BITCOIN NEWS EVRYDAY! From multiple sources.

[ponjava]

The importance of Overstock’s Bitcoin sales

 Christoph Marckx  15/03/2014  Accepts Bitcoin, Bitcoin, Bitcoin Analysis, Bitcoin Merchants, Bitcoin Regulation, Business, News
Posted 4 hours ago

Patrick Byrne is a firm believer in Bitcoin
Overstock CEO Patrick Byrne keeps believing in Bitcoin’s future.
Overstock was one of the first major online retailers to accept Bitcoin as a payment method. The announcement was a big step for Bitcoin. The cryptocoin is trying to find mainstream acceptance and events like this are important when trying to convince common people to start using Bitcoins.

Small Bitcoin revenue

Right after announcing the possibility to pay with Bitcoins, Overstock saw massive purchases made with the virtual currency. Earlier this month, Overstock said they crossed the million dollar mark in Bitcoin payments. Now, when the novelty has worn off, Overstock took another look at the Bitcoin numbers in their sales database. According to Patrick Byrne, CEO of Overstock, they are getting roughly $20k to $30k a day in Bitcoin payments.

It’s a decent amount for sure but, in reality, this is hardly a fraction of Overstock’s daily sales. When we compare these numbers to the company’s 2013 sales figures, the total share of Bitcoin is 0.83% of their total revenue. Of course, there are other things playing here. The percentage may be low, but prospect of the Bitcoin market for Overstock are still good. That’s not even mentioning the amount of free publicity Overstock got after accepting Bitcoin.

To understand the cause of the current problem, we just have to take a closer look at what Bitcoin ‘is’ right now. Half of all the coins are owned by less than 1,000 people. This is a very tiny amount of wallets that make the number of potential shoppers relatively small. If Overstock wants to see their Bitcoin revenue increase, it has to wait for the Bitcoin market to grow. Once the coin becomes a part of everyday life, the mainstream acceptance we talked about earlier, sales using the coin will increase tremendously.

Bitcoin is here to stay

One could fear that the company would think of abandoning Bitcoin until the coin has matured, but Overstock is a different case. Byrne is a believer. He thinks Bitcoin is the future of money and believes the entire situation can only be positive for both his business and Bitcoins. When asked about his perspective, he said that there is no doubt the market will continue to grow and that he stands by the company’s decision.

Overstock isn’t the only company that accepts Bitcoin as a method of payment. Nearly every merchant that works with Bitcoins has received similar results. People are spending Bitcoins daily, but it is only a fraction of their overall revenue. Some people report that Bitcoin’s future is uncertain. People aren’t sure about what Bitcoins are and how they are used. On top of that, the recent scandals that have been hitting the newspapers are spreading fear among the people.

That’s why it is so important to have companies like Overstock around. These are authorities that people believe in. When a CEO like Byrne pronounces his faith in Bitcoin, it gets people’s attention. They become curious as to why someone successful as Byrne would firmly believe in the future of something they heard so much bad things about. They will start looking up things about cryptocurrencies, not because they have to but because they want to. And that is the most important step towards mainstream acceptance. You need people that are interested and willing to learn. Companies like Overstock are pioneers. Every revolution needs pioneers.

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[ponjava]

Bitcoin receives award at CeBIT 2014

 Christoph Marckx  14/03/2014  Bitcoin, Business, Events, News, Services
Posted 1 day ago

http://www.cryptocoinsnews.com/wp-content/uploads/2014/03/flasskamper-300x225.jpg

Oliver Flasskämper accepts Bitcoin award
Oliver Flaßkämper accepted Bitcoin’s award at CeBIT 2014
CeBIT, one of the most important exhibitions about technology and innovations in the world, is going on this week. The German festival  attracts lots of attention. It has several famous key speakers, countless exhibitions, expert panels, everything to make this an interesting week. And, of course, Bitcoin was a trending topic at CeBIT as well.

Award for Bitcoin

After being talk of the town at SXSW 2014, Bitcoin managed to snag an award at CeBIT. This happened yesterday, during the presentation of the Linux New Media Awards. Bitcoin received the award in the category “most innovative open-source project”.

, managing director of Bitcoin.de,was officially representing the Bitcoin Federation and the scene. He, gladly, accepted the award.

The award is handed out by two parties. Medialinx AG, a company that resides in Munich, is the world’s largest content provider when it comes to Linux and open-source projects in general. Together with CeBIT Open Source, they try to find suitable candidates for this reward. They look for projects, organizations, individuals and companies for their outstanding services to Linux and open-source. Once a year, they hand out this reward to the project they think did the best work for the open-source business.

Yesterday that once a year momen,t finally, arrived again. Moderator Michael Fellner gave the microphone to open-source expert Thomas Uhl. Uhl had a fine way of introducing the winner, saying this year’s awarded project was “a bit of IT and bit of cryptography. A damn lot of cryptography.” If there still was anyone left who had no clue about who or what was going to win, these doubts were taken away with Uhl’s next words. ”Some would say it’s a gamble, others that it was fraud. Some claimed that one could lose a lot of money and someone else said it was no money at all, while others said it was the future of the digital economy.”

After that second sentence, everyone knew what he was talking about. In normal circumstances, the award would be granted to Bitcoin’s original creator Satoshi Nakamoto. Obviously, it was impossible to do this, so Uhl presented the award to Flaskämper instead. He praised him for being the manager of Bitcoin.de and addressed him as the representative of the German Bitcoin scene.

Revolutionizing money

In his acceptance speech, Flaskämper explained that Bitcoin.de, the largest marketplace for the virtual  currency in Europe, is doing really well. The exchange is healthy and free of problems as the ones Mt. Gox has been facing the past few months. Immediately after saying that, he expressed his desire to get a better infrastructure. It was his ending sentence that was the most inspirational: “Wikipedia has revolutionized the way we share knowledge, Twitter and Facebook redefined freedom of expression; Bitcoin will revolutionize the way we work with money.”

This kind of award is vital for Bitcoin’s acceptance. We focus too much on the bad news, while there are so many exciting, good things happening right under our noses.

For those that are interested, Linux Magazin promised to put up a stream of the ceremony on its website.

[crazy daisy]

Hello everybody!

I see that there are lots of experts on bitcoin, and I would like to ask you to complete the following form.
It would really help us with our assignment at the Faculty of Economics. Your answers are completly ANONYMOUS, and they will be used only for student purposes.

Thank you very much!:)

(just lead the following link)

https://docs.google.com/forms/d/1VEP1klGDfGXetGNDiq0GwuddzVx769gTYT7GayMcpCk/viewform

[trustnobody]

it will contain only news or discussions as well? if it is something like reddit with lots of useless stuff I won't visit it

[MICRO]

it will contain only news or discussions as well? if it is something like reddit with lots of useless stuff I won't visit it

Well idea is to be only news. But as u can see since this thread have so many reads, it starting to attract spammers , so pls just report them.

[MICRO]

What the UK’s Tax Reversal Means for Bitcoin
Kadhim Shubber (@kadhimshubber) | Published on March 16, 2014 at 10:08 GMT | Analysis, Europe, Lifestyle, News, Regulation

The regular drumbeat of governments warnings on bitcoin continues apace. Last month, Israel, Vietnam and Cyprus joined the chorus.

However, in addition to this din (not entirely unwarranted many would argue) one government body has begun to undo its earlier mistakes in the bitcoin space.

The body in question is the UK’s tax authority, HMRC, which this month effectively recognised bitcoin as a currency after months of lobbying by London’s bitcoin community, led by members of the soon-to-launch UK Digital Currency Association.

But will HMRC’s decision turn the UK into a leading centre for new financial services based around bitcoin or should those arguing for greater government engagement be careful what they wish for?

A sensible approach?

