to block US IP addresses.  That much is certain.  So anyone thinking of buying his code needs to plan with that in it mind even if they could otherwise serve US customers from their country.

Personally I'm not committed to using his code - nor am I committed at all to being involved in running an exchange.  I'm just discussing options with various people - as it appears very much that there's going to be a need for another exchange as the existing ones (that have any credibility) won't be able/willing to take on all the existing securities from BTC-TC/LTC-Global.  In some cases it's undoubtedly for the best if the securities just die (as some are crap and should just be put out of their misery) but it's in few people's interest for viable ones to die purely because of nowhere credible to list.

And if not serving the US is part of some solutions then so be it.   I'm sure there'll always be exchanges serving the US - right now I'm not personally interested in being involved in running/backing/financing one.  If I DO end up involved in some actual exchange that doesn't serve the US then I would definitely insist that anyone listing who had existing US investors made those investors right before being allowed to trade : I would not accept any situation where their shares were just deleted.

Do remember that all I've confirmed (and it remains the case) is that I've been discussing this as a possibility - and indicated that in theory I can commit some funds and some time to an acceptable proposal.  I'm not speaking on behalf of anyone else - let alone on behalf of any actual consortium with an agreed plan.  I'm just clarifying my personal perspective on what I would/wouldn't be involved in, the reasons for that and some general information on how anything I had substantial involvement in WOULD act (because otherwise I wouldn't become involved to any significant extent).

I'm also certain there'll be other new exchanges that DO cater to US investors - similar to the fragmentation that occurred in online poker where some sites accepted US players and others didn't.

I wish you the best. Hopefully you can make this happen quickly before the distributed exchanges come online.

Are Ciphermine shares going to be 1:1 with the shares in the new exchange?

http://www.forbes.com/sites/alanmcglade/2013/09/18/crowdfunding-will-flourish-regardless-of-what-the-sec-does/

Rely on the Jobs Act legislation which makes crowdfunding legal for US investors. There are already sites set up now which are doing equity crowdfunding.


"The SEC has lifted the ban on General Solicitation which means that companies can publicly advertise their fundraising efforts to accredited (high net worth) investors. It is expected that later this year the SEC will publish rules allowing non-accredited investors to participate as well."



"Some forward looking state governments have decided not to wait for federal rulemaking and opened up alternative financing options for businesses and investors that reside within their state. Kansas, the first state to enact laws requiring the registration of sales of securities to the general public 100 years ago, turned out to be the first in the U.S. to enact an “intrastate” equity crowdfunding law. It was put in place by the Securities Commissioner of Kansas and essentially exempted sales of securities from state registration to an unlimited number of non-accredited investors."



"The state of Georgia passed the Invest Georgia Exemption that provides even more freedom for crowdfunding than the Kansas exemption. North Carolina’s House passed a crowdfunding bill that is expected to move to the full legislature in an updated form and be signed into law next year. The state of Washington is currently teeing up crowdfunding legislation and other states will likely follow suit."


This is the invest Georgia exemption: http://rules.sos.state.ga.us/docs/590/4/2/08.pdf
https://www.youtube.com/watch?feature=player_embedded&v=MOxY6GgMdaQ

The invest Georgia exemption basically would require that the business be licensed and run from Georgia. If it is then US investors from Georgia can invest through the exemption on Sterlindfunder. Burnside did not have to shut down BTCT, he could have incorporated in Georgia just as SterlingFunder has done and then waited for the SEC laws to crowdfunding laws take effect in each state. Ultimately there will be sites which take advantage of US crowd funding legislation and Sterlingfunder already does this, but the other possibility is for the US to drive innovation into decentralized route which is also a possibility. If it's part of the block chain then colored coins, mastercoin, Bitshares, or something similar could allow for securities without the need for Tor. Time is on your side.

I doubt many (if any) of those involved in this exchange are accredited investors. If they are, they have much better things to do with their money.

