BITCOIN NEWS EVRYDAY! From multiple sources.

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Boost VC to Accelerate 100 Bitcoin Companies Over Next Three Years
Daniel Cawrey (@danielcawrey) | Published on March 12, 2014 at 20:56 GMT | Investors, News, Startups, Technology

Boost VC, the first incubator to focus on accelerating bitcoin companies in Silicon Valley, has announced an ambitious plan to help grow the bitcoin industry.

Adam Draper, founder and CEO of Boost VC, told CoinDesk:

“We are actually, over the next three years, going to be accelerating 200 companies. And 100 of those are going to be bitcoin companies. That’s our big stake in the ground.”

So far, Boost has accelerated 10 bitcoin startups: seven companies in last year’s summer session and three in its latest class.

“We’re just excited about the space,” said Draper. ”We’re going to launch 10 to 15 bitcoin companies per session.”

Growing interest

Boost VC didn’t start accepting bitcoin companies at its inception – rather, it’s something that evolved over time, according to Draper.

“I started Boost in October of 2012. We accepted seven companies. We were providing housing, office space, bringing in speakers every week. It went really well,” he said.

Boost VC's housing facility in downtown San Mateo, CA. Source: AngelList
Boost VC housing facility, San Mateo, CA. Source: AngelList
The accelerator then started looking at some up-and-coming technologies for its next class.

Drones and 3D printing were ideas tossed around before bitcoin came up. At this point, Draper had a realization:

“When I was looking at bitcoin, I was thinking, ‘Well, there are really only like five companies in the bitcoin space. It’s not really an industry, but there’s a lot of opportunity in this’.”

After meeting a number of people working with the digital currency, Draper made a decision to start incubating bitcoin companies.

Encouragingly, there was investment interest from the start. One investor reached out to Draper and told him:

“If you’re going to be launching these bitcoin companies, I’d be interested in backing all of those that come out of Boost in this session.”

“So, that gave me the idea that there were enough bitcoin investors,” said Draper.

The Boost Bitcoin Fund invested in an initial seven bitcoin companies – anchored by Lightspeed Venture Partners, the Bitcoin Opportunity Fund and angel investor Ben Davenport.

Boost VC was the first bitcoin incubator, now it plans to be the largest.

New phase

Payment processors, exchanges and mining companies all made an appearance in bitcoin’s initial phase. As Boost sees it, the industry is now maturing.

“The exchanges are still a bit volatile – everything is a bit volatile – but we’re moving into a [new] phase,” said Draper.

The aforementioned types of companies are not completely out of the running in terms of investment opportunities, but Boost is looking closely at the next generation of bitcoin innovation. Said Draper:

“What we were thinking about is: What’s next? What does bitcoin do better than USD or pesos?”

Bitcoin can do some things better than cash. So, finding great companies that can make this easy for the consumer is what Draper wants to focus on.

“[Bitcoin] is better at remittance. It’s better at microtransactions. It’s better than using your Visa card online. It’s just a better cash system than most inflationary currencies,” he said.

A startup idea that gets incubated at Boost VC needs to think about being an easy onramp to bitcoin, Draper explained:

“Anything that makes bitcoin easier to access. Coinbase made it super easy to buy bitcoin. They solved one of the main issues with bitcoin – that it was hard to approach.”

He also pointed out some of the past Boost VC companies that help reduce the complexities of bitcoin.

Adam Draper (L) and co-founder Brayton Williams featured in Entrepreneur Magazine.
Draper (L) and Boost co-founder Brayton Williams (R). Source: Entrepreneur magazine
Draper mentioned SnapCard, which makes buying things with bitcoin simple. Gliph was another example, a company that allows users to send bitcoin via its mobile messaging app.

Increasing VC interest

A healthy does of venture-backed money flowed to bitcoin companies last year. Draper believes that venture capital growth will influence other entrepreneurs into thinking about businesses based around the digital currency:

“I feel that entrepreneurs are still starting to work on bitcoin projects. They aren’t necessarily taking a full leap. But with more money in the ecosystem, they are starting to take the leap.”

Now that investors are becoming more familiar with bitcoin, there is a pickup in interest. The US dollar is still a part of the equation, however, as that is the tool for truly valuing deals that get done in bitcoin.

“I see deals happen where they actually invest with bitcoin. USD needs to be a touchstone for what the worth is,” explained Draper.


In fact, the Boost Bitcoin Fund kept a quarter of its holdings in bitcoin. When investing in startups involved in that fund, those companies received BTC as a part of their funding.

“When we created the Boost Bitcoin Fund,” Draper said, ”one-fourth of that fund was held in bitcoin. It was a holding and we held bitcoin and cash for that fund – and we ended up invested in those companies.”

It’s possible that the Boost Bitcoin Fund might be on to something with using bitcoin as an instrument for venture capital. Draper sees it as an effective tool for providing capital to startups:

“It’s actually easier to invest with bitcoin. It’s so easy to send bitcoin to people, and large amounts of it too.”

Future classes

Boost has conducted three sessions over the past year. Draper says that the accelerator, which is based in San Mateo, California, is only going to have summer and winter sessions going forward. The next session will start in July. He added:

“We want to produce the best quality of companies, that’s always been our goal. That’s why we’re going to do about two [sessions] a year. There will eventually be roughly 30 companies per session.”

Applications for the Boost VC summer session, to be held in July, will open in two weeks. Interested entrepreneurs can sign up for Boost’s mailing list to be notified when the process opens up for entrants.

Boost VC's office space. Source: themuse
Boost VC’s office space. Source: the muse
Draper is excited to see the bitcoin innovation that will happen as a result of Boost VC’s efforts:

“The fact that they solved this problem of being able to make a trusted transaction between two untrusted parties, I think, is a very valuable thing. If it works on that scale, it replaces huge institutions in the middle of transactions.”

“There’s so many things that you can hook into bitcoin,” he added.

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Bitcoin Derivatives Platform BTC.SX Resumes Trading After Mt Gox-Induced Freeze
Danny Bradbury (@dannybradbury) | Published on March 12, 2014 at 22:36 GMT | Companies, Exchanges, News

Derivatives trading site BTC.SX has resumed trading after a few weeks of downtime induced by the Mt. Gox collapse. The company has signed BitStamp as its new exchange partner, said BTC.SX CEO Joseph Lee.

BTC.SX suspended its operations until further notice on February 25, after Mt. Gox imploded. At the time, Lee told CoinDesk that he had no prior warning from the exchange, even as a business partner. BTC.SX went to Gox to trade bitcoins on behalf of its customers, who were using Lee’s site to trade bitcoin-based derivatives.

The company was up to around $40m in brokered trades by the time Mt Gox collapsed.

“Counterparty risk is something that we spotted early in the business. It’s always been in our plan to partner with other exchanges,” said Lee, adding that he had originally planned to bring other exchanges on in April. The firm switched on BitStamp integration yesterday.

“We think celebration is premature, because at the end of the day we have 100% counterparty risk with one exchange,” Lee said. The firm is talking to others, including Coinsetter, BitFinex, ItBit, and BTC-e. “We tend to pick exchanges based on who can provide the most liquidity. That’s what our customers want – good fill prices.”

When Mt. Gox imploded, BTC.SX lost all of the bitcoins that it had stored in the exchange’s wallet. However, Lee had begun withdrawing some funds earlier and reducing his exposure to the exchange based on worries about its future. “We do hold a trading reserve out at the exchanges, and that balance is getting moved in and out of,” he explained. “That money depends on the level of risk that we wanted.”