The positive arguments are obvious. HMRC has flip-flopped around the issue for months, first saying bitcoins were ‘taxable vouchers’ in November 2013, meaning that any purchase of bitcoin would require a VAT payment of 20% of the value of the bitcoin. This is the equivalent of paying €100 in tax if you wanted to buy €500 for your holiday in Spain.

Not long after, at the start of December 2013, they began to backtrack, beginning discussions with bitcoiners and indicating that they might reconsider their earlier position. At the time, Elliptic CEO Tom Robinson said:

“The general feeling I got from [our meeting with HMRC] was that they don’t think VAT should be levied on the bitcoin value itself.”

The fact that this was just weeks after HMRC decided the exact opposite indicates their rather haphazard approach to the role of cryptocurrencies.

Firing the starting gun

In their guidance issued on 3rd March, HMRC stepped back from explicitly recognising bitcoin as a currency, but their approach effectively treats it like any other form of payment for tax purposes:

“In all instances, VAT will be due in the normal way from suppliers of any goods or services sold in exchange for Bitcoin or other similar cryptocurrency.”

For Richard Asquith, Head of Tax at the TMF Group, this creates a stable framework that will encourage bitcoin businesses to look at the UK as a base for their operations. Other countries are going to have to come to a decision about how to tax bitcoin, he says:

“It’s going to force tax authorities around Europe and particularly the US to make a decision about how to tax it. The UK has fired the starting gun.”

Few other countries have taken a similar approach. Germany previously classed bitcoin as “private money”, while Singapore has classed it as a good, rather than a currency, and Russia has gone as far as to say bitcoin transactions are illegal, although they have allegedly softened their stance somewhat.

“HMRC’s decision is quite forward thinking in terms of other countries,” says Asquith. “It gives it the proper recognition for how it’s used in day-to-day activities.”

How much is 20%?

But before everyone breaks out the champagne, it should be remembered that there’s a lot that the guidance doesn’t cover.

For one, HMRC deals with tax issues, so their advice doesn’t even touch on the question of how bitcoin businesses might be regulated, unlike the New York Department of Financial Services (NYDFS), which recently announced they would begin regulating bitcoin exchanges.

Furthermore, the question of which exchange rate to use is still one that’s up for debate. HMRC merely says that merchants should use “sterling value of the cryptocurrency at the point the transaction takes place”, which is fine if you are using BitPay or Coinbase, merchant services that instantly convert bitcoin payments into fiat currency. However, if you are taking bitcoin from customers directly then you need to be careful, and consistent, about converting from bitcoin into sterling.

With the recent collapse of Mt. Gox and hacks of other exchanges, it would be dangerous for HMRC to pin their colours to any single bitcoin exchange, or even a group of exchanges says Richard Howlett, whose firm Selachii LLP is launching a lawsuit against Mt. Gox:

“If the government were to implicitly back an exchange, it could be disastrous. They’re not going to want people to think that ‘this is a safe place to trade my bitcoin’.”

Conversely, for fiat currencies HMRC currently publishes exchange rate figures from the Financial Times. As measures of the price of bitcoin become more established (for example, the CoinDesk Bitcoin Price Index), this should become less of an issue.

For now, merchants should choose a popular exchange and ensure they’re not moving around to get the best rate.

“You have to take the fair market value,” says Richard Asquith. “HMRC insist that you use the most popular exchanges and you stick to it.”

Giving bitcoin legitimacy

In a blog post published in response to HMRC’s guidance, Elliptic CEO Tom Robinson, who has arguably driven the change in policy, praised the tax authority, writing that they had taken “a thoughtful and logical approach” to cryptocurrencies.

At the same time, there doesn’t appear to be a consistent attitude towards bitcoin among the UK establishment. The Bank of England, for example, this week suggested that bitcoin is more like a commodity than a currency:

“Digital currencies … may have more conceptual similarities to commodities, such as gold, than money”

Aside from the practical implications, HMRC’s decision gives bitcoin a significant reputation boost. It’s even taxed like a currency, supporters in the UK can now say. Howlett agrees: “[HMRC is] acknowledging that this is something that’s here to stay.”

But if further government regulation is to follow, as Robinson’s post suggests, the next battle for bitcoin’s supporters is ensuring that it’s the “right” regulation. Indeed, getting bitcoiners to agree what regulation is welcome will likely be a challenge all in itself.

[MICRO]

Why Regulation Could Help Bitcoin
Bob Swarup (@bobswarup) | Published on March 16, 2014 at 11:07 GMT | Analysis, Companies, Law, Regulation

A couple of weeks ago, we published a piece called ‘Why Regulating Bitcoin Won’t Work‘. Here Bob Swarup provides the counter argument, assessing what regulations could do for bitcoin. Bob has extensive global experience in financial markets, macroeconomics and regulation. He has also recently released his new book Money Mania: Booms, Panics, and Busts from Ancient Rome to the Great Meltdown.

Is it a commodity? Is it a currency? No, it’s bitcoin.

There is a touch of Messianic fervour about virtual currencies these days, most notably bitcoin.

Newsweek relaunched its print edition on 6th March, with an exclusive scoop on the unmasking of one Satoshi Nakamoto, the founder of bitcoin, sparking a Keystone Cops farcical chase of reporters rushing to question him.

regulation-thumbs-up

A fortnight earlier, the Winklevoss twins (of Facebook fame) launched the Winkdex to track the price of bitcoin and talked of the market being as large as $400bn – some 50 times larger than the current valuation.

Meanwhile, countless firms now talk of taking bitcoins as payment, including Richard Branson for anyone wanting to hitch a spaceflight on Virgin Galactic; Bitcoin ATMs have mushroomed since the first launched in Vancouver, Canada, in November 2013; and an army of bitcoin miners are recreating the digital equivalent of the California Gold Rush.

Bitcoin supporters are everywhere right now, if a tad more defensive in the wake of Mt. Gox. They invoke – in sentiment at least – the arguments of the noted Austrian economist, Friedrich Hayek, who advocated a free market of competing denationalised currencies. Provide people with choice, Hayek held, and they would instinctively choose those currencies that retained their value best and were least subject to the whims of errant policymakers.

Certainly, in an era where trust in the traditional monetary system has been shaken, bitcoin’s limited supply and freedom from human interference are powerful assets. They have transformed what was an interesting intellectual experiment into a living economy. Today, over 100 virtual currencies – bitcoin, Ripple, Unobtanium, HoboNickels, iCoin and their tribe – are fighting it out in a market $10bn large and growing.

But let’s not get ahead of ourselves. None of this is enough to create a sustainable pervasive currency. The reason is simple: currencies that thrive do so because they are endorsed and, thereby, legitimised by the state.

Money and state

Money is a social construct. History shows us anything – wooden sticks, huge stones, coins, gold, boxes of detergent and now, bits of enigmatic computer code – can function as money.

Any meaning we attach is imparted through the polyglot of social interactions – status, social conformity and human behaviour – that money encodes. Without the trust born of these, no medium of exchange can exist. Even when two nations trade, the money exchanged needs to be credible and convertible, which is why they often use a reserve currency, such as the US dollar.

“The currencies that succeed are not those that circumvent the state, but rather those that are legitimised by the state.”

But for a currency to become widespread, lots of people need to accept it. That implies the presence of society and the overarching institutions it creates. In other words, it presupposes the existence of a dominant state that can influence the behaviour of individuals. The currencies that succeed, therefore, are not those that circumvent the state, but rather those that are legitimised by the state.

Once the state accepts said trinkets – digital or otherwise – and starts to regulate them, you also drive individuals to find new ways of acquiring this new medium. They now work for others, trade goods or services, and importantly, begin to use this new medium as a pervasive social hierarchy begins to emerge.

History demonstrates this time and time again. Most notably, in 1100, Henry I of England issued an edict that going forward, taxes could only be paid using tallies – humble wooden sticks. He also prescribed their form – rudimentary medieval regulation – stating that each tally was to be cleaved in half between debtor and creditor, with the sum of money represented by an abacus of carefully delineated notches.

