CoinDesk: Bitcoin exchanges need to grow up fast

Julia Dixon on May 31, 2013

CoinDesk does an excellent job of pointing out the very different standards that entrenched TBTF financial institutions are held to as compared to those outside the system. Those choosing to operate alternative financial businesses are going to face many challenges. In fact, if you’re considering running a digital currency exchange you have only 3 choices…

  1. Find some damn good security experts and operate anonymously
  2. Forget about privacy for yourself or your customers and jump through any and all regulatory hoops
  3. Go to jail

Indeed it is time for digital currency businesses to grow up and make some tough choices.

Via CoinDesk

The relationship between big banks and their regulators is pretty dubious, to put it mildly. But expecting federal investigators to give Bitcoin exchanges the same free ride is childishly naive.

When HSBC got caught laundering money for drug dealers and terrorists, it promised regulators it would improve controls.

It didn’t.

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Liberty Reserve Shutdown

Julia Dixon on May 27, 2013

liberty-reserve-logoThursday last week Liberty Reserve went offline. On Friday Arthur Budovsky Belanchuk, the owner, was arrested in Spain after a joint money laundering investigation by US and Costa Rican authorities. The allegations are that Liberty Reserve was financed using money from child pornography websites and drug trafficking.

The Tico Times, an English newspaper in Costa Rica, is reporting that Budovsky has been under investigation since 2011 after a request from a prosecutor’s office in New York.  Liberty Reserve is a Costa Rican business and Budovsky is a Costa Rican citizen of Ukrainian origin.

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Freemans Perspective: Bitcoin – The Tyranny Test

Julia Dixon on May 21, 2013

By Paul Rosenberg, FreemansPerspective.com

An increasing number of people have complained about governments and central banks in recent years, even using the word “tyranny” to describe them. They are, of course, called names in the establishment press: conspiracy theorists, mainly.

Calling someone a name, however, does not erase their argument (at least not among rational people) and both the governments and the big banks stand accused.

Up till now, however, these accusations were never accepted by the general public. The average guy really didn’t want to hear about the evils of government money. After all, that was the only thing he had ever used to buy food, clothes, gasoline, cars, and so on. He didn’t want to acknowledge the accusations because he feared what might happen to him without his usual money.

Now, however, we have a brand new currency (called Bitcoin) available to us: something radically different. This gives us a new way to directly address the subject of monetary tyranny, providing a clear test for the governments and money masters of the world:

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EFF resumes Bitcoin donations “to Support Digital Liberty”

Julia Dixon on May 21, 2013

The Electronic Frontier Foundation, which aims to defend “your rights in the digital world”, has announced that they will again accept Bitcoin donations.

Via the EFF website

Today, we’re happy to announce that we will be accepting Bitcoin donations through our website. You can use them to make one-time donations, set up monthly donations or get an EFF membership (which includes awesome membership swag like EFF hats and digital freedom t-shirts).

While we are accepting Bitcoin donations, EFF is not endorsing Bitcoin.  EFF does not typically endorse products or services, and we certainly do not endorse any of the electronic payment methods that we currently accept (credit cards, PayPal, and now BitPay).

The EFF stopped accepting Bitcoin donations two years ago. They give the reasons for the reversal of this decision as…

  • “Censorship by payment intermediaries is an ongoing problem for free speech online – so it makes sense to start diversifying the available options.”
  • “You can now give Bitcoins to EFF in the same way that you can give stock.”
  • “Our research and FinCEN’s guidance removed a key risk to EFF.”
  • “Our members keep politely asking for it.”

WebMoney announces the addition of a Bitcoin purse

Julia Dixon on May 18, 2013

The Russian based online payment service  allows users to store their funds in different “purses”. For example WME for Euros and WMG for gold. The new purse, WMX, is denominated in Bitcoin where one WMX = 0.001BTC.

WebMoney has its own exchange to allow users to convert between the supported currencies. This change means that users will be able transfer Bitcoin(WMX) to any of WebMoney’s other denominations.

More details here.

The Mt. Gox Warrant

Julia Dixon on May 18, 2013

The problem here is that Mt. Gox is operating as an unlicensed money transmitter.

With their recent guidance, FinCEN decided that virtual currency exchangers are money transmitters.

“An administrator or exchanger that (1)accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN’s regulations.”

Mt. Gox is not a US company; however, it does a lot of business in the States and is not registered with FinCEN.

An informant working with a Homeland Security agent signed up for both Mt. Gox and Dwolla accounts. After making a few transactions, he was able to determine that his funds had gone through a Wells Fargo bank account owned by Mt. Gox and opened by the exchanges’ CEO Mark Karpeles. The account was opened by Mark in May 2011 who at the time signed a Wells Fargo form declaring that his business was not a Money Services business or a Money Transmitter.  Of course this was almost 2 years prior to FinCEN’s guidance on the issue.

The Warrant states that Mt. Gox is in violation of 18 U.S.C. section 1960. The punishment for this can include fines and up to 5 years in prison.

Ars Technica obtained a copy of the warrant which can be read here.

50,000 more places to spend your Bitcoins

Julia Dixon on May 12, 2013

As Forbes’ Kashmir Hill demonstrated last week, the Bitcoin economy is small. Hill attempted to live on Bitcoin for a week going through coffee withdraw and losing 5lbs in the process. She should have waited a week.

gyft-logoGyft, a mobile gift card app, has announced that it will partner with BitPay to accept Bitcoin payments for gift cards.

This means you can use your bitcoins (although indirectly) to buy a whopper at Burger King, a bed to sleep in at Marriott, some new shoes from Nike and hundreds more. Gift cards purchased through Gyft can be spent at over 50,000 locations. However, the service is only available in the US. If you want to live on Bitcoin elsewhere better move to Berlin.

CFTC to regulate Bitcoin?

Julia Dixon on May 8, 2013

Bitcoiners, Bart Chilton is here to protect you. In a Monday interview on Bitcoin with the Financial Times the CFTC’s lead commissioner Bart said “It’s not monopoly money we’re talking about here – real people can have real risk in these instruments, and we need to ensure that we protect markets and consumers, even in what at first blush appear to be ‘out there’ transactions.”

Another regulator with their eye on the currency can only add to the headache that US based Bitcoin businesses are already experiencing as they try to sort through the implications of FinCEN’s recent guidance and deal with scared banks closing their accounts.

As Bitcoin is a global, non-political currency the obvious question is will heavy regulation simply move Bitcoin businesses off shore? This possibility isn’t lost on the Financial Times who discussed this with Bitcoin entrepreneur Roger Ver. The Bitcoinstore.com founder said that he knew of a few Bitcoin entrepreneurs who had moved to Panama to look into basing their businesses outside the US adding “Even if US regulations make it hard for Bitcoin businesses to operate in the US, that doesn’t mean it will make it difficult for people to use Bitcoin as a currency in the US. Bitcoin is a world currency,”

Chilton is head of the CFTC, that’s the Commodity Futures Trading Commission. As Bitcoin is not a traditional commodity one might not think of the CFTC as a Bitcoin regulator. However, the regulator has broad authority and certainly Mr. Chilton sees his organization as having authority. Reuters is reporting him as saying “Here’s what I know for sure: we could regulate it if we wanted. That is very clear,”