“Counterparty risk is something that we spotted early in the business.”

However, Lee maintains that BTC.SX is still a fully-funded reserve. “We would never ever run a fractional reserve,” he protested. “Businesses that want to run fractional reserves have to be very honest about that, especially in the world of bitcoin.”

BTC.SX’s reserves are held in a separate off-line wallet, he said, and the company doesn’t run a hot wallet at all. The firm has a withdrawal time of 24 hours. Whenever a withdrawal is requested, all account reconciliations are performed before it is processed. “It’s time-consuming for us, but security of customer funds should be considered paramount,” he said.

However, the company isn’t able to formally prove its reserves at present. An audit is “on our to do list,” Lee said. The company is now dually incorporated in Singapore and England, and its financial returns come out at the end of the year, so the order will have to appear before that, he said.

The firm relaunched quietly yesterday. Before that, it tested for a few days with its closest users to ensure that the BitStamp integration was running smoothly. Over the next few days, it will increase trading limits.

BTC-SX used its downtime to perform some upgrades that would ensure its ability to scale as a business. It more than doubled its server capacity, Lee said, and introduced more bookkeeping updates on the back end. It has increased its team to five people in recent months, including its London-based developer team.

Expect to see BTC.SX signing with another one or two exchanges in the next month, Lee concluded. The firm, which began with a $150,000 investment, will also announce the completion of its latest funding round later this month.

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Singapore to Regulate Bitcoin Exchanges and ATMs
Emily Spaven (@emilyspaven) | Published on March 13, 2014 at 11:08 GMT | Asia, News, Regulation

The Monetary Authority of Singapore (MAS) is to regulate virtual currency intermediaries in order to address potential money laundering and terrorist financing risks.       

A statement from MAS said the anonymous nature of virtual currency transactions leave them particularly vulnerable to these risks.

In response, MAS is introducing regulations requiring intermediaries that operate virtual currency exchanges and vending machines to verify the identities of their customers. They will also be required to report any suspicious transactions to the Suspicious Transaction Reporting Office.

Ong Chong Tee, deputy managing director of MAS, said:

“MAS is taking a targeted regulatory approach to virtual currencies to specifically address money laundering and terrorist financing risks. Consumers and businesses should take note of the broader risks that dealing in virtual currencies entails and should exercise the necessary caution.”

These new requirements are similar to those that already exist for money changers and remittance companies that facilitate cash transactions in the country.

Greater clarity

Antony Lewis, business development at Singapore-based bitcoin exchange itBit, said: “We welcome regulatory clarity for bitcoin, and we applaud these steps by the Monetary Authority of Singapore.”

He went on to say itBit focuses on offering bank-level security to those trading bitcoin, comcluding:

“As outfits which knowingly engage in questionable transactions are regulated out of the market, consumers win.”

The MAS statement highlights it does not view virtual currencies such as bitcoin as securities or legal tender and , as such, the intermediaries involved are not covered by the Securities and Futures Act and the Financial Advisers Act.

Last year, MAS warned consumers of the potential dangers of digital currencies, but followed this in December with a statement revealing it would not interfere with bitcoin adoption.

The authority said: “Whether or not businesses accept bitcoins in exchange for their goods and services is a commercial decision in which MAS does not intervene.”

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Tech Millionaire Zhenya Tsvetnenko Brings Bitcoin to Australian Stock Exchange
Nermin Hajdarbegovic | Published on March 13, 2014 at 10:51 GMT | Investors

Australian investment company Macro Energy has announced plans to enter the digital currency space through the acquisition of Digital CC and its subsidiary digitalBTC. The company plans to raise A$9.1m and list digitalBTC on the Australian Stock Exchange (ASX).

Macro Energy describes digitalBTC as an “innovative digital currency company” engaged in bitcoin mining and trading. In addition digitalBTC is developing retail consumer products for bitcoin and other digital currencies.

Strong credentials

The company points out that digitalBTC already has established mining revenues and ties with key hardware partners. It also has a trading desk backed by management experienced in physical commodities trading and is headed by Zhenya Tsvetnenko, a wealthy Perth-based tech entrepreneur.

Macro Energy said:

“Following completion of the transaction, digitalBTC will be the first ASX-listed company offering exposure to the bitcoin system and will gain advantage from the robust corporate transparency and compliance required by the ASX listing.”

The capital raising appears to have been successful and the company says it already has “firm commitments” from investors. The money raised will go towards expanding bitcoin mining and trading activities, as well as development of retail-oriented mobile applications.

High hopes

Tsvetnenko has a background in tech and one of his earlier projects was a micro-transaction platform integrated with Google ads and mobile apps. He believes he can change the way many users approach payments and transfers.

Tsvetnenko said:

“As the bitcoin system matures beyond its initial niche and begins to realise its true disruptive potential, sophisticated service firms will be increasingly required to facilitate the system. We believe that sophisticated intermediaries such as digitalBTC can derive significant profit in supporting this emerging growth phase of bitcoin, as it takes its place as a true worldwide currency.”

Tsvetnenko said he is pleased with the Macro Energy deal, as it will give digitalBTC the platform and capital to take its operation to the next level. Since the company will be listed on the ASX, public market investors will have an opportunity to participate, he points out.

In addition to bitcoin, digitalBTC will also look at other emerging digital currencies, as many of them enjoy similar growth rates to bitcoin and they could complement digitalBTC’s digital currency strategy.

High-quality

Macro Energy managing director Brett Lawrence said the company was on the lookout for high quality investments and digitalBTC ticked all the right boxes. He said digitalBTC offers Macro shareholders “significant potential upside” in a rapidly evolving sector.

“The strong support shown by new investors, having received firm commitments exceeding $9.1m under the capital raising, underlines investor confidence in the future of the bitcoin system,” Lawrence said.

Australia is relatively liberal when it comes to digital currencies, the Reserve Bank of Australia does not believe that it has to step in yet, and the fact that a bitcoin company can trade on the ASX and raise plenty of funding from serious investors is an encouraging sign.

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Pock.io Becomes First UK Retailer to Sell Gift Cards for Cryptocurrencies
Roop Gill (@roopgill) | Published on March 13, 2014 at 15:32 GMT | Companies, Merchants, News, Startups

Consumers in the UK can now use their bitcoin and other cryptocurrencies to buy gift cards for major online retailers like Amazon, Google Play Store, ASOS and Starbucks.

Launched at the end of January, Pock.io has become the first British service to exchange retailer gift cards for digital currencies – with eight different cryptocoins currently accepted.

Pock.io CEO and co-founder Rusty Nash said that the driving force behind the launch of this service was to make digital currencies more mainstream in the UK.

Pock.io’s business model is similar to that of the California-based mobile gift card wallet, Gyft, which started accepting bitcoin last May. Gyft has since expanded to Canada with a limited number of retailers, but hasn’t made the leap across the pond yet.

Some UK users have reported being unable to use their Gyft gift cards on Amazon.co.uk, while others have reported problems with shipping restrictions into the UK with items purchased on the Amazon.com site.

Wide-open market

Nash said he noticed that there was a gap in the British market for this kind of service.

“I had the idea of gift cards even before I knew Gyft and other competitors were available. When I did my research, I obviously found them in the US market, but there was nothing in the UK. I saw a gap that not only I wanted to fill, but needed to be filled.”

