Neo & Bee Share Price Plunges to 0.0001 BTC as Trading Resumes
Daniel Cawrey (@danielcawrey) | Published on April 5, 2014 at 01:17 BST | Companies, Investors, News, Startups
Cyprus-based bitcoin savings and payment network Neo & Bee resumed trading on Havelock Investments today amid turmoil surrounding the company and its CEO.
At 5PM EST on 4 April, buy and sell orders for Neo & Bee on the private bitcoin-only investment exchange platform resumed after six days of suspended trading.
Neo & Bee saw high volume at the outset of resumed trade activity, with a plunge in prices from 0.002 BTC ($0.89) down to 0.0001 BTC ($0.05).
Source: Havelock Investments
Source: Havelock Investments
Questionable activity
On March 28, Havelock halted trading of the NEOBEE fund on its site due to what was then referred to as “questionable trading activity”.
Havelock Investments made an announcement earlier today that the ticker name for Neo & Bee would be changed from NEOBEE to NEOBEEQ.
In the announcement, Havelock noted it has not received an update from Neo & Bee as of yet:
“Financial information on the status of the company [Neo & Bee] has not been released. The units of this Fund will continue to trade even if the company will file for bankruptcy.”
About Neo & Bee
Founded by Danny Brewster, Neo & Bee is a savings and payment processing infrastructure for bitcoin, and started doing business in Cyprus with plans to expand to the larger European market.
Neo is the company’s banking arm, with physical branches. Bee is the payments portion of the business, thus the Neo & Bee name as two separate functions working together as one organization.
Danny Brewster. Source: Twitter
Danny Brewster. Source: Twitter
However, the company has been experiencing turmoil as of late. On 31 March, the company’s shares were suspended from trading on Havelock due to some strange trades. Brewster, the CEO, made a statement on 2 April in order to reassure the company’s investors.
The Cyprus Mail reported on 4 April that Brewster was facing fraud charges stemming from two customers that claim they never received bitcoin that they had paid for from Neo & Bee. Brewster has made it known to the bitcoin community that he is currently not in Cyprus.
About Havelock
Havelock Investments bills itself as a bitcoin-based source for “private companies looking for venture capital”, according to its website.
Source: Havelock Investments
Source: Havelock Investments
Since the NEOBEEQ trading symbol went live for Neo & Bee trading, the Havelock site has been experiencing intermittent outages with CloudFlare proxy placeholders often taking the place of active webpages.
The two largest companies currently on Havelock by market cap are Crypto Financial, which provides fiduciary services within the cryptocurrency industry, and an ASICMiner shares fund.
Havelock Investments makes money via fees on its all-bitcoin platform. There is a a 0.4% trading fee and it also charges users 0.0010BTC, with 0.0005 BTC being paid as a network transaction fee, for withdrawals.
This story is still developing. CoinDesk will monitor and provide updates as new details become known.
Topic: BITCOIN NEWS EVRYDAY! From multiple sources. - page 3. (Read 51244 times)
eBay Adds New ‘Virtual Currency’ Category to US Site
Jon Southurst (@southtopia) | Published on April 4, 2014 at 10:57 BST | Companies, Merchants, News
eBay’s main US site has introduced a category for ‘Virtual Currency’, with listings for dozens of bitcoin and altcoin-related activities – including shares in mining operations.
Although eBay is still not accepting bitcoin as an official payment, any recognition of the currency is significant since eBay is the parent company of PayPal, the payments firm long earmarked for disruption by many bitcoin fans.
The popular online auction site and marketplace quietly included the category in its ‘Category Changes‘ list for April under ‘Coins and Paper Money’.
At press time there were multiple entries for bitcoin and altcoin trades, Mining Hardware, and ‘Mining Contracts’, where investors are invited to buy per-gigahash shares in existing and proposed cryptocurrency mining operations. Search results revealed hundreds of mining-related listings not yet categorized.
One listing selling dogecoins had in its description:
“This will be shipped via USPS, UPS, FedEX, or the shipping method of your choice. Note to eBay: these are NOT being emailed.”
There are, however, other listings promising the coins will be sent electronically. The ‘Mining Hardware’ and ‘Mining Contracts’ subcategories also have some currency sales listed with Auction and ‘Buy it Now’ options.
This is not permitted on eBay’s UK site, which has had a ‘Virtual Currency’ category since February but stipulates listings must be classified ads.
ebay
Virtual Currency listings on Ebay.com
eBay has a colorful history with digital currencies, appearing often in ‘Will they or won’t they?’ stories throughout bitcoin’s recent history.
A filing to the US Securities and Exchanges Commission (SEC) in early 2014 referred to bitcoin as a ‘potential competitor’ to PayPal, which usually charges a 2-3% fee on transactions it processes.
eBay has also applied for patents in the last few months that suggest an interest in digital currency exchange and other payment ‘tokens’.
Previous listings
Reactions to the new ‘Virtual Currency’ category on reddit were a mixture of optimistic and wary, with many claiming the company has added it before, only to remove it at a later stage. This could have been due to eBay’s overseas subsidiary sites, like the UK, adding the listing before the US one.
PayPal has also appeared to toy with the idea of accepting bitcoin in some form. President president David Marcus remarked in an April 2013 interview that he found digital currencies “truly fascinating” and added “We’re kind of thinking about it”.
eBay president John Donohoe has also mused on the possibility of PayPal integrating bitcoin “one day” in interviews, giving no commitment beyond saying “we’re looking at bitcoin closely”.
Potential pitfalls
There may also be concerns at the number of bitcoin mining share listings on eBay. Many of these deals have ended in tears as hardware manufacturers fail to deliver on time, or under-deliver on the kinds of profits investors were expecting due to the exponential increase in the network’s hashing speed requirements.
The sheer number of listings under the category could create a potential customer relations nightmare for eBay, should buyers find themselves dissatisfied with purchases, scammed outright, or have refund claims disputed.
Even the Virtual Currency page itself has a large banner advertising the “eBay Money Back Guarantee – Get the item you ordered or get your money back”.
Trading digital currencies themselves on eBay could also be a minefield, exposing sellers to credit card chargebacks and PayPal claims after the coins have changed hands.
Jon Southurst (@southtopia) | Published on April 4, 2014 at 10:57 BST | Companies, Merchants, News
eBay’s main US site has introduced a category for ‘Virtual Currency’, with listings for dozens of bitcoin and altcoin-related activities – including shares in mining operations.
Although eBay is still not accepting bitcoin as an official payment, any recognition of the currency is significant since eBay is the parent company of PayPal, the payments firm long earmarked for disruption by many bitcoin fans.
The popular online auction site and marketplace quietly included the category in its ‘Category Changes‘ list for April under ‘Coins and Paper Money’.