The results were dramatic. Growing confidence created a natural demand. The need to acquire the sticks for taxes meant that transactions began to be done using them. For the next seven centuries, wood passed as proxy for money and the English even evolved a sophisticated system of government financing based around tallies.

The upside of regulation

Done intelligently, regulation can solve key problems that bitcoin is now facing in its efforts to become a proper currency.

First, regulation can create demand for bitcoins. By making them a means of paying taxes or closing major financial transactions, it provides legitimacy to the currency. That naturally diffuses knowledge, familiarity and demand for bitcoins across a wider swathe of people, breeding acceptance. This is essential. The majority of Americans today – 80% according to a recent poll by TheStreet.com – still have no idea what bitcoin is.

This increased demand in turn can help manage the volatile swings that typify bitcoin today. The currency’s volatility may be loved by speculators looking to claw profits, but businesses still file tax returns and accounts in dollars, euros and other mainstream currencies.

The need to convert back from bitcoins to these and maintain consistent margins means many will prioritise earnings stability over continual monitoring of fluctuating bitcoin prices. But as more people embrace bitcoin, the marketplace gains more liquidity, naturally dampening volatility and making bitcoin transactions more than a marketing gimmick.

Second, the rationale for regulation is always simple: markets may fail and cause financial crisis. This is not surprising – what we term financial markets are little more than a collective noun for the hopes, greed and fears of countless individuals jostling with each other in the continual pursuit of wealth (and status).

The widespread use of any currency, including bitcoin, is predicated on the assurance that it is ‘safe’. Thus, currencies are dependent on the qualitative metric of confidence for their long-term survival.

Fiat vs bitcoin

Bitcoin – more than most other currencies – runs the risk of ‘bank runs’. The limited quantum – a maximum of 21 million – is problematic for the needs of a wider economy that is structurally dependent on borrowing. If bitcoins gain wider acceptance, simple transactions involving exchange will soon give way to borrowing and lending in bitcoins.

This financialisation is an inevitable consequence of human innovation, as people seek to make money out of these contours of supply and demand. But given the limited number of bitcoins, there will inevitably also be bottlenecks as demand occasionally outstrips supply and people overextend themselves.

In the absence of externally imposed safeguards to instil social confidence, people are more likely to panic at the first whiff of trouble, creating a disorderly stampede that could irreparably harm bitcoin’s credibility in the eyes of consumers.

Regulation will not prevent future bitcoin crises, but it can help manage their impact and minimise the disruption caused. This is critical. As humans, we have strong aversions to loss and uncertainty. Regulation provides an emotional salve that soothes our tail risk. It creates an abstract implicit trust that the economic infrastructure we are using is sound, with better behaviour enforced by the threat of sanction. Good regulation also focuses on transparency – an important component of allowing us to judge risks and make reasoned decisions.

Given regulation and the sanction of the state, bitcoin has a chance of progressing past its adolescence. Otherwise, it remains just another interesting economic experiment, confined to niche corners of the digiverse, much like cigarettes in prison or trading cards in the playground.

[MICRO]

What the UK’s Tax Reversal Means for Bitcoin
Kadhim Shubber (@kadhimshubber) | Published on March 16, 2014 at 10:08 GMT | Analysis, Europe, Lifestyle, Regulation

The regular drumbeat of governments warnings on bitcoin continues apace. Last month, Israel, Vietnam and Cyprus joined the chorus.

However, in addition to this din (not entirely unwarranted many would argue) one government body has begun to undo its earlier mistakes in the bitcoin space.

The body in question is the UK’s tax authority, HMRC, which this month effectively recognised bitcoin as a currency after months of lobbying by London’s bitcoin community, led by members of the soon-to-launch UK Digital Currency Association.

But will HMRC’s decision turn the UK into a leading centre for new financial services based around bitcoin or should those arguing for greater government engagement be careful what they wish for?

A sensible approach?

The positive arguments are obvious. HMRC has flip-flopped around the issue for months, first saying bitcoins were ‘taxable vouchers’ in November 2013, meaning that any purchase of bitcoin would require a VAT payment of 20% of the value of the bitcoin. This is the equivalent of paying €100 in tax if you wanted to buy €500 for your holiday in Spain.

Not long after, at the start of December 2013, they began to backtrack, beginning discussions with bitcoiners and indicating that they might reconsider their earlier position. At the time, Elliptic CEO Tom Robinson said:

“The general feeling I got from [our meeting with HMRC] was that they don’t think VAT should be levied on the bitcoin value itself.”

The fact that this was just weeks after HMRC decided the exact opposite indicates their rather haphazard approach to the role of cryptocurrencies.

Firing the starting gun

In their guidance issued on 3rd March, HMRC stepped back from explicitly recognising bitcoin as a currency, but their approach effectively treats it like any other form of payment for tax purposes:

“In all instances, VAT will be due in the normal way from suppliers of any goods or services sold in exchange for Bitcoin or other similar cryptocurrency.”

For Richard Asquith, Head of Tax at the TMF Group, this creates a stable framework that will encourage bitcoin businesses to look at the UK as a base for their operations. Other countries are going to have to come to a decision about how to tax bitcoin, he says:

“It’s going to force tax authorities around Europe and particularly the US to make a decision about how to tax it. The UK has fired the starting gun.”

Few other countries have taken a similar approach. Germany previously classed bitcoin as “private money”, while Singapore has classed it as a good, rather than a currency, and Russia has gone as far as to say bitcoin transactions are illegal, although they have allegedly softened their stance somewhat.

“HMRC’s decision is quite forward thinking in terms of other countries,” says Asquith. “It gives it the proper recognition for how it’s used in day-to-day activities.”

How much is 20%?

But before everyone breaks out the champagne, it should be remembered that there’s a lot that the guidance doesn’t cover.

For one, HMRC deals with tax issues, so their advice doesn’t even touch on the question of how bitcoin businesses might be regulated, unlike the New York Department of Financial Services (NYDFS), which recently announced they would begin regulating bitcoin exchanges.

Furthermore, the question of which exchange rate to use is still one that’s up for debate. HMRC merely says that merchants should use “sterling value of the cryptocurrency at the point the transaction takes place”, which is fine if you are using BitPay or Coinbase, merchant services that instantly convert bitcoin payments into fiat currency. However, if you are taking bitcoin from customers directly then you need to be careful, and consistent, about converting from bitcoin into sterling.

With the recent collapse of Mt. Gox and hacks of other exchanges, it would be dangerous for HMRC to pin their colours to any single bitcoin exchange, or even a group of exchanges says Richard Howlett, whose firm Selachii LLP is launching a lawsuit against Mt. Gox:

“If the government were to implicitly back an exchange, it could be disastrous. They’re not going to want people to think that ‘this is a safe place to trade my bitcoin’.”

Conversely, for fiat currencies HMRC currently publishes exchange rate figures from the Financial Times. As measures of the price of bitcoin become more established (for example, the CoinDesk Bitcoin Price Index), this should become less of an issue.

For now, merchants should choose a popular exchange and ensure they’re not moving around to get the best rate.

“You have to take the fair market value,” says Richard Asquith. “HMRC insist that you use the most popular exchanges and you stick to it.”

Giving bitcoin legitimacy

In a blog post published in response to HMRC’s guidance, Elliptic CEO Tom Robinson, who has arguably driven the change in policy, praised the tax authority, writing that they had taken “a thoughtful and logical approach” to cryptocurrencies.

At the same time, there doesn’t appear to be a consistent attitude towards bitcoin among the UK establishment. The Bank of England, for example, this week suggested that bitcoin is more like a commodity than a currency:

“Digital currencies … may have more conceptual similarities to commodities, such as gold, than money”

Aside from the practical implications, HMRC’s decision gives bitcoin a significant reputation boost. It’s even taxed like a currency, supporters in the UK can now say. Howlett agrees: “[HMRC is] acknowledging that this is something that’s here to stay.”