Even though Pock.io is only a couple of months old, Nash is already planning to expand the service across Europe. He eventually also wants to take it to America and Canada, where he will face competition from Gyft and eGifter. He says what sets his company apart is that it accepts a variety of digital currencies, not just bitcoin.

“We match [Gyft and eGifter] on the fact that we have zero per cent commission. But, our main difference is the fact that we accept multiple cryptocurrencies.”

Community focused

Currently, Pock.io is accepting bitcoin, percoin, litecoin, dogecoin, maxcoin, verticoin, worldcoin and quark. Nash said that they would continue to add more currencies based on the community’s requests.

“We listen to the community and we have managed to grow so fast because we like to take direction from the community,” says Nash.

True to Nash’s word, Pock.io removed Apple from its gift card selection following the Cupercino-based company’s controversial decision to remove Blockchain’s wallet app from the App Store.


While iTunes products may no longer be available via Pock.io, the company is working on adding more merchants to its network.

The latest partnership they have struck is with the Great British Pub Card, which enables people to top up their gift cards for drinks and food at 750 pubs in the UK.

Nash said that they are also in pre-approval stages to add a major UK supermarket to their database.

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Bank of England: Digital Currencies are Similar to Commodities
Nermin Hajdarbegovic | Published on March 13, 2014 at 13:02 GMT | Europe, News, Regulation

The Bank of England (BoE) has published an article on the role of money in the modern economy and one topic was the future of digital currencies and payment technologies. The currency v commodity debate has been going on for a while and the Bank of England is clearly on the commodity side of the argument.

“Digital currencies are not at present widely used as a medium of exchange. Instead, their popularity largely derives from their ability to serve as an asset class. As such they may have more conceptual similarities to commodities, such as gold, than money,” the bank concluded.

Not a generally accepted medium of exchange

Digital currencies were brought up in the context of alternative currencies and recent developments in payment technologies. The advent of e-money and services like PayPal and Google Wallet was discussed and the bank concluded that these forms of money have similar features to bank deposits.

“For example, money in an e-money account represents a store of value so long as the companies providing it are seen as trustworthy. E-money can also be used as a medium of exchange with businesses (such as online sellers) or individuals that accept it,” the report points out, adding:

“However, it is still not as widely accepted as other media of exchange, for instance, it is not generally accepted by high street shops. Transactions using these technologies are also typically denominated in the existing unit of account (pounds sterling in the United Kingdom).”

Digital currencies are quite a bit different, since they can be created out of nothing and their exchange rate is not fixed. The supply of digital currencies is typically limited, which is not the case with e-money accounts.

The bank also outlines some basic differences between local currencies and digital currencies. The former are issued in a defined environment, they are not decentralised and they are usually bought in exchange for currency at fixed rates. This of course is not the case with digital currencies, as they do not have a fixed rate and they are practically their own unit of account.

Bank of England not to keen to weigh in

The Bank of England has not said much about bitcoin in the past. It seems it simply does not think bitcoin is big enough to worry about, or as the bank puts it:

“The current levels of economic activity and payments involving bitcoin are too light to have a material impact on [the bank's] monetary or financial stability objectives in the short term.”

This is not the case with most European central banks and the ECB for that matter. Many of them have already issued similarly worded bitcoin warnings, cautioning the public about potential losses stemming from volatility, fraud, theft and a range of other issues.

Speaking at a bitcoin panel discussion last year, BoE chief cashier Chris Salmon described bitcoin as “genuinely innovative,” but he warned that it would not be the “final word” in digital currencies. In other words, something better could eventually replace bitcoin.

Salmon also said that it is highly unlikely that central banks will issue digital money in the next decade, but he admitted it is a possibility sometime in the future. Salmon believes digital currencies in their current form cannot replace traditional money, but they can complement it.

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Bitcoin price info:


Bitcoin average price:

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Bitfinex Now Included in the CoinDesk Bitcoin Price Index
Garrick Hileman (@garrickhileman) | Published on March 13, 2014 at 16:00 GMT | Exchanges, News, Prices

CoinDesk has added Bitfinex to the Bitcoin Price Index (BPI) today as of 16:00 GMT.

Bitfinex, which is incorporated in Hong Kong, has been on CoinDesk’s radar for possible inclusion in the BPI for some time now.

Over the past several weeks, and particularly since the decline of Mt. Gox, we have observed that Bitfinex has been able to sustain a dramatic increase in its share of the total volume of US dollar-denominated bitcoins traded.

CoinDesk has also verified that Bitfinex meets the CoinDesk BPI criteria, which include rules ranging from minimum trade size to maximum customer withdrawal delays.

Three horse race

In late 2013, Bitfinex was already the fourth largest exchange. However, it was a distant fourth compared to the big three exchanges that comprised the BPI during this time: Bitstamp, BTC-e, and Mt. Gox – all of which averaged at least 30% of US dollar-denominated bitcoin trading volume (see Table 1).

Table 1: Top 4 Bitcoin Exchange $USD Volume Market Share, late-2013
Sources: CoinDesk, BitcoinAverage

In contrast, for much of late November and December in 2013, Bitfinex’s overall share of total US dollar-denominated bitcoin trading volume was in the single digits, averaging only 6% of the total.

Rapid rise

Much has changed in the bitcoin exchange world since December, starting with Bitfinex surpassing the now bankrupt Mt. Gox on several days of trading in January.

Bitfinex also recently leapfrogged BTC-e, another BPI component, with more US dollar-denominated bitcoins exchanged in five of the last six trading days, and almost half of the past 29 trading days (see Table 2).

Table 2: Top 3 Bitcoin Exchange $USD Volume Market Share, late-2013 (% of total $USD exchanged)
Top 3 Bitcoin Exchanges $USD Volume Market Share, late-2013 (% of total $USD exchanged)

Have you got some feedback on the CoinDesk BPI criteria? Are there other exchanges you think should be included? Please share your thoughts in the comments below or send them to contact@coindesk.com.

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Mobile Ad Platform Vungle Offers Publishers Payouts in Bitcoin
Tom Sharkey | Published on March 13, 2014 at 17:07 GMT | Merchants, News, Startups

Good news for mobile app developers who want more options when getting paid from their advertising revenue: mobile advertising platform Vungle has just announced plans to offer their publishers the option to receive payments in bitcoin.

Vungle is one of Silicon Valley’s fastest growing companies in the mobile app monetization space, and after receiving $17m in series B fundraising last month, the tech company is looking to expand its reach.

The move to start offering bitcoin payouts to the publishers of more than 4,000 apps on the Vungle network comes in response to demand from app developers who expressed their desire for more flexibility in receiving payments from their advertising revenues, says Vungle’s VP of Marketing Andrea Sharfin:

“A lot of our independent app developers showed interest in bitcoin payments. These are usually teams of 2-3 people, working on their own out of a garage. These are the people who can especially benefit from the lower transaction fees associated with getting paid in bitcoin.”

More benefits for publishers

Publishers who serve their mobile app advertisements through Vungle will reap the benefits that bitcoin offers to users who may be dealing with credit card transaction fees and time delays.

vungle

Sharfin explains that in addition to the lower transaction fees that come with bitcoin payments (around 1%, as opposed to 3-5% with credit cards), publishers that opt to receive payment in bitcoin will also receive their money much faster.

Bitcoin payments are processed and delivered almost instantaneously, while credit card payments and bank transfers can take days.