At press time there were multiple entries for bitcoin and altcoin trades, Mining Hardware, and ‘Mining Contracts’, where investors are invited to buy per-gigahash shares in existing and proposed cryptocurrency mining operations. Search results revealed hundreds of mining-related listings not yet categorized.
One listing selling dogecoins had in its description:
“This will be shipped via USPS, UPS, FedEX, or the shipping method of your choice. Note to eBay: these are NOT being emailed.”
There are, however, other listings promising the coins will be sent electronically. The ‘Mining Hardware’ and ‘Mining Contracts’ subcategories also have some currency sales listed with Auction and ‘Buy it Now’ options.
This is not permitted on eBay’s UK site, which has had a ‘Virtual Currency’ category since February but stipulates listings must be classified ads.
ebay
Virtual Currency listings on Ebay.com
eBay has a colorful history with digital currencies, appearing often in ‘Will they or won’t they?’ stories throughout bitcoin’s recent history.
A filing to the US Securities and Exchanges Commission (SEC) in early 2014 referred to bitcoin as a ‘potential competitor’ to PayPal, which usually charges a 2-3% fee on transactions it processes.
eBay has also applied for patents in the last few months that suggest an interest in digital currency exchange and other payment ‘tokens’.
Previous listings
Reactions to the new ‘Virtual Currency’ category on reddit were a mixture of optimistic and wary, with many claiming the company has added it before, only to remove it at a later stage. This could have been due to eBay’s overseas subsidiary sites, like the UK, adding the listing before the US one.
PayPal has also appeared to toy with the idea of accepting bitcoin in some form. President president David Marcus remarked in an April 2013 interview that he found digital currencies “truly fascinating” and added “We’re kind of thinking about it”.
eBay president John Donohoe has also mused on the possibility of PayPal integrating bitcoin “one day” in interviews, giving no commitment beyond saying “we’re looking at bitcoin closely”.
Potential pitfalls
There may also be concerns at the number of bitcoin mining share listings on eBay. Many of these deals have ended in tears as hardware manufacturers fail to deliver on time, or under-deliver on the kinds of profits investors were expecting due to the exponential increase in the network’s hashing speed requirements.
The sheer number of listings under the category could create a potential customer relations nightmare for eBay, should buyers find themselves dissatisfied with purchases, scammed outright, or have refund claims disputed.
Even the Virtual Currency page itself has a large banner advertising the “eBay Money Back Guarantee – Get the item you ordered or get your money back”.
Trading digital currencies themselves on eBay could also be a minefield, exposing sellers to credit card chargebacks and PayPal claims after the coins have changed hands.
Tipping Platform Patreon ‘Exploring Bitcoin Integration’
Jon Southurst (@southtopia) | Published on April 4, 2014 at 05:17 BST | Companies, News
Online tipping and funding platform Patreon is planning to accept bitcoin “hopefully soon”, allowing fans to make regular micropayments to their favorite online artists.
Founded in 2013, Patreon has to date raised more than $2m in seed funding, and is one of a host of recent startups looking to help content creators recoup revenue otherwise lost to online middlemen like YouTube.
The announcement comes courtesy of an email the company sent to reddit user ‘camponez‘, who wrote to Patreon to enquire about bitcoin integration, and received the following reply:
“Thanks so much for your note! We are actually exploring bitcoin integration right now.”
“Be sure to follow us on Twitter @patreon because we will be making the announcement of when it is live on there!”
Patreon co-founder, musician Jack Conte, confirmed the message in a reply to the thread:
“It’s true, we’ve been talking about bitcoin for months. my co-founder, Sam, already built most of the code, but it’s not pushed yet. We’re fixing some bugs and tweaking. don’t know when it will happen. hopefully soon.”
How Patreon works
Patreon is different to other project-funding sites like Kickstarter, focusing instead on creators who release a stream of smaller, regular works. Rather than raise a large sum of money for one big project, Patreon allows donors to set up payments closer to $1-10 to be paid out whenever their favorite artist or creator releases a new work; such as a YouTube video, podcast, web comic or even a news article.
Patrons have full control over the regularity and size of their payments, with monthly maximums. The system also allows creators to set rewards and perks for their patrons, such as tutorials, Google Hangouts or concert tickets.
Conte demonstrates how the system works in a video here, which also shows he gets over $4,000 in tips for every video he releases from his 1,200+ ‘patrons’.
Bitcoin advantage
To use Patreon either as a Creator or a Patron, you need to sign up for an account (or use a Facebook login). Currently, Patrons must have either a credit card or a PayPal account, limiting the number of potential tippers.
Of course, any artist with a web presence can simply publish a bitcoin address or QR code image to collect 100% of all tips. In fact, this is probably better for one-off payments, since it requires a benefactor to actually visit your site and enter each tip manually.
With Patreon, payments can happen regularly and automatically without the need for a special visit, so if you make regular releases, signing up might well pay off.
Jon Southurst (@southtopia) | Published on April 4, 2014 at 05:17 BST | Companies, News
Online tipping and funding platform Patreon is planning to accept bitcoin “hopefully soon”, allowing fans to make regular micropayments to their favorite online artists.
Founded in 2013, Patreon has to date raised more than $2m in seed funding, and is one of a host of recent startups looking to help content creators recoup revenue otherwise lost to online middlemen like YouTube.
The announcement comes courtesy of an email the company sent to reddit user ‘camponez‘, who wrote to Patreon to enquire about bitcoin integration, and received the following reply:
“Thanks so much for your note! We are actually exploring bitcoin integration right now.”
“Be sure to follow us on Twitter @patreon because we will be making the announcement of when it is live on there!”
Patreon co-founder, musician Jack Conte, confirmed the message in a reply to the thread:
“It’s true, we’ve been talking about bitcoin for months. my co-founder, Sam, already built most of the code, but it’s not pushed yet. We’re fixing some bugs and tweaking. don’t know when it will happen. hopefully soon.”
How Patreon works
Patreon is different to other project-funding sites like Kickstarter, focusing instead on creators who release a stream of smaller, regular works. Rather than raise a large sum of money for one big project, Patreon allows donors to set up payments closer to $1-10 to be paid out whenever their favorite artist or creator releases a new work; such as a YouTube video, podcast, web comic or even a news article.
Patrons have full control over the regularity and size of their payments, with monthly maximums. The system also allows creators to set rewards and perks for their patrons, such as tutorials, Google Hangouts or concert tickets.
Conte demonstrates how the system works in a video here, which also shows he gets over $4,000 in tips for every video he releases from his 1,200+ ‘patrons’.
Bitcoin advantage
To use Patreon either as a Creator or a Patron, you need to sign up for an account (or use a Facebook login). Currently, Patrons must have either a credit card or a PayPal account, limiting the number of potential tippers.