You did not read all the websites. Sterlingfunder already allows unaccredited investors if they are from Georgia. This means any company can offer their securities on Sterlingfunder right now and US unaccredited investors can purchase. Also many people involved in Bitcoin in 2013 are unaccredited investors but in 2016 they may be accredited investors. Why would you suggest they'd have better things to do with their money?

The SEC law will take affect sometime in late 2013 which means it's only months away from allowing unaccredited investors to invest. This is why I don't understand the decision of Burnside or others. If it's literally going to happen within a matter of months why not just wait it out? If he could run the site as long as he did what is a few more months of waiting?

Maybe there are other SEC regulations violated by security exchanges like btct.co?

Yes but those regulations were minor and could have been fixed over time. Like for instance in each particular state there are certain laws to prevent scams but these laws are mainly about preventing fraud and not targeting the crowd funding exchanges as far as I know. The Jobs Act specifically allows for sites like BTCT provided that they set it up right. Burnside could have known that the SEC law hasn't fully taken effect but the fact that it is on the books, signed, and in the process of taking effect he could have just waited for it to take effect and then complied with it.  

Either the DATA will push its lobbyists into modifying laws on the state level or a decentralized exchange will do it. It would be best to do it with the SEC so that scams can be avoided or prosecuted, but I expect that the decentralized exchange will still exist for high risk investors. https://www.youtube.com/watch?v=fmFjmvwPGKU

I can't really go into detail at this point but we looked in-depth at all of our options.

If the environment changes we may have the option to come back later.

After you've auctioned off the code?

If he does come back 6 months to a year from now, a lot will have changed. I expect that the exchanges will have decentralized backends with central website/domain names on the front end.

Remember how Napster was at one point the poster boy of file sharing? It was centralized P2P and could be stopped. Then as they cracked down on it, we ended up with Gnutella, then Limewire, Bearshare and finally Bittorrent.

At some point, we will be able to trade stocks, bonds, and all sorts of stuff through the blockchain itself or with some other decentralized backend protocol. The website front end would still matter though, because trading is a lot more than just a transaction.

The stock market is going to be decentralized and distributed and it's only a matter of time before it happens either on the Bitcoin blockchain itself or with an altcoin. The DATA which formed recently also gives the Bitcoin community growing lobbying power and the community should seek to make one of it's very first priorities to get better crowd funding legislation to create an exemption for Bitcoin funded businesses.

Dollar funded businesses should remain under the regular SEC crowdfunding laws, but Bitcoin funded businesses should be treated differently because people using Bitcoin have a different level of risk tolerance, technical capability, and the goal should be to legitimize things rather than drive it underground.  Figure out by collecting data how people actually trade in the Bitcoin community and then make regulations based around community norms. The SEC does not understand and probably thinks Bitcoin is like some kind of online poker chip when in reality its much more important.

Such a site would require significant reworking.  It would be a different product.

BTC.co is down. Status?
Also, how do we withdraw our coins if the maximum per day is 2.5btc.

Dude, you just asked this. You can withdraw more, it just has to be done manually by burnside.

I really, really hope you guys can get this going. I loved btct.

I was going to ask what the legal viewpoint is now that trade halting is starting but I guess we will need to wait a while.

When will it be up again?

it's just one page and half, you could bother to actually read it.

I haven't spoken to the sources directly, but apparently it's the professional opinion of a UK accountant...

http://www.reddit.com/r/Bitcoin/comments/1h8m2a/my_accountant_on_capital_gains_in_the_uk_on/

...and HMRC themselves...

https://bitcointalk.org/index.php?topic=143425.msg1827881#msg1827881

that it is capital gains and not income tax.

this part makes no sense as it's written.
Are you saying that if Mr A sells 10 BTC, and receives 1000 fiat's, he must treat 1000 fiat's as additional income?
Where in EU is selling ones personal property (excl. house, land) treated as a source for additional income. I can sell you me old boots for 1000€ and guess  what, this 1000 is not taxed as income.
Now, if I buy and sell old boots as a source of income (small business) this will be different story entirely.

Can you please clarify this part and point me to your source regarding taxation of proceeds form sale of BTC.