Vungle has partnered with Coinbase to provide more flexibility for the roster of app developers in their network, and with mobile platforms becoming increasingly popular with the general population, publishers have started to place their focus on monetizing mobile content.

No stranger to bitcoin

Although Vungle has just started offering payments in bitcoin to their publishers, the platform has been keeping an eye on the digital currency, and Sharfin says the company has even been offering its employees the option to be reimbursed for expense reports with bitcoin “for some time”.

Building on comments from Vungle’s CEO Zain Jaffer that Vungle has a “long view” on bitcoin, Sharfin explained the company’s decision to offer bitcoin payouts as just one aspect of their progressive stance in the technology industry:

“Of course we can’t speak in certain terms, but we would love to be bullish in our long term prospects for bitcoin. For us, working with bitcoin helps us embrace our future in the tech industry as a leading monetization platform for apps.”

The value of feedback

Feedback from a number of their publishers acted as an impetus for Vungle to offer bitcoin as a payment method, and the company will continue to rely on this feedback to offer the most value for app developers on their network, says Sharfin.

When asked if Vungle expects to see a wave of new publishers from the bitcoin community joining their network, Sharfin was optimistic:

“We would love to see new customers joining the network, and we really hope that adding this flexibility for our existing partners helps maximize their profits and ease some financial stress. We will continue to rely on feedback from publishers in response to offering bitcoin payouts.”

Vungle currently works with a number of big names in a variety of industries to provide in-app advertisements for developers like Sega, Zeptolab and Wooga, all of whom now have the ability to get paid in bitcoin.

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How to Increase Public Confidence in Bitcoin Exchanges
Daniel Cawrey (@danielcawrey) | Published on March 13, 2014 at 19:23 GMT | Analysis, Bitcoin protocol, Exchanges, Investors, Technology

Digital currency exchanges have faced some trying times of late, with lawsuits due to negligence, closures because of regulatory pressure and collapses brought on by outright theft. All of which have fuelled the bitcoin media frenzy in recent weeks.

With so much dour news, what is the best way forward for the bitcoin industry? Are there methods to prove that an exchange has the asset holdings that it claims?

In fact, there are ways to verify this vital information, but implementing them will be a challenge.

Lack of disclosure

When doing business with a digital currency exchange, events like those mentioned above mean it is getting more difficult to entrust your bitcoins to hosted wallets and mysterious accounting structures.

Furthermore, to protect their interests, most exchanges do not disclose this sort of information.

Proprietary business knowledge is important to protect, of course, but surely transparency would be a better safeguard than a damaging leak, as seems to have happened with Mt. Gox.

Transactions excluding popular addresses has gone back up since the Mt. Gox collapse. Source: Blockchain.info
Recovery in progress: transactions excluding popular addresses have recovered ground since the Mt. Gox collapse. Source: Blockchain.info
There are certainly worthwhile digital currency exchanges that are trying to move bitcoin in a positive direction, but there have been far too many that have had serious problems.

Fiat currency institutions are not immune from all this, of course – payment card issuers, merchants and acquiring banks lost $11.27 billion to fraud in the calendar year 2012.

However, given the issues surrounding decentralised digital currencies, criminals are looking to profit within this environment. It’s low-hanging fruit versus the highly regulated banking industry’s estimated $1 trillion in IT spending year-over-year in the United States alone.

These problems permeate the mind and create a degree of uncertainty and mistrust concerning the industry. So, what can be done?

Public transparency

Proving legitimacy within the digital currency industry is becoming ever more important. When Bitstamp conducts audits and Coinbase allows a third party to review its infrastructure, this creates positive sentiment that there are people in the bitcoin sphere doing things correctly.

Jaron Lukasiewicz is the CEO and founder of Coinsetter. The company is an exchange and has a trading platform that links in with other exchange APIs.

Lukasiewicz has been gathering consensus about adopting a public transparency system. Coinsetter’s goal is to enable proof. Said Lukasiewicz:

“You can prove that you have a total amount of assets on the one hand and then prove or demonstrate the balance.”

‘Trustless proof’ of solvency gives exchange users a way to confirm that an exchange is doing what it says. It’s influenced by Gregory Maxwell’s proposal of ‘nodes’, which has seen increased interest over recent weeks.

Lukasiewicz explains the idea thus:

“What would happen is no one would ever know who a person is. They will benefit from cryptographic proof that shows their 10,000 BTC, for example, is theirs. I think any sort of downside is outweighed by the potential upside.”

Many exchanges are doing the right thing, but Coinsetter wants to go even further. Lukasiewicz is hoping that other exchanges will see the significance of an initiative like this.

“No one would give up privacy in the interest of assets. All I know is what we’re doing, but my hope is that other exchanges [will] do it,” he said.

Smart contracts

One problem with public transparency is that while it does provide information, how can you tell if the data you are getting is accurate?

Perhaps public transparency is only part of the equation. Smart contracts could further benefit everyone and are integrated within the Bitcoin protocol itself.

What a smart contract would do is guarantee users the existence of funds. When it comes to the US dollar and traditional banking, it is understood that the system is based on the backing of the federal government.

Bitcoin lacks a third party in the form of a powerful financial institution, so legitimacy may require reliance on some sort of cryptographic contract.

There are a number of efforts currently under way to provide smart contract concepts in some alternative digital currencies. However, employing this type of safeguard within bitcoin might be the most important goal for influencing adoption as a whole.

The banking industry is one sector that needs to see the iterative potential of digital currencies. Innovation in bitcoin would be one way to prove that the protocol can better adapt to the needs of the people than fiat currencies.

Mike Hearn, who oversees development of the bitcoinj Java client, has said that overall bitcoin development is falling behind, attributing the problem to fewer people putting in effort to move things forward.

Lukasiewicz agrees, and said that one of the reasons why he started the conversation is the lack of one right now:

“Bitcoin as a protocol, it’s had additions, it’s had fixes, but it hasn’t innovated on some of the more novel but very important things.”

Inherent risks

No matter if it is credit cards, banking or bitcoin there are always financial risks. Even transparency can come at a cost, because more information is being given out to those who may want to intrude and steal.

New ideas like security crowdsourcing are helping to combat this. The startup CrowdCurity, for example, brings more eyes to application-level security in the form of rewards-based incentives.

However, no matter how much is spent on securing a system, someone will always be there to try to get in. Just ask the banking industry.

Not everyone will like the idea of public transparency and/or utilizing smart contracts within bitcoin exchanges. Those uncomfortable with such ideas may simply go elsewhere.

When presented with that notion, Lukasiewicz couldn’t deny that people will always have options, but he contends that the expectation of privacy within this system is part of the plan. As he explained:

“People would probably go to other exchanges, but what I would say is that all the initiatives we’re looking to implement are anonymous. No one would give up privacy in the interests of assets.”

That is, at least, an improvement over the services existing financial providers offer.

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Bitcoin Proves Just the Tonic for London Gin Distillery
Roop Gill (@roopgill) | Published on March 13, 2014 at 18:03 GMT | Companies, Lifestyle, Merchants, News

UK Bitcoin holders can now spend their digital currency on a bottle of Dodd’s Gin or a 109 Cask, both distilled by The London Distillery Company (TLDC).

TLDC joins a growing list of merchants in London that are now accepting bitcoin. The distillery only opened their digital doors to cryptocurrencies this Monday and have since been surprised by the response from the community.