Of course, any artist with a web presence can simply publish a bitcoin address or QR code image to collect 100% of all tips. In fact, this is probably better for one-off payments, since it requires a benefactor to actually visit your site and enter each tip manually.
With Patreon, payments can happen regularly and automatically without the need for a special visit, so if you make regular releases, signing up might well pay off.
Bulgarian Bitcoin Tax Guidance May Leave Money-Laundering Loophole
Pete Rizzo (@pete_rizzo_) | Published on April 3, 2014 at 19:21 BST | Crime, Europe, Regulation
Bulgaria’s National Revenue Agency (NRA), the government organisation in charge of administering state taxes and social security contributions in the eastern European nation, has issued new taxation guidelines for digital currency.
In a 2nd April post, the NRA indicated that income from the sale of digital currencies such as bitcoin will be treated as income from the sale of financial assets and taxed at a rate of 10%.
Effectively, earnings from bitcoin trades will be taxed on the same level as ordinary income and corporate income in Bulgaria.
Explained the NRA:
“Taxable income … is the sum of the gains realized during the year specified for each transaction, reduced by the amount of losses realized during the year designated for each specific transaction.”
This differs from guidance from the US Internal Revenue Service, which called for digital currency to be taxed as property, thereby allowing capital gains taxes to be imposed on each trade.
One source in Bulgaria suggested that the guidelines merely prevent its citizens from declaring bitcoin as non-taxable income, and that gains realized on purchases are not subject to taxation.
Timing and impact
The release comes in advance of the NRA’s 30th April 2013 tax deadline, and includes guidance on where bitcoin gains should be reported on tax forms.
Perhaps most notably, however, the announcement does not seem to have big-picture implications for how digital currencies will be classified or regulated. The NRA’s announcement compares bitcoin as a financial instrument, not a currency.
Further, Stamen Gorchev, founder of Bulgaria-based bitcoin informational website Hash.bg and member of the newly launched Bulgarian Bitcoin Association, stressed that the guidance amounted more to an ad-hoc announcement, and that the NRA has no legal authority to determine the status of bitcoin.
Bulgaria’s Financial Supervision Commission has reviewed the matter, but does not have the authority to determine the legal status of a currency in the country, according to Gorchev.
He indicated that the FSC sent a letter to the National Bank asking for regulation on the matter in August, 2013.
Money-laundering risk?
Gorchev indicated that the move was perhaps motivated by a desire on the part of the NRA to reduce the risk that citizens would use bitcoin to avoid tax payments, however, he suggests this intent may backfire.
He notes the NRA does not require taxpayers to submit documentation that proves income from bitcoin trading, and that this comment has been raised on social media outlets by the local community.
As a result, Gorchev explained, this could cause problems for the local government:
“It’s a very easy way for someone in Bulgaria who gets some dirty money just to sell some bitcoins, pay the back tax for it, and this way, it’s very easy to launder money.”
Income targeted
Gorchev indicated Bulgaria’s guidance differs from the recent IRS guidance in that it mostly covers those who earn income from trading digital currencies.
Explained Gorchev:
“If a miner sells bitcoins, he must pay tax on the sale price and he cannot subtract the cost of producing the bitcoins.”
Furthermore, Gorchev indicated that gains realized on bitcoin purchases aren’t taxable:
“If you buy one bitcoin at $500 and then later purchase goods for $600 with this bitcoin, you are not liable to pay taxes on the realized gain of $100.”
Regulation to follow?
A member of the European Union since 2007, the announcement is notable as it illustrates how different states are approaching taxation and regulation in lieu of formal guidelines from higher authorities.
For example, on 25th March, Denmark declared that it would not tax gains and losses from casual bitcoin trading, a different approach than that announced by Bulgaria yesterday.
The news notably follows calls from member state financial officials for the EU to take action on regulating bitcoin, and as more European countries – such as Greece and Lithuania – indicate that they are looking for the EU to take a leading position on the matter.
Still, Gorchev indicates that Bulgaria is likely to wait for such guidance from the EU as opposed to issuing its own regulation.
Pete Rizzo (@pete_rizzo_) | Published on April 3, 2014 at 19:21 BST | Crime, Europe, Regulation
Bulgaria’s National Revenue Agency (NRA), the government organisation in charge of administering state taxes and social security contributions in the eastern European nation, has issued new taxation guidelines for digital currency.
In a 2nd April post, the NRA indicated that income from the sale of digital currencies such as bitcoin will be treated as income from the sale of financial assets and taxed at a rate of 10%.
Effectively, earnings from bitcoin trades will be taxed on the same level as ordinary income and corporate income in Bulgaria.
Explained the NRA:
“Taxable income … is the sum of the gains realized during the year specified for each transaction, reduced by the amount of losses realized during the year designated for each specific transaction.”
This differs from guidance from the US Internal Revenue Service, which called for digital currency to be taxed as property, thereby allowing capital gains taxes to be imposed on each trade.
One source in Bulgaria suggested that the guidelines merely prevent its citizens from declaring bitcoin as non-taxable income, and that gains realized on purchases are not subject to taxation.
Timing and impact
The release comes in advance of the NRA’s 30th April 2013 tax deadline, and includes guidance on where bitcoin gains should be reported on tax forms.
Perhaps most notably, however, the announcement does not seem to have big-picture implications for how digital currencies will be classified or regulated. The NRA’s announcement compares bitcoin as a financial instrument, not a currency.
Further, Stamen Gorchev, founder of Bulgaria-based bitcoin informational website Hash.bg and member of the newly launched Bulgarian Bitcoin Association, stressed that the guidance amounted more to an ad-hoc announcement, and that the NRA has no legal authority to determine the status of bitcoin.
Bulgaria’s Financial Supervision Commission has reviewed the matter, but does not have the authority to determine the legal status of a currency in the country, according to Gorchev.
He indicated that the FSC sent a letter to the National Bank asking for regulation on the matter in August, 2013.
Money-laundering risk?
Gorchev indicated that the move was perhaps motivated by a desire on the part of the NRA to reduce the risk that citizens would use bitcoin to avoid tax payments, however, he suggests this intent may backfire.
He notes the NRA does not require taxpayers to submit documentation that proves income from bitcoin trading, and that this comment has been raised on social media outlets by the local community.
As a result, Gorchev explained, this could cause problems for the local government:
“It’s a very easy way for someone in Bulgaria who gets some dirty money just to sell some bitcoins, pay the back tax for it, and this way, it’s very easy to launder money.”
Income targeted
Gorchev indicated Bulgaria’s guidance differs from the recent IRS guidance in that it mostly covers those who earn income from trading digital currencies.
Explained Gorchev:
“If a miner sells bitcoins, he must pay tax on the sale price and he cannot subtract the cost of producing the bitcoins.”