But if further government regulation is to follow, as Robinson’s post suggests, the next battle for bitcoin’s supporters is ensuring that it’s the “right” regulation. Indeed, getting bitcoiners to agree what regulation is welcome will likely be a challenge all in itself.

[MICRO]

Seeing Through Regulation, Banking on Bitcoin, and a Sheer Art Attack
John Law (@scotonomist) | Published on March 16, 2014 at 12:05 GMT | Analysis, News

Welcome to the CoinDesk Weekly Review 16th March 2014 – a regular look at the hottest, most thought-provoking and most controversial events in the world of digital currency through the eyes of scepticism and wonder.

Your host … John Law.

Regulation issues

money-bags

Mysteries in bitcoinland don’t stay mysteries for long.

Take the world record transaction, which was noted in the block chain last November, when nearly 200,000 bitcoins hit a single wallet. Who was behind it? Turns out it was Bitstamp, which has just released details of an audit that confirms the transaction.

Why publish an audit when you don’t have to? It’s time for more transparency, says Bitstamp, and an industry that takes responsibility for itself.

Meanwhile, the extent of the transparency inherent in the system is becoming clearer. At the first academic conference dedicated to cryptocurrency analysis – held in Bermuda, unlike every academic conference John Law has been to – a fascinating paper was published that attempted to show how much digital dosh the Dread Pirate Roberts had garnered during his stint at the helm of Silk Road (squillions) and how many the FBI seized (about a fifth of that). Which is a fairly detailed audit of the affairs of an outfit running in total secrecy – Silk Road, silly, not the FBI.

John Law is not on the libertarian arm of the bitcoin booster brigade, and thinks that decent regulation worldwide will be essential to help the cybercurrency reach its potential to really shake things up.

Like cash, this won’t preclude unregulated activity, but while the Wild West is all very well in the movies it’s not a patch on living in the actual 21st century. But, as Google’s director of ideas Jared Cohen pointed out this week, while regulation’s been talked about for years there’s a real lack of new ideas.

More transparency is certainly one way to build confidence in the bitcoin ecosystem. But as the protocol is inherently transparent, regulation could largely consist of mandating access methods to information that identified company transactions.

If you want to have the protection of the regulator, then sign up to its disclosure regulations. Bitcoin, being a brand-new industry and one with everything to prove, is at a phase where the players should eagerly accept this.

It’s paradoxical but true that openness is often more secure than secrecy. If you don’t rely on people not finding things out, you’ve got nothing to lose if they do.

By adopting a radical approach to regulation based on what may seem an unhealthy degree of disclosure about their systems and activities, bitcoin companies could well end up more trustworthy than existing financial institutions – after all, how well has all that traditional corporate secrecy worked of late, and for whose benefit?

John Law has long been a fan of compulsory systems audits for companies, where their software gets a thorough going-over by independent analysts; not a problem for companies starting with that in mind, but how many banks would pass?

Regulators and industry members alike should recognise there’s a one-off chance here to create a truly innovative and effective environment, suited to the realities of the digital millennium. It could drag the rest of the financial industry along with it.

Taking it personally

banker

The aftershocks of the failure of Mt. Gox continue to exercise the commentators, but the real world has moved on. In particular, the continuing problems in Ukraine, where the Russians seem to have forgotten that invading neighbouring countries stopped ending well some time ago, have led to a run on the banks in Crimea. The banks have responded by putting limits in cash withdrawals, which has increased customer confidence about as much as you’d expect.

“Wouldn’t happen with bitcoin,” one tweeter suggested. That’s true enough: in fact, would you even need a bank account?

The personal current account – PCA, in banking parlance – is a cornerstone of retail banking, In the UK, banks make about 30% of their revenue from PCAs more than from credit cards and savings combined, but in a 2008 report, the Office of Fair Trading noted that the PCA market wasn’t being run in the consumers’ best interest. Not much has changed since.

Charges and fees weren’t transparent, and customers had little idea how their accounts actually worked. Without that sort of knowledge, nobody was changing accounts, and thus with no competition the banks were and are free to do what they liked. Which, mostly, is help themselves. According to the OFT, banks made around £160 a year per current account – a nice trick with other people’s money.

Which is money you rarely actually see. Come payday, your employer asks the bank which has all of its money to send some of it to the bank that has all yours. Much the same sort of thing happens when you pay a bill. Unless you go to a cashpoint and withdraw a fistful of twenties, the banks have all the money all the time.

Bitcoin wallets could change that. The reason PCAs are such a good idea is that they’re gateways to all sorts of financial services such as bill paying, mortgages, insurance, credit cards and so on. Without a bank account, it’s very difficult to get at these. But – in that fabulous fantasy future where bitcoin is as ubiquitous as the Internet – bitcoin and software can do all that just as securely and reliably as a PCA.

Like real wallets, you can’t run a bitcoin wallet in overdraft. And it won’t pay you interest when you’re in credit, but then, overdrafts are terrible forms of credit and you won’t get much by way of interest from your PCA. So, why go to a bank for your daily financials?

In fact, there’s a more interesting question: why doesn’t the bank come to you? PCAs provide the banking system with a huge cash float that is an intimate part of its capitalisation, which is why you can’t get your cash out quickly from a Crimean cashpoint at the moment. But if bitcoin triggers a much slower but harder to control run on the banks, it need not be a disaster for them, yet it could be very good for us.

Your current account is worth £160 a year to them. Very well, let them pay for the privilege. They can run your bitcoin wallet for you, letting it count towards their liquidity much as PCAs do now, but on the understanding that you can click your fingers and get it back whenever you like – with all the direct debits, etc, intact.

That would put competition back into the system, much as number portability has kept the mobile phone companies … well, honest is clearly the wrong word, so let’s say nervous. Banks could offer services such as credit, or even actual cash, but would have to be a lot more transparent about how it all works. They might not like that, but it would make them better companies to deal with.

It would also finally put the old anecdote to bed – the letter from a bank manager to a perennially overdrawn customer that starts: “Dear Sir. It may have escaped your attention that the nature of our relationship is that you bank with us, not vice-versa.”

Art for art’s sake, bitcoin for God’s sake

Florence, Italy Mona Lisa mime

It’s not just academics who are getting it together on bitcoin – the first art exhibition on a bitcoin theme took place this week in San Francisco. The pieces were, as so often at such events, good solid contemporary stuff that manage a degree of wit, but doesn’t tent the boxers. John Law, who has been known to wave his walking-stick in disgust at modern artists for not being nearly adventurous enough, has some suggestions for future projects.

1. The Angels Of The West: A pair of statues, some 500 metres tall, of the Winklevoss Twins, in a heroic Soviet style, one pointing to the sky, the other gazing firmly upwards with hands on hips. Entirely hollow and coated in iron pyrites, this work will symbolise the power of bitcoin to create image unrelated to actual gravity. The inside can be divided into floors and used for affordable housing in the Bay Area, while the twins’ substantial self-esteem should provide funding for the construction.

2. Satoshis I – CXI: A room filled with a large bush, in which are hidden 111 teddy bears. Each of them has a tiny name badge pinned to their furry chests saying: “Hi! I’m Satoshi”. None of them invented bitcoin.

3. The Miner Lisa: A mysterious smile adorns the face of this chunky little robot, which seeks out the nearest power socket, plugs in and then just sits there. Over the next few weeks, the smile is slowly replaced by a frown, as of one straining at stool, while the robot gets hotter and hotter. Very occasionally, a bright copper ha’penny rolls down its trouser leg.

4. Fleur De Lie: A painting of Rene Magritte holding a tulip. Under it, in pink Comic Sans, is the phrase: “This is not a tulip.” The painting has a Raspberry Pi embedded in it, connected to the Internet via 3G and with its own bitcoin wallet and GPS receiver. If the painting isn’t constantly moved between cities and the bitcoin wallet increased in value, the Raspberry Pi ignites a set of explosives in the picture frame. Don’t get left holding the baby when the music stops!