Chief Executive Darren Rook did not expect such immediate feedback:

“I’ve been amazed by the number of people who actually tried to do transactions through the website. It’s been pretty incredible actually. I don’t think I realised how many people have bitcoin and are looking for services outside of trading.”
https://www.youtube.com/watch?feature=player_embedded&v=dYFNfLWNTkA

Located at the south end of Battersea Bridge, TLDC can be found in an old Victoria dairy. Neighoubouring vendors and businesses include an art collective, a boxing gym and a bar.

Rook says that once his business has ironed out all the technicalities with accepting bitcoin, he will bring up the idea to others as well.

“We are looking at our neighbours to say ‘We can accept bitcoin; maybe you should look at it too because we’ll have people coming through.’ Our plan is to iron out the issues that we’ll potentially have and then go to everyone and say this is the opportunity.”

Currently, BitPay has only approved TLDC for transactions under £55 ($100) per day, but they are hoping to raise that limit by the end of the next week. In the meantime, some customers who tried to order pricier items were met with disappointed.

“We saw someone from America trying to do a cask purchase worth £1,000, but because of the authorisation limits we have in place at the moment it couldn’t go through,” says Rook. But, he admits that he is excited to see a new clientele who want to use their bitcoin.

Rook also revealed that the TLDC is also considering installing a Bitcoin ATM on site, similar to the machine over the river in the Old Shoreditch Station Cafe. Cheers to that, Londoners.

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Xapo Raises $20 Million for Ultra-Secure Bitcoin Storage
Pete Rizzo (@pete_rizzo_) | Published on March 13, 2014 at 21:00 GMT | Investors, Technology

California-based bitcoin security company Xapo has raised $20m as part of an initial round of fundraising led by Benchmark, Fortress Investment Group and Ribbit Capital.

The funding round is the second largest public round in the bitcoin space, trailing Coinbase’s $25m Series B completed in December, but coming in ahead of Circle’s $9m Series A round in October.

Founded by Wences Casares, former CEO and founder of digital wallet startup Lemon, the company maintains bitcoin cold storage facilities in two undisclosed locations.

Casares invoked his Argentinian background when talking about the company, noting his parents routinely lost money due to rapid inflation and deflation in his home country, and that as such, providing protection to clients against this risk is a matter he takes seriously.

Said Casares:

“I recognize that those are extremes but, when you grow up in that environment you become much more aware of problems with currency. So, when I saw bitcoin it was like a dream.”

The vaults boast enhanced security. For example, their servers were never online, meaning that no cybercriminals can fingerprint them as a means to steal information. Further, all the bitcoin in Xapo’s vaults are insured.

Fortress revealed in February that it bought $20m worth of bitcoins as part of its experimentation in the sector, while Ribbit Capital was founded by Bitcoin Foundation board member Micky Malka.

Service overview

Currently, Xapo holds bitcoin for large commercial customers such as hedge funds, family offices and wealth funds. Users pay 12 basis points a year for the service.

Benchmark partner Matt Cohler indicated that he believes the funding round is a natural step for the ecosystem, noting that he expects bitcoin users to eventually pick storage service providers the way they do banks.

Said Cohler:

“You’ll want to understand the company’s credibility, backing and solvency. In this case, you have a company led by one of the most important people in the bitcoin ecosystem, it’s insured and has investors from both Silicon Valley and Wall Street.”

2014 in startup funding

The Xapo funding is by far the largest round yet registered this year, in what has been a slow few months for funding. To date, the largest rounds in 2014 have been for Asian companies such as Singapore-based ATM manufacturer Tembusu and South Korean bitcoin exchange Korbit, both of which raised under $500,000.

However, if earlier predictions hold true it may not be one of the largest for long, as venture capital firms are still bullish on bitcoin‘s prospects across all sectors of the industry.

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Mintspare Will Pay Bitcoin For Your Old Electronics
Daniel Cawrey (@danielcawrey) | Published on March 13, 2014 at 22:54 GMT | Companies, News, Startups, Wallets

Consumers can now receive bitcoin when they trade in their old electronics through a new startup called Mintspare.

Galfry Puechavy, Mintspare’s CEO, told CoinDesk that the company’s goal is to be a simple way to get started with bitcoin:

“It’s just allows people to get in very, very easily. I personally haven’t seen a simpler way to acquire bitcoins,” said Puechavy.

How it works

Mintspare has its own bitcoin wallet that it provides to customers when an account is created. Users choose a device that they want to trade in, select the model and then determine the condition that it is in.

mintspareselectdevice

Mintspare then generates a prepaid shipping label and the user sends it in for BTC. Explained Puechavy:

“When we receive your iPhone or iPad, after verifying and diagnosing it and making sure it’s the right model we just send out your funds to your Mintspare wallet within 24 hours.”

Mintspare’s goal is to introduce newcomers to owning their first bitcoins.

Puechavy believes that the verification procedures required for exchanges “scare” potential bitcoin enthusiasts. Instead, bitcoin for gadgets is an alternative onramp to the crytpocurrency ecosystem MintSpare provides.

Electronics for bitcoin

Mintspare isn’t the only company that takes bitcoin for used devices. Glyde, a Palo Alto-based startup, also pays out in bitcoin for gadgets.

But, Glyde is a marketplace that connects sellers with buyers and also pays out in dollars. Mintspare is a trade-in program focused solely on fueling bitcoin adoption.

“Glyde is a different model than what we have. They still have their purpose, but the main goal of Mintspare is to alleviate the friction of starting with ownership with bitcoin.”

Like Glyde, Mintspare has a referral program. But it’s a bit different: With Glyde, users who refer customers get $5 per sign up. Mintspare’s program is on a sliding scale based on the amount of BTC a user’s trade-ins are worth.


MintSpare referral program rewards.

MintSpare’s referral program rewards are on a sliding scale with tiers.
“We have a referral program that we opened up after the beta. Now we’re ready to go full throttle,” Puechavy said.

Values and transparency

Mintspare makes a valuation on used devices based on a number of sources.

It has put together its own proprietary resource that allows them to determine the dollar value of a gadget. It then converts that to bitcoin. Said Puechavy:

“We have our own database. It comes from multiple sources. We just have an average from those sources that we get our numbers from.”

The company believes that in order to sell the Mintspare idea to prospective users, it is key to provide as much information as possible.

Being a bitcoin-based business means Mintspare has to offer prompt customer engagement and education. Many people are still wary of BTC, so providing a level of comfort is important. Puechavy is aware of this, and told CoinDesk:

“[Mintspare is] very transparent, the entire process. It’s a huge issue.”

More about Mintspare

The company began a private beta one month ago, with limitations on the number of devices that could be sent in, and opened to the public this week.

mintsparescreenshot

The startup is a project that Puechavy and a small globally distributed team has been working on for six months.

“Because we deal in bitcoin,we have employees around the world. This is really the first time in the world that you can really seamlessly integrate an international team,” he said.

“There are so many benefits from bitcoin that you don’t realize until you are given the circumstances. This is something impressive,” Puechavy said.

Mintspare signups are now open to anyone who has devices to trade in for bitcoin.

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Hong Kong’s First Bitcoin ATM Goes Live Today
Jon Southurst (@southtopia) | Published on March 14, 2014 at 09:40 GMT | Bitcoin ATM, Companies, News

Hong Kong’s first bitcoin ATM opened earlier today at a cafe in one of the city’s busiest pedestrian districts.