Furthermore, Gorchev indicated that gains realized on bitcoin purchases aren’t taxable:
“If you buy one bitcoin at $500 and then later purchase goods for $600 with this bitcoin, you are not liable to pay taxes on the realized gain of $100.”
Regulation to follow?
A member of the European Union since 2007, the announcement is notable as it illustrates how different states are approaching taxation and regulation in lieu of formal guidelines from higher authorities.
For example, on 25th March, Denmark declared that it would not tax gains and losses from casual bitcoin trading, a different approach than that announced by Bulgaria yesterday.
The news notably follows calls from member state financial officials for the EU to take action on regulating bitcoin, and as more European countries – such as Greece and Lithuania – indicate that they are looking for the EU to take a leading position on the matter.
Still, Gorchev indicates that Bulgaria is likely to wait for such guidance from the EU as opposed to issuing its own regulation.
Chicago Sun-Times Becomes First Major US Newspaper to Accept Bitcoin
Pete Rizzo (@pete_rizzo_) | Published on April 3, 2014 at 17:26 BST | Coinbase, Companies, Lifestyle, News, Technology
Following its successful test with bitcoin micropayments provider BitWall back in February, the Chicago Sun-Times has announced that it has partnered with San Francisco-based bitcoin startup Coinbase to accept bitcoin payments.
That test saw the newspaper receive more than 700 bitcoin donations over a 24-hour trial period in support of the non-profit Taproot foundation, which offers pro-bono service work to organisations tackling social problems.
The announcement makes the Sun-Times the first US newspaper to accept bitcoin as a payment option, a move that editor in chief Jim Kirk indicated was in line with its digital-first promotional strategy.
Said Kirk:
“Our goal is to keep the Sun-Times current and evolving with changing technology. Accepting bitcoin payments is one of many ways we are working to stay digitally focused.”
The company indicated that it chose to partner with Coinbase as it would offer subscribers the quickest way to begin paying for content with bitcoin.
Chicago bitcoin preview
Sun-Times subscribers can now pay for subscriptions with bitcoin here.
BitWall test
The announcement that the Sun-Times would partner with Coinbase is particularly surprising given that the major newspaper had partnered for a test with BitWall earlier this year.
It is not yet clear how the Sun-Times partnership with Coinbase would affect the companies potentially moving forward with a micropayments partnership. Notably, the Sun-Times appears to only be accepting bitcoin subscription payments through Coinbase.
In contrast, the BitWall partnership tested payments on individual articles.
Bitcoin’s role in publishing
The Chicago Sun-Times is certainly not unique in accepting bitcoin, as many bitcoin blogs and news sites accept formal donations. Earlier this year, it was reported that Dutch newspaper NRC Handelsblad would also begin experimenting with bitcoin micropayments.
Further, if bitcoin is able to reach its goal of becoming a reliable micropayments service, content publishers will be among those that benefit the most, meaning the Sun-Times is likely to be far from the last major newspaper to implement bitcoin payments.
However, some developers have raised questions about bitcoin’s ability to handle such transactions.
Pete Rizzo (@pete_rizzo_) | Published on April 3, 2014 at 17:26 BST | Coinbase, Companies, Lifestyle, News, Technology
Following its successful test with bitcoin micropayments provider BitWall back in February, the Chicago Sun-Times has announced that it has partnered with San Francisco-based bitcoin startup Coinbase to accept bitcoin payments.
That test saw the newspaper receive more than 700 bitcoin donations over a 24-hour trial period in support of the non-profit Taproot foundation, which offers pro-bono service work to organisations tackling social problems.
The announcement makes the Sun-Times the first US newspaper to accept bitcoin as a payment option, a move that editor in chief Jim Kirk indicated was in line with its digital-first promotional strategy.
Said Kirk:
“Our goal is to keep the Sun-Times current and evolving with changing technology. Accepting bitcoin payments is one of many ways we are working to stay digitally focused.”
The company indicated that it chose to partner with Coinbase as it would offer subscribers the quickest way to begin paying for content with bitcoin.
Chicago bitcoin preview
Sun-Times subscribers can now pay for subscriptions with bitcoin here.
BitWall test
The announcement that the Sun-Times would partner with Coinbase is particularly surprising given that the major newspaper had partnered for a test with BitWall earlier this year.
It is not yet clear how the Sun-Times partnership with Coinbase would affect the companies potentially moving forward with a micropayments partnership. Notably, the Sun-Times appears to only be accepting bitcoin subscription payments through Coinbase.
In contrast, the BitWall partnership tested payments on individual articles.
Bitcoin’s role in publishing
The Chicago Sun-Times is certainly not unique in accepting bitcoin, as many bitcoin blogs and news sites accept formal donations. Earlier this year, it was reported that Dutch newspaper NRC Handelsblad would also begin experimenting with bitcoin micropayments.
Further, if bitcoin is able to reach its goal of becoming a reliable micropayments service, content publishers will be among those that benefit the most, meaning the Sun-Times is likely to be far from the last major newspaper to implement bitcoin payments.
However, some developers have raised questions about bitcoin’s ability to handle such transactions.
London’s Iconic O2 Venue to Host Bitcoin Fight Night
Emily Spaven (@emilyspaven) | Published on April 3, 2014 at 13:53 BST | Events, News
A number of kickboxers will go head-to-head in London’s iconic O2 venue on Saturday (5th April), fighting for a prize of £5,000 in bitcoin.
Some 18 fighters from across Europe are taking part in the Bitcoin Fight Night, which is being held in the indigO2, within The O2 venue.
A rather familiar face will also be taking to the ring – broadcaster and bitcoin enthusiast Max Keiser. He’s competing in a celebrity bout against a professionally trained fighter who is a big supporter of Jamie Dimon, the chief executive of JP Morgan Chase.
Organiser Patrick Carroll explained:
“We originally came up with the idea of a Bitcoin Fight Night while attending a bitcoin meet up group run by CoinScrum in central London.”
He said over 700 tickets for the event have been sold so far, but he expects over 1,000 people to show up on the day.
“We are very much looking forward to seeing everyone this Saturday and expect it to be the biggest UK-based bitcoin gathering to date,” Carroll concluded.
indigo2
Free meetup
A free bitcoin meetup is taking place at the indigO2 before the fight night, featuring a panel debate titled ‘How Bitcoin Can Fight Back Against the Hackers’.
The panel discussing the issues faced by digital currency will be chaired by bitcoin fan and co-founder of feathercoin Chris Ellis and will comprise of:
Ben Dyson – bitcoin sceptic and founder of Positive Money
Greg Davies – head of behavioural finance at Barclays PLC
Gautam Dhillon – founder of the Treasury Outsourcing Company and former employee of Lloyds Bank & JP Morgan Chase
Michele Seven – freedom advocate
Kristov Atlas – philosopher, computer scientist researching bitcoin security and author of Anonymous Bitcoin.