Move over Banksy, Clear your schedule, Turner Prize committee. This isn’t just good art, it’s the Law.

John Law is an 18th Century Scottish entrepreneur, financial engineer and gambler. Having reformed the French economy, invented paper currency, state banks, the Mississippi Bubble and other ideas essential to modern economics, he took 300 years off in a small cottage outside Bude. He has returned to write for CoinDesk on the foibles of digital currency.

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Japanese Megabank Mizuho Now an Official Defendant in Mt. Gox Lawsuits
Jon Southurst (@southtopia) | Published on March 16, 2014 at 14:43 GMT | Companies, Exchanges, Law, Mt. Gox, News

Mizuho, one of Japan’s three largest banks and the banking partner of now-bankrupt bitcoin exchange Mt. Gox, has been named as a defendant in two class action lawsuits stemming from the exchange’s insolvency.

Reuters reported that the megabank was named as a defendant in the existing US lawsuit in which Mt. Gox is accused of defrauding customers, and a Canadian class action lawsuit blaming Gox for a security breach that allowed hackers to steal an alarming 800,000+ bitcoins.

It is still not known for sure what happened to Mt. Gox’s bitcoins, whether they have been lost, stolen or remain “temporarily unavailable“.

Speculation continued over the weekend as observers noted the exchange’s API was still being used to move bitcoins around, sometimes in very similar amounts.

The amended US suit also added Mark Karpeles’ second-in-command Gonzague Gay-Bouchery and Mt. Gox’s original founder and shareholder Jed McCaleb as defendants.

Providing services

In both legal cases, it was Mizuho’s position as Mt. Gox’s banker that prompted the actions. The bank held large amounts of fiat currency for the exchange and its customers, and the US complaint made by Illinois resident Gregory Greene said “Mizuho profited from the fraud” by doing so.

The suit says Mizuho should have segregated Mt. Gox’s funds from those of the exchange’s customers, and that by continuing to provide banking services it actually inflated consumer losses.

A leaked recording, released to the Internet, reportedly shows a Mizuho manager asking Karpeles to close Gox’s account with the bank due to compliance and other concerns. Despite the manager warning the bank would close the account forcibly if necessary, Karpeles did not cooperate.

Problems for other bitcoin businesses

Holding banks so liable could cause companies in other countries to become even more reluctant to become involved with bitcoin businesses, something that’s presented a problem for startups over the past year or so.

Some, including ordinary customers, have found their business denied and others their accounts shut down without much explanation, apparently for being involved with bitcoin-related business.

Despite CEO Karpeles’ Japanese language press conference, public apology and the company’s Japanese legal statements posted since to its website, 99% of Mt. Gox’s customers are not Japanese and those involved in lawsuits overseas could see Mizuho as a potentially lucrative avenue for reimbursement.

Bankruptcy proceedings in the US are preventing further action against Mt. Gox in Japan, but do not protect Japanese parent company Tibanne, its CEO Karpeles or its Gox’s US-based subsidiary Mt. Gox, Inc.

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OKCoin Raises $10 Million to Become China’s ‘Largest Exchange’
Marc van der Chijs (@chijs) | Published on March 16, 2014 at 16:34 GMT | Asia, Exchanges, Investors, News

OKCoin, the exchange claiming to be China’s largest by trading volume, has announced a $10m Series A funding round.

The investment round was led by Ceyuan, one of China’s earliest venture capital firms, followed by Mandra Capital, VenturesLab and numerous high-profile angel investors.

Despite the nation’s recent crackdown on cryptocurrencies, it seems Chinese venture capitalists are still bullish on bitcoin exchanges and the currency itself.

Bitcoin in China

Back in November 2013, the focus of the bitcoin community was on China – the world’s hub for bitcoin trading. At that time, BTC China was the biggest exchange in the world, having managed to raise a $5m Series A funding round from Lightspeed Venture Partners (Snapchat, Nest). There were even rumours that a bigger round was in the works for the young company.

However, things change quickly. After the Chinese government began regulating bitcoin in December, trade volume plummeted and the world’s top exchange was no longer Chinese.

Local exchanges came up with creative solutions for customers to continue to buy and sell bitcoin, and players like Huobi and OKCoin claimed to pass BTC China in their daily trade volume, although these figures have been the subject of much dispute.

OKCoin has grown rapidly over the past few weeks and is now the biggest Chinese exchange, according to its CEO Star Xu. He claims the exchange’s current daily trade volume is approximately 50,000 bitcoins per day.

Interestingly, on top of that, the exchange allegedly trades 5 million litecoins per day. The company claims that at its peak it reached over 300,000 bitcoin and 13 million litecoin trades.

Future growth

Mr Feng Bo, founder and partner at Ceyuan, commented that he has a tremendous amount of confidence in the future of bitcoin and the continued growth of OKCoin:

“We are delighted to invest in the pioneer of China’s bitcoin exchanges; given the company’s leadership under Star Xu and his team, we know there is much more good news ahead.”

Ceyuan is a well-known fund with investments in successful Chinese companies like Qihoo 360 (NASDAQ: QIHU), Light in the Box (NASDAQ: LITB), UC Web and VANCL – among others.

Interestingly, Silicon Valley investor Tim Draper was involved in the round, as a partner of VenturesLab. He and his son Adam remain active in bitcoin-related investments, mainly via Adam’s Boost.vc incubator where Tim is a mentor. Tim also invested in OKCoin’s angel round.

OKCoin overseas

The investment in OKCoin will be used to expand the team, fund product research and development, further security enhancements, but also to expand OKCoin’s operations beyond China.

This a different strategy from the other Chinese exchanges and it may prove to be a smart move, given the current regulations in the state.

Mark Mai, VentureLab’s China partner, stated that as the regulatory environment in regions such as Singapore, the US and Hong Kong becomes clearer, it will open up opportunities for OKCoin to operate in geographies where it can offer maximized safety and protection for OKCoin clients.

Mai said that the growth of virtual currency is inevitable, and that many countries are coming to terms with the fact that they have to regulate these currencies, because their citizens are using them regardless.

He added that OKCoin welcomes oversight because he believes it will help the company to serve its customers better, allowing them to open up regulated bank and trading accounts so it can engage in third-party clearance and settlement.

All eyes will be on OKCoin’s global expansion in these uncertain times. Will the exchange make it as a large player outside China? Only time will tell.

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Texas Regulators Warn About Risks of ‘Trendy’ Digital Currencies
Jon Southurst (@southtopia) | Published on March 17, 2014 at 10:03 GMT | News, Regulation, US & Canada

Regulators in Texas have warned digital currencies like bitcoin are volatile and probably more suited to young people than retirees, the Dallas Morning News has reported.

Describing digital currencies as “very, very trendy” right now, Joseph Rotunda, director of enforcement at the Texas State Securities Board, said that all the “buzz” around digital currencies had led people to look only at the positives and not the risks.

Rotunda said it wasn’t just about bitcoin, but the myriad other digital currencies popping up every week that presented a risk to investors.

“There’s more of them in production right now, in development. It’s a real fertile ground,” he said. He admitted such investments could prove useful, but only for younger people and not those looking for future security.

“An investment tied to digital currencies may be suitable for someone in their 20s, in their 30s. When you’re talking about a retiree’s nest egg, that may not be something they’d want to subject to this type of a risk.”

Risks for unaware investors

Such warnings from government regulators have become fairly commonplace in recent months.

“In many ways, digital currencies operate as ‘online cash,’ only this type of currency is extremely volatile and can disappear the same way your money disappears when you lose your wallet,” said John Morgan, Texas securities commissioner.

Rotunda also pointed out that trust remains a huge issue in the unregulated space, in the security systems and infrastructure, accounting practices and overall business models of those providing digital currency services.