The ATM, a Lamassu one-way bitcoin dispensing machine, will be sited at Mr Bing – a cafe franchise that specialises in Beijing crepes or jianbing.

The launch took place at 7:30am, within the franchise premises at 83 Wellington Street, just off Hong Kong’s Central-Mid Levels escalator.

With such a public location, it will likely serve as an indicator of the Hong Kong general public’s interest in bitcoin.

HongKongATM2

Competition

The exact same day, local Hong Kong bitcoin exchange ANXBTC also launched a similar machine, revealing a race was on to supply bitcoins to an increasingly aware public in the startup and financial hub. There are even reports that a third company, Alitobit, will unveil another ATM in the coming weeks.

Bitcoin ATM manufacturer Robocoin announced it would be shipping machines to Hong Kong back in early January, but it seems it has been beaten to the post by the simpler, smaller Lamassu version.

The special administrative region of China already has online digital currency exchanges like ANXBTC and Bitfinex, with others coming soon. Furthermore, ANXBTC opened a physical trading counter just a couple of weeks ago.

Ideal location

In densely populated Hong Kong, the Central-Mid Levels escalator is an 800-metre covered escalator and moving walkway system – the longest in the world – that carries 55,000 people a day, serving as a commuter transit system carrying city workers to and from their apartments.

The route has become a highly developed retail and restaurant precinct, and the Mr Bing outlet sees a high turnover every day.

The Beijing creperie – which was founded by New Yorker Brian Goldberg – was also present at Hong Kong’s recent ‘RISE:Bitcoin‘ event, which aimed to introduce newcomers to digital currency use in daily life and attracted over 100 interested attendees on the day.

The company launching the ATM, Bitcoin Group HK, was formed by five long-term Hong Kong residents who came together to find new opportunities for digital currency in the territory.

Should the first ATM prove successful, they will definitely be scouting out a location for a second machine.

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Coins for Bands Hope to Disrupt Music Industry
Danny Bradbury (@dannybradbury) | Published on March 14, 2014 at 04:04 GMT | Altcoins, Lifestyle, News

Altcoins targeting specific communities are starting to emerge. This month sees the introduction of two separate cryptocurrencies aimed at musicians. Songcoin and FUNK each take different political and technical approaches to helping the independent music economy.

Songcoin is the brainchild of Pimovi, a subsidiary of Australian natural gas exploration firm The Chancellor Group.

Co-founded by Kasian Franks, who formerly founded now-defunct multimedia search firm SeeqPod, Pimovi is a digital entertainment company, eager to get involved in the cryptocurrency space.

Songcoin is designed not only to accommodate donations from fans, but also as a means of running contests and promotions – almost as a kind of loyalty points system that can travel between different bands and labels.

“We decided that the first phase should be providing musicians with tip jars. Fans can acquire Songcoins and can use them to tip musicians, and then as the circulation increases, the value would increase and the musicians would have another form of revenue,” Franks said. “We would step in as a company and do everything that we wanted to do to support it.”

Pimovi, 61% owned by the Group, has some muscle behind it. It has Rax Saxena of Cisco Systems, and formerly of JP Morgan Chase, Bank Of America And PricewaterhouseCoopers, on its advisory board. On the technical side, it has Dylan Durst, described as one of the co-architects of namecoin, advising.

The architecture of the coin was originally to be based on namecoin, but Franks said that the firm switched to litecoin, before finally settling on bitcoin. Now, it’s effective a bitcoin clone, with the same SHA-256 proof of work, reward block, and difficulty. Which begs the question: why wouldn’t musicians simply use bitcoin instead?

“The way I always answer that question is, why doesn’t the world have one credit card? The world has hundreds or thousands of them, serving different industries,” Franks says. “They all build in incentives and various ways that their customers specific to their industries can benefit. We can use Songcoin to create further incentives for music fans.”

Franks says that this extends into running services atop the coin, partnering with musicians for contents and promotions, but also with ticket houses and merchandisers to provide discount sales.

A marketing play

This seems to turn it into a marketing play, rather than a technological innovation. Songcoin will be premined, with the premined proportion amounting to far less than 50%, said Franks, although Pimovi hasn’t decided what proportion will be premined yet. The premine will be used for initial giveaways to promote the coin (known as ‘faucets’, in the cryptocurrency world).

But Franks maintains that bands are interested. He will work with the Merlin Group, he says, which represents many indie labels, and he already claims to have one large band interested.

Naturally, Franks sees big things ahead for the coin. “We are closely watching Auroracoin with its $230 million market cap along with its distribution designed for Iceland’s population. We see the music listening population as being much larger obviously,” he said.

He begins the premine in a week, and expects to provide wallets on Windows, OSX and Linux in around two weeks. Miners will be able to begin mining around then, too.

While Franks is using the bitcoin source for Pimovi’s coin, Simon de la Rouviere has chosen a Scrypt-based mechanism for his. De la Rouviere, co-founder of bitcoin-based digital content sales site Min.io, has launched the Cypherphunks, a network of musicians with its own cryptocurrency, called the FUNK.

Anyone can join the Cyberphunks, says de la Rouviere, who describes participants as a “decentralized band”. All musicians have rights to everything produced, and it can remixed and shared by participants in the collective. It is essentially crowdsourced, open sourced music.

The currency, like Songcoin, will be used for musician tip jars, and can also be used for donations. If members of the collective want to mount a project or play at a venue, then others could donate the cryptocurrency to help.

Venn diagrams of crypto currencies

De la Rouviere has his own argument for why musicians shouldn’t simply use bitcoin.

“Each cryptocurrency encompasses its own network, acting as stock in that network,” he said. “So if it is a new project that can’t necessarily fully fit into another cryptocurrency, it is better to create a new currency for it. Think of it in terms of venn diagrams: each cryptocurrency overlapping with others.”

The coin will have a two-minute block time, and will initially distribute 100,000 coins per block, an amount that will be halved every year for four years. From year 5 onwards, the block reward will be fixed at 5000 per block, and there will be no cap on the number of FUNKs.

“The infinite supply decision was difficult to make, because it untested at the moment. The reason for it was that if the coin also acts as stock in the idea, there might not be enough transactions in the future for the miners to sustain themselves just on transaction fees,” de la Rouviere said.

The coin will not be premined, he said. “Everyone needs equal stake in the idea for it flourish fully.”

De la Rouviere also sees potential for micropayments with the cryptocurrency, which will be traceable in and outside the Cypherphunks community, and he is working on various micro payments schemes, including a project based on PayFile, a micro transaction system initially developed by bitcoin core developer Mike Hearn.

This would allow users to pay for files downloaded on a per-kilobyte basis. “This could work well for things like streaming of MP3s,” he said, “but the jury is still out whether users would want to do it this way.”

In any case, members of the collective are all supposed to own the music, which makes micro payments a bit tricky, unless it’s donation-based, he points out.

“An idea is for each song sold (in say BTC or Doge), it is used directly to buy up FUNK on the market and then donate that FUNK to either projects within the community or just directly to the miners (as tx fees).”

The emergence of two musician-focused coins in the same month shows opportunity for a disruption in the independent music economy. With altcoins sprouting weekly and all of them targeting different communities, we’re sure these won’t be the last.

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Australian Tax Office Explains Bitcoin, Intends to Tax it
Jon Southurst (@southtopia) | Published on March 14, 2014 at 11:36 GMT | Asia, News, Regulation

The Australian Tax Office (ATO) has provided businesses with some more guidelines on how it intends to deal with bitcoin, stating that income and profits derived from bitcoin transactions are taxable.