Josh Walker – bitcoin and maths enthusiast
The panel discussion will begin at around 15:00 (BST), with the fight night starting at 19:00 followed by a VIP after-party at 22:30.
Tickets are priced from £29.75 – £45.75, but those who attend the CoinScrum event are entitled to half-price tickets (£15) and entrance to the VIP party if they RSVP before the event.
Sponsorship
The event is being sponsored by Firestartr.co, which provides seed-stage capital and aids startups in their early stages.
Firestartr.co is increasing its activity in the digital currency space and recently led the Bitstamp audit, which required the creation of the largest single bitcoin wallet and transaction in history.
Cécile Baird, head of operations and portfolio at Firestartr.co, said: “In order for bitcoin to grow stronger, it’s weaknesses needs to be tackled. The CoinScrum panel event will confront the tough issues that need to be solved.”
“Thanks to the location and support we can reach out to a wider audience beyond the bitcoin community and include sports fans too,” she added.
Emily Spaven (@emilyspaven) | Published on April 3, 2014 at 13:53 BST | Events, News
A number of kickboxers will go head-to-head in London’s iconic O2 venue on Saturday (5th April), fighting for a prize of £5,000 in bitcoin.
Some 18 fighters from across Europe are taking part in the Bitcoin Fight Night, which is being held in the indigO2, within The O2 venue.
A rather familiar face will also be taking to the ring – broadcaster and bitcoin enthusiast Max Keiser. He’s competing in a celebrity bout against a professionally trained fighter who is a big supporter of Jamie Dimon, the chief executive of JP Morgan Chase.
Organiser Patrick Carroll explained:
“We originally came up with the idea of a Bitcoin Fight Night while attending a bitcoin meet up group run by CoinScrum in central London.”
He said over 700 tickets for the event have been sold so far, but he expects over 1,000 people to show up on the day.
“We are very much looking forward to seeing everyone this Saturday and expect it to be the biggest UK-based bitcoin gathering to date,” Carroll concluded.
indigo2
Free meetup
A free bitcoin meetup is taking place at the indigO2 before the fight night, featuring a panel debate titled ‘How Bitcoin Can Fight Back Against the Hackers’.
The panel discussing the issues faced by digital currency will be chaired by bitcoin fan and co-founder of feathercoin Chris Ellis and will comprise of:
Ben Dyson – bitcoin sceptic and founder of Positive Money
Greg Davies – head of behavioural finance at Barclays PLC
Gautam Dhillon – founder of the Treasury Outsourcing Company and former employee of Lloyds Bank & JP Morgan Chase
Michele Seven – freedom advocate
Kristov Atlas – philosopher, computer scientist researching bitcoin security and author of Anonymous Bitcoin.
Josh Walker – bitcoin and maths enthusiast
The panel discussion will begin at around 15:00 (BST), with the fight night starting at 19:00 followed by a VIP after-party at 22:30.
Tickets are priced from £29.75 – £45.75, but those who attend the CoinScrum event are entitled to half-price tickets (£15) and entrance to the VIP party if they RSVP before the event.
Sponsorship
The event is being sponsored by Firestartr.co, which provides seed-stage capital and aids startups in their early stages.
Firestartr.co is increasing its activity in the digital currency space and recently led the Bitstamp audit, which required the creation of the largest single bitcoin wallet and transaction in history.
Cécile Baird, head of operations and portfolio at Firestartr.co, said: “In order for bitcoin to grow stronger, it’s weaknesses needs to be tackled. The CoinScrum panel event will confront the tough issues that need to be solved.”
“Thanks to the location and support we can reach out to a wider audience beyond the bitcoin community and include sports fans too,” she added.
CrowdCurity ‘Capture the Coin’ Contest Rewards Bug Finders With Bitcoin
Daniel Cawrey (@danielcawrey) | Published on April 3, 2014 at 13:18 BST | Bitcoin protocol, Companies, Crime, News, Startups, Technology
Crowdsourced IT security startup CrowdCurity has created a new bug bounty programme with a unique twist.
Titled Capture the Coin, the programme is inspired by the well-known capture the flag game, and aims to reward security researchers for locating private bitcoin keys hidden within the front-end of web platforms.
CrowdCurity is testing the idea on its own website to start with, and is kicking it off as a competition with bitcoin for prizes.
Jacob Hanson, CEO of CrowdCurity, told CoinDesk:
“We find it an interesting approach to basically test the security of our own platform.”
How it works
For the contest, CrowdCurity created three paper wallets that store the bitcoin offline. Each is in different amounts, based on the perceived value of the possible security intrusion that the vulnerability represents.
The private keys to those wallets, however, are hidden within their website’s code awaiting discovery – for those with sufficient skills.
There are three different rewards: the 1.5 BTC Nakamoto Reward, the 1BTC Dorian Reward and the 0.5 BTC Scytale reward. furthermore, each has its own clues to aid the researchers, which are detailed on the company’s blog.
Each reward is for a very specific vulnerability, making this a rather different bug bounty programme than normal. For example, Google’s bug reward scheme has a chart it uses to calculate rewards.
CrowdCurity wants to experiment with a more competitive reward style with Capture the Coin.
Said Hansen:
“[With bitcoin] you can put a monetary value on vulnerabilities. Most companies give away prizes based on levels, but Capture the Coin offers better granularity and adjustments for rewards programs.”
Monetizing vulnerabilities
In the differing bitcoin amounts, CrowdCurity has set a specific a value for vulnerabilities of differing hardness levels. For example, the first place 1.5 BTC Nakamoto Reward should be one that’s a significantly tougher nut to crack, since only CrowdCurity should already know about it.
Hansen believes that creating a marketplace for vulnerabilities by using private keys for bitcoin wallets could change the way that security researchers compete in bug bounty programmes:
“We have different amounts in each of these different private keys. The different amounts correspond to the criticality of the bugs that the company actually sees in the system.”
And if someone finds the private key, possession of the wallet is instant. There’s no waiting for someone to decide on a reward like in regular bug bounty schemes.
Security transparency
The block chain’s ability to publicly display all transactions means that, in theory, future security systems using Capture the Coin-style cryptocurrency rewards could offer more transparency.
Hansen says the block chain is, “an intrusion detection system where we can monitor bitcoin addresses and see if private keys are being used”.
Most intrusion detection systems in IT security are passive in nature – designed to wait for a certain threshold to be violated, and then a warning notification is issued.
With block chain-based transaction monitoring, a more reactive system might be possible to quickly mitigate an intrusion.
Explained Hansen:
“Being able to monitor movements on [a bitcoin] account is actually a very reactive system. You can build a certain chain of reactions once you see a certain movement take place [on the block chain].”