The level of anonymity digital currencies provide users also created risks, he said, adding:

“That makes it hard from a regulatory standpoint to regulate those transactions, but it also fosters an environment that caters to money laundering to conceal transactions to all sorts of situations where a promoter could be playing with investors’ money without their knowledge.”

Late last week, the Texas State Securities Board also warned energy firm Balanced Energy LLC with a cease and desist letter against getting involved in bitcoin, saying the company had not fully disclosed the risks of bitcoin to its investors, especially those associated with wild value swings.

Shavers ‘Ponzi’ case update

Yip also referred to Texas’ own Trendon T Shavers, who gained notoriety last July when he managed to raise 700,000 BTC at his company Bitcoin Savings and Trust (BTCST). The US Securities and Exchange Commission (SEC) described the operation as a bitcoin Ponzi scheme.

Shavers, incidentally, denied his was a Ponzi scheme and was actually never charged with any criminal offence. He did not accept any currency other than bitcoin, he said, and appeared not to keep any useful records of his transactions.

The SEC filed a civil complaint against him at the beginning of this month, posting a transcript of Shavers’ interview online, in which he referred to his scheme as merely one of lending and bitcoin value speculation based on the fluctuating price at Mt. Gox in early 2013.

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Bitstamp Got $10m From Fortress-Linked Hedge Fund Last Year: Bloomberg
Jon Southurst (@southtopia) | Published on March 17, 2014 at 10:56 GMT | Bitstamp, Companies, Exchanges, News

Bitcoin exchange Bitstamp received $10m in hedge fund investment last year, according to a new Bloomberg report.

The money came from Pantera Capital Management LP, “the hedge fund that manages money for Fortress Investment Group LLC (FIG) executives”, Bloomberg said. If true, it would be one of the largest single investments in a bitcoin-related business to date.

Bitstamp has been a huge beneficiary of the collapse of Mt. Gox, multiplying its share of dollar trades by up to 50% since February. It now has at least 35% of the total bitcoin trade market share, according to bitcoincharts.

Tahoe gathering

Pantera’s path to investment was led by founder Dan Morehead, who took about 30 bitcoin entrepreneurs to Lake Tahoe in October last year to discuss his vision, among them Bitstamp CEO Nejc Kodric. Soon after that, Pantera formed a $147m fund called Pantera Bitcoin Advisors and a principal at Fortress, Michael Novogratz, called Morehead “our man when it comes to bitcoin”.

When CoinDesk asked Kodric whether Bloomberg’s report was accurate, he merely said: “No comment”.

Bloomberg’s story highlighted the incredible potential of this and future link-ups between Wall Street and Silicon Valley, as expertise in finance met technological excellence. Funds like Pantera’s had the power to lift bitcoin businesses from startup obscurity into the big time.

“Finance people are now recognizing the force multiplier of combining their deep knowledge of finance with new, possibly game-changing technologies,” said Chris Larsen, CEO of Ripple Labs.

Pantera also contributed a portion of Ripple Labs’ recent $9m funding round, along with Google and Lightspeed Ventures.

Pantera hasn’t commented on this week’s revelations, made by three people who knew of the deal, and the new fund has stayed quiet about other intentions and big deals.

New attraction

Bitcoin startups, taking a lead from Silicon Valley startups, have appealed more to tech venture capitalists and corporations for their big break. They will probably in future pay extra attention to very deep-pocketed Wall Street players. Wall Street, in turn, will demand a new breed of financially-focused and compliance-willing management teams to match its own involvement.

“A group like that should be able to deliver the kinds of relationships that startups need. I’d take Pantera over a lot of other firms,” said Brock Pierce, a California VC.

Bitstamp is UK-registered but reportedly has most operations in Slovenia. It was founded in 2011 by Kodric and Damijan Merlak. Since then it has established a reputation for stability and good management, and has an advantage in its location in the European Union with its integrated money transfer system.

It has always been compliant with financial regulations and users must have verified identification, something that has become more or less standard at bitcoin exchanges around the world, especially the current crop of new startups in Asia.

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Dorian Nakamoto Hires Lawyer, Denies Knowledge of Bitcoin
Dan Palmer | Published on March 17, 2014 at 11:24 GMT | Bitcoin protocol, News

Dorian Satoshi Nakamoto
It’s hard not to feel sorry for Dorian Satoshi Nakamoto, recently ‘exposed’ by Newsweek as the creator of bitcoin.

Whether or nor he is the genius behind the ubiquitous cryptocurrency, it is obvious that he is a private man who shies away from the intrusion of the public eye.

In the latest chapter of the saga, Nakamoto has said in a statement issued through his recently hired lawyer, LA-based Ethan Kirschner, that he “did not create, invent or otherwise work on bitcoin”.

‘Unfamiliar’ with bitcoin

“I unconditionally deny the Newsweek report,” Nakamoto said, adding that:

“I am writing this statement to clear my name.”

The statement was initially published by Reuters blogger, Felix Salmon on his Twitter feed, and Kirschner has confirmed to TechCrunch that it is genuine. Nakamoto stated that, until February, he had not heard of bitcoin, and it was his son who first told him about the cryptocurrency.

In an interview with Associated Press soon after the Newsweek article, he claimed he “called the technology ‘bitcom’ [as he was] still unfamiliar with the term”.

Hard times

According to the statement, life has not been easy for Nakamoto – an American citizen living in Temple City, California.

Nakamoto has a background in engineering and does “have the ability to program”, he said, but he has not been able to find steady work in the field for over 10 years – instead taking assignments as a “labourer, polltaker and substitute teacher”.

Apparently, he discontinued his internet service in 2013, “due to severe financial stress”. This is all at odds with what you would expect from a man who is said to hold $400m in bitcoins from his early mining efforts.

Furthermore, Nakamoto is trying to recover from prostate surgery undertaken in October 2012 and a stroke he suffered in October 2013, he stated.

Closing the statement, Nakamoto thanked people around the world “who have offered me their support” and asks for his privacy to be respected. “This will be our last public statement on this matter,” he says.


What we know about bitcoin’s creator

The Bitcoin protocol was published in a paper via the Cryptography Mailing List in November 2008 – with the author named as Satoshi Nakamoto.

The same person then released the first version of the bitcoin software client in 2009, and participated with others on the project via mailing lists, until he finally began to fade from the community toward the end of 2010.

The last anyone heard from him was in the spring of 2011, when he said that he had “moved on to other things”.

Since the Newsweek article, an account supposedly linked to the inventor of bitcoin was used to post to the P2P Foundation’s Ning page, stating: “I am not Dorian Nakamoto”.

If indeed this anonymous individual is the real creator of bitcoin, the publication of irrefutable evidence to the fact would quickly put the issue to rest, and allow the beleaguered Californian some peace and quiet.

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MetroDeal, the Philippines’ Top Daily Deals Site, Now Accepts Bitcoin
Pete Rizzo (@pete_rizzo_) | Published on March 17, 2014 at 15:11 GMT | Asia, Merchants, News

Asia-based daily deals giant MetroDeal, the number two e-commerce website in the Philippines according to Alexa rankings, is now accepting bitcoin for its discount vouchers and coupons.

Founded in early 2011, MetroDeal has seen a meteoric rise in popularity among the Philippines’ 33 million active Internet users. It achieved annual revenue of $18m in 2012, and was projected to top $20m in revenue in 2013.

MetroDeal follows a template similar to US-based daily deal giants such as Groupon and LivingSocial. Deals run for a limited time and offer consumers deep discounts from a wide range of merchants.

The company trails only Rocket Internet-funded startup Lazada, which recently raised $250m in its Series E round, in overall site visitation among commerce websites.

MetroDeal is accepting bitcoin through a partnership with Coins.ph, a bitcoin exchange and bitcoin merchant directory provider serving the Philippines.

Founded by Ralph Wunsch, a former marketing manager at Austria-based discounts site Daily Deal, MetroDeal was reportedly designed from a public computer at a local McDonald’s franchise before quickly taking off.