The letter, sent to an Australian bitcoin entrepreneur in response to a request made last June, was a private ruling to specific questions and noted its contents were valid only to that case. But it gives digital currency businesses in the country a better idea of how they should act to comply with tax regulations.

The first question asked if transferring bitcoins to a private company in return for shares would count as income, either ordinary or that from a for-profit undertaking. The answer was simply “Yes”.

As to whether transferring bitcoins to another party would be subject to Goods and Services Tax (GST), the answer was also a one-word “Yes”.

Bitcoin profits would also be subject to capital gains tax, though deductions depending on the individual case would apply.

Clear understanding

The letter also laid out a series of explanations showing the ATO has a very clear understanding of what bitcoin is, as well as the technology and processes behind it.

It acknowledges that bitcoin is “based on an open source cryptographic protocol, which is not under the control of a central authority”.

According to the ATO’s definition:

“A Bitcoin is a numerical amount that is allocated to a ‘Bitcoin address’. A Bitcoin address is a long string of numbers and letters, each one unique. The process through which Bitcoins are created and enter into circulation is called Bitcoin mining.

Mining involves using freely downloadable Bitcoin software to solve complex cryptographic equations that essentially verify and validate blocks of Bitcoin transactions. The first ‘miner’ to successfully solving an equation receives a specified number of newly created Bitcoins as a reward to their Bitcoin address.

Accordingly, Bitcoins rely on a network of Bitcoin miners using the system to validate transactions and collectively implement a replicated ledger of Bitcoin transactions. The security of this ledger is protected by this mining process.

Bitcoins are circulated using a peer-to-peer computer network. Bitcoin users store their Bitcoins in a software program called a ‘Bitcoin wallet’.

A transaction involving Bitcoins requires an account, which is in essence a ‘public-/private-keypair’. A Bitcoin address derived from the public key is used to identify the account. To transfer Bitcoins to an account a transaction is created with the address of the account as the destination. To send Bitcoins from an account, the transaction has to be signed with the private key associated with the sending account.”

It also identified that participants in the bitcoin economy did so with the intention of making money, particularly those who mined:

“You invested a substantial amount of money in computer hardware and advanced scientific computing systems with the purpose of making substantial profit from mining and selling Bitcoins.”

An ATO representative had said in early February that the department would publish guidelines on bitcoin for the current tax year, which ends in June. Transactions would be taxed according to their value in Australian dollars.

Permissive atmosphere

Australia has provided some of the more level-headed responses to bitcoin and bitcoin business so far. Compared to other nations, warnings from Australia’s regulators have been comparatively mild and so far unofficial.

While the country’s corporate banks have reacted in different ways, there have been no central bank moves to block those banks or other financial institutions from working with digital currency. There are no longer any government-owned banks in Australia.

So far the response has been similar to that of Singapore, which has also provided some guidelines on how bitcoin businesses should approach tax time.

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Macro Energy Shares Soar on Australian Stock Exchange Following Bitcoin Deal
Nermin Hajdarbegovic | Published on March 14, 2014 at 12:30 GMT | Companies, Investors, News

Shares of Australian investment firm Macro Energy gained 42% yesterday, after news emerged that it plans to enter the bitcoin space and raise A$9.1m ($8.2m) in funding.

Yesterday, the company announced the acquisition of Digital CC and its subsidiary digitalBTC, which runs a bitcoin mining operation and a trade desk.

The move will make digitalBTC the first bitcoin company listed on the Australian Stock Exchange (ASX). Macro Energy also announced that it has firm commitments from investors who are planning to invest A$9.1m in the consolidated company.

The money will be used to expand digitalBTC’s mining and trading operations, as well as to develop retail bitcoin products such as mobile apps.

Zhenya Tsvetnenko, the founder and chairman of digitalBTC, pointed out that the ASX listing will allow public market investors the opportunity to get involved in digital currencies.

Are institutional investors looking at bitcoin?

A number of leading names in the financial industry have started looking into bitcoin and several interesting reports have been published over the last couple of months. None of them will enter the bitcoin space anytime soon, but their interest has not gone unnoticed.

They are not keen on bitcoin as a currency, but rather as a cost-effective payments platform, especially for microtransactions and remittances. While the media buzz is still focused on speculation, questionable practices and volatility, the big players are looking at the Bitcoin protocol and the network.

Earlier this week Perseus Telecom announced the launch of a globally integrated bitcoin exchange and the Digital Currency Initiative. The firm is one of the leading providers of high-bandwidth communications used by trading firms around the world and it believes it can offer unparalleled security and speed, trouncing existing bitcoin platforms.

Movement on the regulatory front

Regulatory issues remain the biggest concern for big investors who are reluctant to make investments in a completely unregulated market. However, the ball is finally rolling and New York State is leading the charge, spearheaded by New York’s Superintendent of Financial Services, Benjamin M Lawsky.

Lawsky and the NYDFS are working on no-nonsense regulation that could pave the way to the creation of New York-based bitcoin exchanges and a lot of headway has been made over the last couple of months.

The NYDFS bitcoin hearings in January were a step in the right direction and this week New York started accepting applications for digital currency exchanges.

However, the rest of the US might not be as keen to regulate and embrace digital currencies. The Texas State Securities Board has apparently informed Balanced Energy LLC to stop getting involved in bitcoin.

The company has also been accused of selling unregistered securities, so regulatory involvement may have a different background than some reports indicate, ie it has more to do with violating securities legislation than merely investing in bitcoin.

The regulator also pointed out that Balanced Energy has failed to disclose to investors the risks of using bitcoins to purchase interest in various investments. Extreme swings in the price of digital currencies could affect the amount of money available for business operations, the regulator warned.

According to the Austin American-Statesman, this is the first bitcoin-related cease and desist order issued in the US.

The company has been ordered to stop accepting bitcoin investments and selling unregistered securities.

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Iranian Government Could Move Quickly to Regulate Bitcoin, Reports Suggest
Pete Rizzo (@pete_rizzo_) | Published on March 14, 2014 at 13:33 GMT | News, Prices, Regulation

A new report from Fars News Agency has surfaced, suggesting that Iran’s National Center of Cyberspace (NCC) may consider implementing regulation regarding digital currencies, possibly as soon as this year.

Founded in 2012, the NCC is a government body responsible for implementing policies created by the Supreme Council of Cyberspace (SCC), which oversees Internet issues. The organisation has been described as a major decision-making authority in the hardware and software fields.

Informal translations of the text, corroborated by CoinDesk sources in Iran, suggest that the document provides an overview of bitcoin’s benefits, noting that it is not controlled by governments, features irreversible payments and comes with very low transaction fees.

Statements from Saeed Mahdyoon, described in past reports as a telecommunications official with the Irani government, indicate that the nation sees regulation as necessary, given that the world is quickly adopting digital currency payments and that the positive and negatives of their use are still unknown.

Further, he suggests high-level officials in the Ministry of Economic Affairs and Finance and the Central Bank of Iran may be involved in the deliberations.

Community reaction

A spokesperson for Iran-based bitcoin exchange CoinAva suggested that the reports seemed credible given that the Fars News Agency has ties to the Irani government. Though, he doesn’t believe this is an accurate representation of the agency’s internal thinking.

“I see this news as testing the water to get feedback and reaction from other authorities in power rather than an official stance.”