Never 100% secure
CrowdCurity’s main business strategy has been crowdsourcing IT security rewards to get results, instead of paying expensive consultants for time, which it views as a disruptive industry approach.
The latter is a model that the company says many bitcoin companies are using, which make up around a half of CrowdCurity’s current customer base.
No business is ever completely protected against security threats, and because thefts and security breaches are on the rise, innovative methods to help thwart intruders are necessary.
53% of mid-size and larger businesses spent more on security in 2013. Source: TechTarget
53% of mid-size and larger businesses spent more on security in 2013. Source: TechTarget
Capture the Coin is CrowdCurity’s test to see how bitcoin can help harden front-end web security as part of its business.
“Hopefully in the future we will be able to provide this as a service to customers,” said Hansen.
Cryptocurrency-based security
Using cryptocurrency to incentivize and make security issues more transparent seems like a logical extension of CrowdCurity’s crowdsourcing business model.
Private keys for bitcoin wallets embedded in websites could end up being used as ‘honey pots’ – an IT security tactic designed to entice possible thieves in order to track down them and catch them in the act.
And the tracking method for this honey pot could use the power of the block chain’s ledger, something that has not been possible before.
Said Hansen:
“Now we have programmable money. And you can do this kind of stuff in security that could not be done earlier.”
“You can’t do this with PayPal. You can’t do this with regular money. It’s very, very interesting,” he added.
Daniel Cawrey (@danielcawrey) | Published on April 3, 2014 at 13:18 BST | Bitcoin protocol, Companies, Crime, News, Startups, Technology
Crowdsourced IT security startup CrowdCurity has created a new bug bounty programme with a unique twist.
Titled Capture the Coin, the programme is inspired by the well-known capture the flag game, and aims to reward security researchers for locating private bitcoin keys hidden within the front-end of web platforms.
CrowdCurity is testing the idea on its own website to start with, and is kicking it off as a competition with bitcoin for prizes.
Jacob Hanson, CEO of CrowdCurity, told CoinDesk:
“We find it an interesting approach to basically test the security of our own platform.”
How it works
For the contest, CrowdCurity created three paper wallets that store the bitcoin offline. Each is in different amounts, based on the perceived value of the possible security intrusion that the vulnerability represents.
The private keys to those wallets, however, are hidden within their website’s code awaiting discovery – for those with sufficient skills.
There are three different rewards: the 1.5 BTC Nakamoto Reward, the 1BTC Dorian Reward and the 0.5 BTC Scytale reward. furthermore, each has its own clues to aid the researchers, which are detailed on the company’s blog.
Each reward is for a very specific vulnerability, making this a rather different bug bounty programme than normal. For example, Google’s bug reward scheme has a chart it uses to calculate rewards.
CrowdCurity wants to experiment with a more competitive reward style with Capture the Coin.
Said Hansen:
“[With bitcoin] you can put a monetary value on vulnerabilities. Most companies give away prizes based on levels, but Capture the Coin offers better granularity and adjustments for rewards programs.”
Monetizing vulnerabilities
In the differing bitcoin amounts, CrowdCurity has set a specific a value for vulnerabilities of differing hardness levels. For example, the first place 1.5 BTC Nakamoto Reward should be one that’s a significantly tougher nut to crack, since only CrowdCurity should already know about it.
Hansen believes that creating a marketplace for vulnerabilities by using private keys for bitcoin wallets could change the way that security researchers compete in bug bounty programmes:
“We have different amounts in each of these different private keys. The different amounts correspond to the criticality of the bugs that the company actually sees in the system.”
And if someone finds the private key, possession of the wallet is instant. There’s no waiting for someone to decide on a reward like in regular bug bounty schemes.
Security transparency
The block chain’s ability to publicly display all transactions means that, in theory, future security systems using Capture the Coin-style cryptocurrency rewards could offer more transparency.
Hansen says the block chain is, “an intrusion detection system where we can monitor bitcoin addresses and see if private keys are being used”.
Most intrusion detection systems in IT security are passive in nature – designed to wait for a certain threshold to be violated, and then a warning notification is issued.
With block chain-based transaction monitoring, a more reactive system might be possible to quickly mitigate an intrusion.
Explained Hansen:
“Being able to monitor movements on [a bitcoin] account is actually a very reactive system. You can build a certain chain of reactions once you see a certain movement take place [on the block chain].”
Never 100% secure
CrowdCurity’s main business strategy has been crowdsourcing IT security rewards to get results, instead of paying expensive consultants for time, which it views as a disruptive industry approach.
The latter is a model that the company says many bitcoin companies are using, which make up around a half of CrowdCurity’s current customer base.
No business is ever completely protected against security threats, and because thefts and security breaches are on the rise, innovative methods to help thwart intruders are necessary.
53% of mid-size and larger businesses spent more on security in 2013. Source: TechTarget
53% of mid-size and larger businesses spent more on security in 2013. Source: TechTarget
Capture the Coin is CrowdCurity’s test to see how bitcoin can help harden front-end web security as part of its business.
“Hopefully in the future we will be able to provide this as a service to customers,” said Hansen.
Cryptocurrency-based security
Using cryptocurrency to incentivize and make security issues more transparent seems like a logical extension of CrowdCurity’s crowdsourcing business model.
Private keys for bitcoin wallets embedded in websites could end up being used as ‘honey pots’ – an IT security tactic designed to entice possible thieves in order to track down them and catch them in the act.
And the tracking method for this honey pot could use the power of the block chain’s ledger, something that has not been possible before.
Said Hansen:
“Now we have programmable money. And you can do this kind of stuff in security that could not be done earlier.”
“You can’t do this with PayPal. You can’t do this with regular money. It’s very, very interesting,” he added.
San Jose Earthquakes Soccer Team Embraces Bitcoin
Nermin Hajdarbegovic | Published on April 3, 2014 at 11:27 BST | BitPay, Companies, Lifestyle, Merchants
In a ground-breaking move, Californian soccer team, the San Jose Earthquakes, will start accepting bitcoin payments in the upcoming US season.
The Earthquakes’ president Dave Kaval told SiliconANGLE that fans will be able to use bitcoin to pay for items from the team’s merchandise store and to buy tickets. However, hotdogs and popcorn don’t appear to be on the list just yet.
Winning titles
The ‘Quakes’ are a major soccer team, having already won two Major League Soccer Cup titles back in 2001 and 2003. However, they aren’t the first major US sports team to accept bitcoin. The NBA took that honour in January, when the Sacramento Kings became the first major sports team in the US to accept bitcoin.
“In May, we are actually taking bitcoin in our stadium for merchandise, hopefully for concessions as well, but definitely for merchandise,” Kaval told SiliconANGLE.
