Regulation – Page 2

Bank of Thailand bans Bitcoin

Julia Dixon on July 30, 2013

On Monday, Thailand based Bitcoin exchange Bitcoin Co. Ltd. ceased trading due to an advisement from the Bank of Thailand declaring Bitcoin transactions illegal.

Via the exchange’s site…

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:

Buying Bitcoins
Selling Bitcoins
Buying any goods or services in exchange for Bitcoins
Selling any goods or services for Bitcoins
Sending Bitcoins to anyone located outside of Thailand
Receiving Bitcoins from anyone located outside of Thailand

The exchange had been operating on previous advice from the Bank of Thailand that Bitcoin was not a currency. However, the businesses had been in the process of registering with regulators in Thailand to ensure that they were operating lawfully.

This change in policy from the Bank of Thailand occurred after the exchange made a presentation to bank members in an attempt to explain the currency to them. The companies managing director gave a presentation on “the workings of Bitcoin, the benefits of Bitcoin, incite into the company’s operations and future implications of Bitcoin.” …I guess he got their attention!

Bitcoin, Regulators and Online Markets – a look at the World of Bitcoin Exchange

Julia Dixon on July 29, 2013

Exchanges are the link between the old world of banking and the new world of crypto-currencies; they play a vital role in supporting the growing Bitcoin economy. If Bitcoin hopes to continue rapidly gaining new users it needs this bridge between the old and new systems to be up and functioning. While Bitcoin is in no way dependant on a link to the traditional banking system, its smooth transition into mainstream use certainly is.

Unfortunately these bridges which make up the exchange market are concentrated and often broken. This leads to concerns over reliability and security, which can cause market panic and extreme volatility. As Bitcoin enters the mainstream a wave of new businesses, services and software developers have recently dedicated their efforts to solving this problem. Their task will not be easy, and the while the exchange rate has seen some recent stability, there is a long way to go before obtaining bitcoins can be called user friendly and reliable.

A possible Bitcoin fork? – Bitcoin 2: Freedom of Transaction

Julia Dixon on July 24, 2013

Those following the internal rift in the Bitcoin community over regulation have often discussed the possibility of a fork. The Bitcoin world moves quickly.

Hitting the web only hours ago is a paper detailing the how and why of a proposed “Bitcoin 2”. The authors, and many in the Bitcoin community, are concerned that changes will be made to the Bitcoin protocol turning it into “a distributed PayPal instead of a censorship resistant currency”.

The paper discusses inherent weaknesses and changes to the protocol currently being discussed which could see users lose the option of anonymity or see miners concentrate into larger centres of control. The proposed “Bitcoin 2” aims to increase Bitcoin’s resistance to centralization, censorship and political control and prevent it from being “absorbed by the established financial and regulatory environment.”

Bitcoin Foundation Comments on Liberty Reserve Special Measures

Julia Dixon on July 21, 2013

After shutdown of Liberty Reserve in May this year FinCEN proposed an “Imposition of Special Measure Against Liberty Reserve S.A. as a Financial Institution of Primary Money Laundering Concern”. The primary purpose of the ‘Special Measure’ being to cut Liberty Reserve off from the banking system.

FinCEN noted Liberty Reserve’s irrevocable transactions and lack of ID verification as evidence that “Liberty Reserve’s system is structured so as to facilitate money laundering and other criminal activity,” these comments worried the digital currency community and was likely what scarred off many of their banking partners.

On the 19th, the Bitcoin Foundation responded to FinCEN’s proposed special measure urging them to clarify that not all virtual currency transactions are inherently suspect.

UK regulator will not require Bitcoin exchanges to register

Julia Dixon on July 9, 2013

CoinDesk is reporting that in a letter send to an exchange start up the UK, financial regulator HM Revenue & Customs (HMRC) has stated that the proposed exchange has no need to register under money laundering regulations. However the letter does make it clear that HMRC may change their mind and require registration in the future.

Via CoinDesk…

The letter from HMRC reads as follows:

“With reference to your enquiry at this time there is no requirement to register with HMRC under the Money Laundering regulations, however HMRC recognise that the issuing of Bitcoins represent an emerging development.

A Bitcoin ETF?

Julia Dixon on July 4, 2013

On Monday the Winklevoss twins, Cameron and Tyler, filed paper work with the SEC for a Bitcoin ETF. The “The Winklevoss Bitcoin Trust” has filed for an initial public offering of 1 million shares at $20 each.

“The Winklevoss Bitcoin Trust (Trust) will issue Winklevoss Bitcoin Shares (Shares) which represent units of fractional undivided beneficial interest in and ownership of the Trust. Math-Based Asset Services LLC is the sponsor of the Trust (Sponsor) and [TRUSTEE] is the trustee and custodian of the Trust (Trustee) using proprietary and patent-pending technology to administer the Trust. The Trust intends to issue additional Shares on a continuous basis.”

While this is certainly a sign of Bitcoin continuing its move towards the mainstream, the filing has also drawn a lot of criticism. Critics include those who think Bitcoin is a silly idea in general, to those who are all too happy to list all the ways in which it could go wrong.

The EFT is still a long ways off of actually happening, and it will certainly be interesting to see how the SEC will handle the filling.

True peer-to-peer currency exchange?

Julia Dixon on July 2, 2013

One of the biggest problems currently facing the Bitcoin economy is the exchange market. The market suffers from continued concentration and price volatility. In order to maintain their links to the traditional banking world, these businesses have the unenviable task of attempting to shove Bitcoin into the world of bank accounts and anti-money laundering policies. New exchanges are joining the Bitcoin economy but regulatory compliance is no small barrier to entry. The few existing online exchange services continue to be significant points of failure for the Bitcoin economy.

A network of small, peer-to-peer transactions would likely bypass many of these issues and would be a fitting solution for the brilliantly decentralized Bitcoin network. But is such a thing possible? The guys behind MetaLair, a UK based start-up, think so and are working hard to develop the software and find the investors to make it a reality.

Mt. Gox registers with FinCEN

Julia Dixon on July 1, 2013

Late last week the Japan based exchange received an MSB license from US financial regulator FinCEN, license #31000029348132.

The exchange market leader had a run-in with US regulators earlier in the year when their US subsidiary, Mutum Sigillum LLC, had its bank account and Dwolla account shut down due to a lack of licensing. Soon afterwards the site changed their policies requiring all customers wishing to perform any USD withdraws/deposits to first verify their identity. As the majority of Mt. Gox’s businesses is in USD/BTC trades, their decision to appease US regulators is unsurprising.

The e-gold story

Julia Dixon on June 27, 2013

As Bitcoin continues its move towards the mainstream and Bitcoin businesses experience rocky relations with bankers and regulators, now is a good time to look at previous leaders in the digital currency world.

In the late 90’s and early 2000’s, e-gold was the industry leader. As one of the world’s first successful online payment systems e-gold was a pioneer using many now standard practices such as SSL connections and API’s. Brought down by a run in with regulators in 2008 the e-gold story is required reading for anyone involved in the digital currency world.

Sent in by Wikipedia editor Cadwallader, below is a thoroug review of the e-gold story.

California Accuses Bitcoin Foundation of Unlicensed Money Transmission, Issues Cease and Desist Order

Julia Dixon on June 23, 2013

Update: Read the Bitcoin Foundation’s responce here.

Via Jon Matonis/Forbes

Directly following last month’s Bitcoin 2013 conference event in San Jose, CA that brought decent revenue into the state, California’s Department of Financial Institutions decided to issue a cease and desist warning to conference organizer Bitcoin Foundation for allegedly engaging in the business of money transmission without a license or proper authorization.