Mor Roghani, CEO of Iran-based e-commerce business Persian Shoes, was more positive about the announcement, suggesting also that this won’t be the last of Iran’s statements on bitcoin.

Said Roghani:

“The fact that someone in the government has positive attitude toward bitcoin is fascinating. I think we will see more in the coming months.”

Bitcoin ecosystem

Though the current bitcoin ecosystem in Iran remains small, the country’s population is predominantly young, meaning more than 50% of the population now uses the Internet.

Estimates from The Washington Post suggest Iran has the highest number of Internet users in the Middle East, and perhaps unsurprisingly, some of these individuals have become interested in bitcoin.

The business sector remains small as well. CoinAva launched in July, while merchants like Persian Shoes and musician Mohammad Rafigh are using the payment tool to open up paths to new customers.

Notably, speculation on reddit centered on how bitcoin could potentially gain significant inroads given issues with the domestic currency, the rial. In 2012, the currency suffered from severe hyperinflation, though more recent reports now suggest the currency has stablized. Discussions also theorized bitcoin could help the country hedge against harsh sanctions imposed by other nations.

Bitcoin in the Middle East

Though on-the-ground reports are scarce, some companies and countries in the Middle East have acknowledged bitcoin, suggesting awareness may be small but growing.

For example, Anghami, a streaming music platform serving the Middle East and North Africa, recently began accepting bitcoin.

The Central Bank of Jordan, the Bank of Lebanon and the Bank of Israel have also commented on digital currency regulation, with Israel and Lebanon issuing warnings to consumers and Jordan limiting its banks ability to work with the sector.

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Polish Bitcoin Exchange Bitcurex Targeted by Hacking Attack
Jaroslaw Adamowski | Published on March 14, 2014 at 14:52 GMT | Companies, Crime, News, Technology

UPDATE, 14th March, 17:37 GMT: Bitcurex official statement added.

—————————————————-

Poland’s leading bitcoin exchange Bitcurex temporarily shut down its site today following a hack which targeted funds in its users’ bitcoin wallets.

The exchange’s staff published a message on Facebook which stated that due “to an error and ongoing maintenance works” the platform had decided to “temporarily shut down [its] service”.

Company representatives told CoinDesk that the decision to temporarily close the website will allow the platform’s IT team to “perform a necessary verification”.

More details on the incident will be disclosed shortly once the maintenance works are completed, the representatives said, adding that there are reasons for optimism on their final outcome.

Filip Godecki, a representative of Bitcurex, told CoinDesk: ”Based on what our IT team has been able to determine, it seems that the worst-case scenario can be ruled out.”

The site reportedly halted all transactions at 09:37 am local time.

A statement from the company said:

“We successfully blocked a hacking attack on Bitcurex, preventing mass theft of BTC funds of our users. Thanks to automatic safety procedures, hackers managed to defraud only a portion of the funds stored in operational Hot Wallet Bitcurex. The majority of funds from Hot Wallet, as well the entirety of funds from Cold Wallet and FIAT monetary funds remained intact.

Our team located and removed the source of the problem. We are working on resuming normal service, at the same time an external audit is being conducted: we will soon provide the exact date of resuming all Bitcurex functionalities. More information will be provided in further statements.

We are sorry for the inconvenience, and most of all we thank the whole BTC community for the support we received: we were put to a test that will make us stronger.”

When asked exactly how many bitcoins had been stolen, Godecki would not part with the specifics, replying: “It’s managable – it was only a part of our hot wallet.”

Community reaction

Meanwhile, the platform’s users have been discussing the incident on various Polish cryptocurrency forums, and a user’s account of what happened was published by local news site Niebezpiecznik.pl. According to the information obtained, the attack targeted digital currency worth several million dollars. The user said:

“At about 09:34 am, someone placed an offer to buy bitcoins at PLN 5,000 per unit, for a total of at least PLN 94m, and after a while offers to sell for the same price were also made.”

As a confirmation of the presented account, a screenshot taken from the website prior to the shutdown by another user shows an offer to buy 18,978.5 BTC for the total amount of PLN 94.89m ($31.1m), which translates into roughly PLN 5,000 ($1,637) per BTC.

About Bitcurex

According to data obtained from Bitcoincharts on 14th March, Bitcurex had a 30-day volume of 18,359.3 BTC and PLN 36.61m ($12m). The platform’s six-month volume is 131,617.4 BTC and roughly PLN 229m ($75m).

The attack comes several weeks after Bitcurex released a statement designed to calm its users following the meltdown of Mt.Gox.

“Out of concern for the safety of transactions made by our customers and their funds … we repeated a series of internal audits, as we always treat such incidents very seriously, regardless of how efficient our system is and how much we trust our solutions.”

It added: “Bitcurex has always absolutely prioritized the safety of the service and the mechanics of its operation. This is why we always choose solutions that we are 100% sure [of], and it does not matter how much time and effort it takes to implement them.”

The incident is not the first attack to target a Poland-based bitcoin exchange. As earlier reported, in November 2013, Poland’s digital currency exchange Bidextreme.pl was hacked and its customers’ bitcoin and litecoin wallets were emptied.

The amount of digital currency stolen was not disclosed by the Polish platform, which was founded in 2013. Following the attack, the site was shut down by its owner and put up for sale for a minimum price of 170 BTC.

Set up in July 2012, Bitcurex is based in Łódź, Poland. The cryptocurrency exchange is operated by local company Digital Future Ltd.

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US Mulls Regulating Bitcoin Under Rules for Commodities
Dan Palmer | Published on March 14, 2014 at 15:26 GMT | Law, News, Regulation, US & Canada

The US Commodity Futures Trading Commission (CTFC) has announced that it is investigating whether it has the authority to regulate bitcoin and other digital currencies, Reuters reports.

“We are looking into that,” Mark Wetjen, the CFTC’s acting chairman, said at an industry conference. “It’s been initiated, there’s been an internal discussion at the staff level.”

The CFTC, which regulates the swaps and futures market, is studying whether bitcoin falls under the same rules as commodities markets, according to Wetjen. He said:

“I think people [within the CTFC] believe there’s a pretty good argument that it would fit that definition.”

Issues remain

“Then there’s a separate question about whether or not there is some derivative contract based on, or denominated in, a virtual currency and whether that’s listed on an exchange,” Wetjen stated, adding that the issue remains to be looked at in detail.

Wetjen said he could not predict the outcome of the discussions or give a timeframe for regulation. The chairman has previously spoken out about cryptocurrencies. In a statement before the US Senate Committee he said:

“Virtual currency [...] does present new risk, as a firm would be interacting outside of bank payment channels, increasing the risk of hacking or fraud, among other cybersecurity issues. The CFTC is working with registrants that are seeking to accept virtual currencies to educate them about best practices.”

Change of attitude

The comments follow New York State’s recent decision to commence regulating bitcoin exchanges this week.

Referencing the collapse of Mt. Gox and other exchanges, New York’s Superintendent of Financial Services, Benjamin M. Lawsky, announced that the state is accepting applications for digital currency exchanges, with such submissions representing a formal commitment to the regulatory process.

Lawsky said that these businesses will be regulated under new New York regulation, anticipated to be in place by the middle of 2014.

Wetjen’s comments seem to indicate that regulation is now very much on the horizon across the US as a whole, which will come as a relief to many bitcoin business that had complained of a lack of regulations to abide by.