Checkout process

To purchase with bitcoin on MetroDeal, buyers first choose their desired deal and select “Buy Now!”

Screen Shot 2014-03-17 at 10.12.13 AM

Buyers must then log in with Facebook or with an email account before picking a payment method. Available options include credit and debit cards, bank deposits and bitcoin.

After selecting the bitcoin option, buyers simply scan the QR code and send payment to complete their purchase.

Screen Shot 2014-03-17 at 10.19.35 AM

Bitcoin in Philippines

The news of MetroDeal’s acceptance comes in the wake of a warning from Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, to its consumers about the use of digital currencies.

BSP listed a number of concerns about the use of digital currencies, including their high volatility and lack of consumer protections, as well as the absence of regulation imposed on businesses servicing the emerging sector, in its statements.

Though the local community is small, the Philippines holds substantial untapped potential for bitcoin.

One of the largest potential use cases for bitcoin in the Philippines remains in the remittance market. In 2013, the country’s international workers sent nearly $14bn to family members back home, often paying a substantial price through the traditional financial system for doing so.

Given MetroDeal’s size, it could prove effective at raising awareness for bitcoin and its potential in the country.

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Mexico’s First Bitcoin ATMs Will Also Deal in Altcoins
Nermin Hajdarbegovic | Published on March 17, 2014 at 16:26 GMT | Altcoins, Bitcoin ATM, Dogecoin, Litecoin, Technology

The Mexican border town of Tijuana is to see the launch of two digital currency-toting ATMs today, and with an interesting twist – in addition to the expected provision of bitcoin, the ATMs will support litecoin and dogecoin too.

Tijuana is a popular spot for US tourists, including many geeky and potentially bitcoin-friendly college kids who venture south of the border to let their hair down. What happens in Tijuana stays in Tijuana, they say, apart from some less than legal ‘souvenirs’ that sometimes find their way back to the US.

The company launching the ATMs is called Bitcoin42, and it says that one of the units will accept US dollars and the other Mexican pesos, so it is clear much of the target audience is expected to show up with greenbacks.

Bitcoin42 says these aren’t just the first bitcoin ATMs in Mexico, they are the first units in the whole of Latin America. However, there is still no word on the actual ATM hardware they are planning to employ.

Social contribution

“Our main objective is a positive contribution to the potential of all living beings to develop, today and in the future. Our business model focuses on cultural, social, ecological, and economical projects that aim to tackle challenges in our society by developing creative solutions,” the company said. It added:

“Ethical and social responsibility is important to us. We are inspired by the Institute for Social Banking and the Economy for the Common Good, which received larger popularity since the banking crisis.”

Bitcoin42 is putting its money where its mouth is: the company will be giving 10% of all profits generated by the ATMs to non-profit associations in Tijuana. Customers will even be able to choose the cause they wish to donate to.

Bitcoin42 is also advocating the use of cyprocurrencies by non-profit organisations, as it believes cryptocurrencies can help non-profits reduce their administration costs and move funds in faster, with more transparency:

“Through this, anybody can become a [truly] independent auditor, since one can provide information to verify balances and transactions, and also allow the public to see how much in donations has been received and where it went.”

Dog lovers

The company did not say why it chose to add dogecoin and litecoin to the list of supported currencies, but in a forum post one of the team members said dogecoin was proposed by the developer of the ATM – and that Bitcoin42 also “really likes dogs”.

Dogecoin was never envisioned as a serious digital currency and as a result it doesn’t get much attention from cryptocurrency businesses or investors, although there is a large and vibrant community behind it.

Last month a team of dogecoin lovers set up a DIY dogecoin ATM at the CoinFest digital currency festival in Vancouver, Canada.

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US Treasury Adds Digital Currency Representative to Advisory Group
Pete Rizzo (@pete_rizzo_) | Published on March 18, 2014 at 15:08 GMT | Events, Law, News, US & Canada

At the latest Bloomberg Breakfast event held in New York on 18th March, David S Cohen, Under Secretary of the US Department of the Treasury, discussed the challenges of digital currencies as part of a broader conversation with the media outlet’s Matt Miller to air on Bloomberg TV.

In the hour-long talk, Cohen spoke about the organisation’s role as a global leader in educating consumers and governments on the evolving issue, paying a particular interest to the potential illicit uses of digital currencies, as well as the measures it is willing to take to ensure their proper use.

Most notably, however, Cohen revealed that the Treasury is taking an interest in ensuring that the digital currency industry evolves in a regulated manner despite these concerns.

For the first time, Cohen said, his group will be including an unnamed member of the digital currency community as part of the Treasury’s Bank Secrecy Act Advisory Group (BSAAG) in an effort to work toward this goal.

Chaired by the Financial Crimes Enforcement Network (FinCEN) director, the body makes recommendations to the Treasury on issues regarding the Bank Secrecy Act, the US law that requires financial institutions to help detect and prevent money laundering.

Said Cohen regarding the decision:

“We are hopeful that formally including the virtual currency community’s voice in the BSAAG will mean that our regulatory approach as a whole, including our approach to virtual currency regulation, is better informed and more effective.”

Cohen indicated that there had already been “ad-hoc” meetings with members of the community, though this move is intended to ensure such conversation is more consistent.

Accounting for illicit use

Cohen began his prepared remarks by denoting the dangers of digital currencies in an effort to show his organization would not hesitate to take tough measures against those who abuse the technology.

For example, Cohen evoked the now-defunct digital currency Liberty Reserve, a site shut down through measures made possible by the controversial USA Patriot Act; and Silk Road, the online black market seized by law enforcement officials in late 2013, calling the negative attention paid to digital currencies in respect to these organisations “well-deserved”.

Such high-profile arrests, he said more positively, were also indicative that current regulations are working to contain the illegal use of digital currencies.

The under secretary indicated that the Treasury would take a approach that looks to encourage lawful practices, while understanding that not every entity will comply with rules. Cohen did, however, firmly warn organisations that are not in compliance with FinCEN, suggesting these entities could face consequences for this decision.

Cohen also addressed the innovative aspects of the technology, but suggested the full power of the illicit use of digital currency remains something it needs to consider:

“For terrorist financiers virtual currencies are understandably appealing: if funds could be swiftly sent across borders in a secure, cheap and highly secretive manner, it would suit their needs well. Moreover, access to a fully anonymous – or even pseudonymous – currency would allow terrorists to better cover their tracks.”

Fostering innovation

IMG_2738Despite these risks, however, Cohen indicated that his agency’s approach to digital currency would be rooted in two guiding principles – fostering innovation and ensuring transparency.

For the moment, at least, he indicated that the focus of the organisation is on the former.

“We do not currently see widespread use of virtual currencies as a means of terrorist financing or sanctions evasion. The volatility associated with virtual currency, combined with its low capitaliziation and liquidity has limited its appeal to these illicit actors.”

Further, he noted that digital currency companies regulated under FinCEN are now filing more suspicious activity reports, a fact that shows evidence the industry is willing to assist law enforcement.

Cash-like restrictions

Cohen also suggested that it will seek to regulate digital currencies only at the points where digital currency is exchange for ‘real’ money.

“At the current adoption levels, we think that this type of oversight is sufficient to guard against money laundering and other illicit finance threats.”

However, he indicated that long-term, the Treasury may move to apply cash-like restrictions to the use of virtual currencies. Though, this he said, would come with wider adoption.

For now, Cohen said he remains focused on working with international partners, including the European Commission, to increase global understanding of the illicit finance threats associated with virtual currencies and regulatory approaches to confront them.

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Database Glitch Causes Blockchain.info Outage
Nermin Hajdarbegovic | Published on March 18, 2014 at 12:58 GMT | Blockchain, News, Wallets

The bitcoin wallet and block explorer service Blockchain.info has been down since late last night (17th March) and it seems the issue is bigger than originally anticipated.