Kaval pointed out that the ultimate goal is to produce a seamless commerce experience using mobile platforms. Concessions will be a bit trickier, as mobile POS systems will be necessary, but sooner or later Quakes fans could be smearing mustard from their bitcoin hotdog on their bitcoin season ticket.
Teething problems
San Jose Earthquakes
The team was apparently forced to push back bitcoin adoption after it ran into problems with two payment processors that went out of business. The Quakes then tapped BitPay.
Kaval said his team did a bit of research and decided to use BitPay due to its professionalism and robust payment solutions.
Interestingly, the Earthquakes are planning to move to a new stadium next year, which seems to have been a factor in the team’s decision to try out bitcoin payments. The team hope to employ a number of new technologies in the new facility.
And, of course, technology sells: it’s good for your image, it garners great publicity and the kids love it. The Quakes were quick to recognise this, along with the Sacramento Kings.
Nermin Hajdarbegovic | Published on April 3, 2014 at 11:27 BST | BitPay, Companies, Lifestyle, Merchants
In a ground-breaking move, Californian soccer team, the San Jose Earthquakes, will start accepting bitcoin payments in the upcoming US season.
The Earthquakes’ president Dave Kaval told SiliconANGLE that fans will be able to use bitcoin to pay for items from the team’s merchandise store and to buy tickets. However, hotdogs and popcorn don’t appear to be on the list just yet.
Winning titles
The ‘Quakes’ are a major soccer team, having already won two Major League Soccer Cup titles back in 2001 and 2003. However, they aren’t the first major US sports team to accept bitcoin. The NBA took that honour in January, when the Sacramento Kings became the first major sports team in the US to accept bitcoin.
“In May, we are actually taking bitcoin in our stadium for merchandise, hopefully for concessions as well, but definitely for merchandise,” Kaval told SiliconANGLE.
Kaval pointed out that the ultimate goal is to produce a seamless commerce experience using mobile platforms. Concessions will be a bit trickier, as mobile POS systems will be necessary, but sooner or later Quakes fans could be smearing mustard from their bitcoin hotdog on their bitcoin season ticket.
Teething problems
San Jose Earthquakes
The team was apparently forced to push back bitcoin adoption after it ran into problems with two payment processors that went out of business. The Quakes then tapped BitPay.
Kaval said his team did a bit of research and decided to use BitPay due to its professionalism and robust payment solutions.
Interestingly, the Earthquakes are planning to move to a new stadium next year, which seems to have been a factor in the team’s decision to try out bitcoin payments. The team hope to employ a number of new technologies in the new facility.
And, of course, technology sells: it’s good for your image, it garners great publicity and the kids love it. The Quakes were quick to recognise this, along with the Sacramento Kings.
South Korean Bitcoin Startup Coinplug Secures Further $400,000 Investment
Jon Southurst (@southtopia) | Published on April 3, 2014 at 10:11 BST | Bitcoin ATM, Companies, Investors, Merchants, News, Technology
South Korean bitcoin services startup Coinplug announced this week that it has secured another $400,000 in funding from venture capital firm DFJ (Draper Fisher Jurvetson) Partners’ Tim Draper and his affiliates.
Chol Hwan Kim from Key Initiatives Technical Entrepreneur also participated in the investment.
This funding is in addition to the $400,000 Coinplug has already received from Silicon Valley investor SilverBlue in November last year.
Bitcoin ATM, Gangnam style
As well as its bitcoin exchange, Coinplug also develops wallet and merchant payment software. Last month it even launched its own two-way bitcoin ATM in Gangnam, Seoul, in partnership with the largest ATM hardware manufacturer outside the US, Nautilus Hyosung.
Coinplug’s Richard Yun said the company would use the money to hire more engineers to expedite development of its bitcoin payment solutions. The company is also planning to release English versions of its software around the end of April.
Yun added:
“Also, the ATM is doing good. Many people are happy to visit, purchase and sell bitcoin. Because of our bitcoin ATM, people changed their bitcoin point of view, they can convert [digital currency] to fiat money instantly.”
He promised that Coinplug would reveal more about how much revenue the ATM was generating at a later date, and was interested in selling the technology to buyers overseas.
People in Korea were generally becoming more aware of bitcoin and curious about using it, he said, but some had been put off by negative reports in the media about high profile bitcoin company failures like Mt. Gox. The overall mood towards bitcoin in the country “may be neutral”, he explained.
Aiming at gaming
As for Coinplug’s future directions, Yun said that Korea’s reputation as a mobile and online gaming haven represented a huge potential market for bitcoin.
The company is targeting this market, including massive multiplayer online role-playing games (MMORPGs) and K-Pop and K-Drama online payment solutions, as well as general social and e-commerce.
Furthermore, the company is developing a secure and user-friendly point of sale (POS) system for both commercial (integrated into the current system) and personal use, which would be aimed at customers both in Korea and overseas
Jon Southurst (@southtopia) | Published on April 3, 2014 at 10:11 BST | Bitcoin ATM, Companies, Investors, Merchants, News, Technology
South Korean bitcoin services startup Coinplug announced this week that it has secured another $400,000 in funding from venture capital firm DFJ (Draper Fisher Jurvetson) Partners’ Tim Draper and his affiliates.
Chol Hwan Kim from Key Initiatives Technical Entrepreneur also participated in the investment.
This funding is in addition to the $400,000 Coinplug has already received from Silicon Valley investor SilverBlue in November last year.
Bitcoin ATM, Gangnam style
As well as its bitcoin exchange, Coinplug also develops wallet and merchant payment software. Last month it even launched its own two-way bitcoin ATM in Gangnam, Seoul, in partnership with the largest ATM hardware manufacturer outside the US, Nautilus Hyosung.
Coinplug’s Richard Yun said the company would use the money to hire more engineers to expedite development of its bitcoin payment solutions. The company is also planning to release English versions of its software around the end of April.
Yun added:
“Also, the ATM is doing good. Many people are happy to visit, purchase and sell bitcoin. Because of our bitcoin ATM, people changed their bitcoin point of view, they can convert [digital currency] to fiat money instantly.”
He promised that Coinplug would reveal more about how much revenue the ATM was generating at a later date, and was interested in selling the technology to buyers overseas.
People in Korea were generally becoming more aware of bitcoin and curious about using it, he said, but some had been put off by negative reports in the media about high profile bitcoin company failures like Mt. Gox. The overall mood towards bitcoin in the country “may be neutral”, he explained.
Aiming at gaming
As for Coinplug’s future directions, Yun said that Korea’s reputation as a mobile and online gaming haven represented a huge potential market for bitcoin.
The company is targeting this market, including massive multiplayer online role-playing games (MMORPGs) and K-Pop and K-Drama online payment solutions, as well as general social and e-commerce.