A problem first came to light when a reddit user started a thread about a failed ‘shared coin’ transaction. Blockchain.info responded to his post and quickly moved to disable shared coin functionality.

The move was followed with a tweet letting users know that shared coin transactions had been suspended pending the outcome of an investigation:

“We have temporarily suspended shared coin transactions while investigating some transactions that are ‘stuck’. The particular transaction in question is https://blockchain.info/tx-index/115315411/10. Rebroadcasting this transaction in bitcoind results in Error code -22.”

Shared coin transactions were re-enabled four hours later, but further issues came to light and blockchain.info was taken down soon after.

User funds ‘safe’

The Blockchain.info team traced the problem back to a database issue and it promptly tweeted that it would take “several hours” to resolve.

Blockchain.info was quick to point out that it was not hacked and that all funds were safe throughout the outage, which was the result of a database bug. Since Blockchain.info does not hold any keys, there was no risk to users’ coins.

Wallet function was not affected by the issue and user wallets could be restored even during the outage. A guide was published on the Blockchain.info blog, but it seems that many users did not get the message.

Once again the issue has proved that many bitcoin users aren’t very informed about wallet technology, and even about some relatively basic principles.

Blockchain.info was quick to reassure the public that there was no danger to funds, but the sudden influx of users looking for information quickly brought down the company blog and allowed misinformation to propagate through social networks.

In a statement Blockchain.info apologized for the extended outage and said it is working hard to restore services.

“As we mentioned previously, the outage was caused by a bug in some database handling code. Please rest assured that your wallets are safe and this outage does not affect the security of funds or the completion of executed transactions.”

Blockchain.info also published instructions on how to import wallet backups via MultiBit.

Limited damage

Despite the outage continuing for some hours, the issue has not been far reaching. A few services like ATM provider BitVendo have been affected, but the damage appears to be limited.

@blockchain is down, please avoid using the bitcoin ATM until they’re back online – https://t.co/6CIVTHvETa

— BitVendo (@BitVendo) March 18, 2014

Blockchain.info informed CoinDesk that its team has been working around the clock and that progress is being made. All relevant updates will be posted on its blog.

“Once we’re there, we will publish a full post-mortem of this unusual database issue,” Blockchain said.

“Because of how Blockchain was designed, all of our users who linked an email address with their account, or manually made a backup, still have complete access and control of their bitcoins, even during the outage.”

In light of recent security breaches and the Mt. Gox disaster, it is understandable that much of the bitcoin community is edgy. At least in this case the issue seems benign, even if annoying and disruptive.

It should be noted that Blockchain.info has been on a roll in recent months. In December it acquired bitcoin price app ZeroBlock, in January it announced the creation of its one-millionth wallet, and earlier this month it rolled out a new bitcoin app for merchants.

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DigitalBTC to Enter Strategic Partnership With CloudHashing.com
Nermin Hajdarbegovic | Published on March 18, 2014 at 17:30 GMT | Investors, Mining, News

Australian investment firm Macro Energy Limited, which recently acquired digitalBTC, has announced a strategic agreement with CloudHashing.com – a company that lets customers pay to use its servers to mine bitcoin, rather than invest in their own rigs.

Macro is planning to raise AU$9.1m as part of the digitalBTC deal and last week it said it will invest the money in mining operations and the expansion of other digitalBTC operations.

It now appears that a sizable chunk of the investment will go toward the newly announced strategic deal with CloudHashing.com.

‘Win-win’ situation

Under the agreement, CloudHashing.com’s software will be deployed on digitalBTC’s bitcoin hardware, located in data centres in Iceland and Texas. The hardware will be managed by CloudHashing.com, and the companies will have an opportunity engage in reciprocal arrangements for the supply of mining hardware.

This synergic relationship extends to trading too, as digitalBTC – a bitcoin investment and management company – will handle bitcoin trading activities for CloudHashing.com through its trade desk. Since CloudHashing.com is the largest bitcoin cloud mining provider on the planet, this sounds like a coup for digitalBTC.

“The provision of digitalBTC trading services to CloudHashing.com will create a win-win outcome for both digitalBTC and CloudHashing.com,” said digitalBTC’s Executive Chairman Zhenya Tsvetnenko.

Expansion opportunities

Tsvetnenko said digitalBTC is poised and ready to expand in all facets of bitcoin operations, but it will start off by focusing on bitcoin mining:

“This agreement with CloudHashing.com will lead to the deployment of their best-in-class proprietary bitcoin mining management system to our state of the art hardware, allowing us to concentrate our software development resources on our integrated suite of retail-focused mobile applications for bitcoin and other digital currencies.”

Tsvetnenko and Macro Energy are clearly taking their bitcoin push seriously. They plan to raise a significant amount of money, but, more importantly, digitalBTC will be the first bitcoin company to be listed on the Australian Stock Exchange, allowing public market investors to get on board.

The market liked that idea and Macro Energy shares gained 42% following the announcement of the digitalBTC acquisition.

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Bank of Thailand Says Bitcoin ‘Not Illegal’ But Warns Against its Use
Dan Palmer | Published on March 18, 2014 at 16:44 GMT | Asia, Exchanges, News, Regulation

The Bank of Thailand (BOT) has issued a statement on bitcoin, warning consumers that it is not a currency and that its use comes with inherent risks, reports say.

The statement bears similarities to others issued from central banks around the world, most recently Mexico and Germany, but could be considered an improvement in the legal status of bitcoin users, as Thailand was widely considered to have implemented a bitcoin ban in the summer of 2013.

The bank stated, according to a partial translation published online:

“Bitcoin is electronic data. Thus, it’s not considered a currency and can’t be used for payments, and [is] not considered legal tender like money. With no self worth, the value of such data varies based on the needs of the market. Bitcoin changes in value very quickly and it could became something of no value if none desired it.”

Effectively, bitcoin is just electronic data with no intrinsic value, and its value rises or falls depending upon the whims of the market.

The BOT also said that the illegal theft of data and the closing of online businesses such as Mt. Gox pose a threat to consumers.

Furthermore, consumers’ legal recourse will be severely limited in the case of any claims over coins stolen or sent to the wrong wallet, or over goods purchased with bitcoin but not received.

Welcome news?

While hardly a ringing endorsement of digital currencies, the bank’s words may come as good news for bitcoin users and businesses in Thailand. The key point being that they have not banned the cryptocurrency.

Over the past nine months, the legal status of cryptocurrencies in Thailand has been an issue of great confusion.

Back in July 2013, Thai-based exchange Bitcoin Co Ltd suspended trading after a meeting with the Bank of Thailand in which the bank allegedly declared trading in the cryptocurrency illegal. A post on the company’s website said at the time:

“At the conclusion of the meeting, senior members of the Foreign Exchange Administration and Policy Department advised that due to lack of existing applicable laws, capital controls and the fact that Bitcoin straddles multiple financial facets the following Bitcoin activities are illegal in Thailand.”

Then in February of this year the exchange reopened after receiving a letter from the bank seeming to indicate that it could trade after all. However, the legal status of bitcoin trading in the South-East Asian country was still unclear.

Adding to the confusion, the exchange received another letter days later, indicating that “interpreted the letter to serve its own interests”, and that it perhaps acted improperly by reinstating its services. At this stage, Bitcoin Co Ltd decided to remain trading until a clear statement was made.

Licensing issues

One issue with exchanges is not so much the legality of owning bitcoin, but whether they qualify for a licence to trade in cryptocurrencies, which could be considered a foreign exchange activity and therefore illegal.

Thailand’s Foreign Exchange Administration and Policy Department had also previously told Bitcoin Co Ltd that it was illegal to buy or sell bitcoins, exchange bitcoins for goods or services, or send and receive bitcoins outside of Thailand in an early hearing on the matter.

Hopefully, the legal status of exchanges in the light of the new statement will become clear in coming days.