Furthermore, the company is developing a secure and user-friendly point of sale (POS) system for both commercial (integrated into the current system) and personal use, which would be aimed at customers both in Korea and overseas
Swedish Exchange Safello Aims to be ‘CoinBase for Europe’
Jona Kallgren (@Jonakallgren) | Published on April 3, 2014 at 08:00 BST | Companies, Exchanges, News
Swedish bitcoin exchange Safello is making the push to establish itself as Europe’s leading bitcoin exchange with direct payments now available from 86 European banks in 11 countries.
Safello is using the instant SOFORT payment system, meaning there will be no need to wait for an international bank transfer to be cleared into the company’s accounts.
“The only way many people were able to buy bitcoin before was via an international bank transfer. But now they can simply do an immediate payment,” Ludvig Öberg, Vice President of Product Development told CoinDesk.
“As soon as we get your money, whether it is euro, Swedish krona or pounds, we send you bitcoin. If you send us bitcoin we will send you fiat straight away.”
Safello hopes that the speed and ease of a SOFORT payment will open up the market around Europe and introduce bitcoin trading to new customers.
Strong backing
The move comes only two months after the company secured $600,000 in investment – much of it from major bitcoin players such as the Erik Voorhees of Coinapult, serial bitcoin investor Roger Ver and Nicolas Cary from Blockchain.info.
With such backing, in both finance and in expertise,Safello can be forgiven for talking big. Said Öberg:
“We are aiming to be the Coinbase for Europe.”
The Safello website will be available in nine local languages and the company hopes to set up local representatives to deal with customer service around Europe in the future.
Meeting a need
According to Öberg there has been a clear gap in the market for a pan-European exchange for some time, and Safello intends to fill that gap as soon as possible.
“Currently there is no easy bitcoin reseller that is available for everyone. Rather there are a lot of local players but no one is making it easy to buy and sell local for the whole of Europe,” he said.
Safello map
The 11 countries which will be available for direct payment via the SOFORT direct payment system are: Belgium, Poland, Spain, Hungary, the Netherlands, Sweden, Italy, Switzerland, Germany, France and Austria.
Safello already supports the Dutch payment system iDEAL, as well as SEPA (Single Euro Payments Area) payments, and will continue to support international wire transfers.
Opportunity amid crisis
It might seem like a strange time to make a major bitcoin push, since the cryptocurrency has been battered in the eyes of the general public following the much-publicized Mt. Gox bankruptcy.
According to Öberg, however, the Mt. Gox collapse has opened up opportunities for new exchanges like Safello, which transfers the bitcoin to the customers’ wallets without holding any of the BTC themselves.
Safello team ATM
The bitcoin ATM bought to market by Safello.
Safello was founded in Stockholm in August 2013 and quickly grew to become Sweden’s leading bitcoin exchange.
In October 2013, it expanded to trade in the Netherlands, the home country of CEO Frank Schuil, and in December 2013 it made news as it unveiled Sweden’s first bitcoin ATM.
Swedish entrepreneurs are already behind such Internet success stories as Spotify, Skype and SoundCloud. It remains to be seen if Safello can join this club of Scandinavian trailblazers.
For Öberg the European launch is just the first step. He says he believes Safello is marching towards a “global introduction”.
Jona Kallgren (@Jonakallgren) | Published on April 3, 2014 at 08:00 BST | Companies, Exchanges, News
Swedish bitcoin exchange Safello is making the push to establish itself as Europe’s leading bitcoin exchange with direct payments now available from 86 European banks in 11 countries.
Safello is using the instant SOFORT payment system, meaning there will be no need to wait for an international bank transfer to be cleared into the company’s accounts.
“The only way many people were able to buy bitcoin before was via an international bank transfer. But now they can simply do an immediate payment,” Ludvig Öberg, Vice President of Product Development told CoinDesk.
“As soon as we get your money, whether it is euro, Swedish krona or pounds, we send you bitcoin. If you send us bitcoin we will send you fiat straight away.”
Safello hopes that the speed and ease of a SOFORT payment will open up the market around Europe and introduce bitcoin trading to new customers.
Strong backing
The move comes only two months after the company secured $600,000 in investment – much of it from major bitcoin players such as the Erik Voorhees of Coinapult, serial bitcoin investor Roger Ver and Nicolas Cary from Blockchain.info.
With such backing, in both finance and in expertise,Safello can be forgiven for talking big. Said Öberg:
“We are aiming to be the Coinbase for Europe.”
The Safello website will be available in nine local languages and the company hopes to set up local representatives to deal with customer service around Europe in the future.
Meeting a need
According to Öberg there has been a clear gap in the market for a pan-European exchange for some time, and Safello intends to fill that gap as soon as possible.
“Currently there is no easy bitcoin reseller that is available for everyone. Rather there are a lot of local players but no one is making it easy to buy and sell local for the whole of Europe,” he said.
Safello map
The 11 countries which will be available for direct payment via the SOFORT direct payment system are: Belgium, Poland, Spain, Hungary, the Netherlands, Sweden, Italy, Switzerland, Germany, France and Austria.
Safello already supports the Dutch payment system iDEAL, as well as SEPA (Single Euro Payments Area) payments, and will continue to support international wire transfers.
Opportunity amid crisis
It might seem like a strange time to make a major bitcoin push, since the cryptocurrency has been battered in the eyes of the general public following the much-publicized Mt. Gox bankruptcy.
According to Öberg, however, the Mt. Gox collapse has opened up opportunities for new exchanges like Safello, which transfers the bitcoin to the customers’ wallets without holding any of the BTC themselves.
Safello team ATM
The bitcoin ATM bought to market by Safello.
Safello was founded in Stockholm in August 2013 and quickly grew to become Sweden’s leading bitcoin exchange.
In October 2013, it expanded to trade in the Netherlands, the home country of CEO Frank Schuil, and in December 2013 it made news as it unveiled Sweden’s first bitcoin ATM.
Swedish entrepreneurs are already behind such Internet success stories as Spotify, Skype and SoundCloud. It remains to be seen if Safello can join this club of Scandinavian trailblazers.
For Öberg the European launch is just the first step. He says he believes Safello is marching towards a “global introduction”.
Libra Promises Bitcoin Tax Service to Ease Compliance With IRS Guidance
Danny Bradbury (@dannybradbury) | Published on April 3, 2014 at 07:47 BST | News, US & Canada
Remember when we wondered whether someone would develop a service to help you keep track of the capital gains on bitcoins? Well, now it turns out that someone has – or, at least, wants to. Libra is a new venture that claims it can help you to keep the IRS happy.
Launched by Jake Benson, a former SAP HCM Consultant for Cap Gemini specialising in US and Canadian payroll, the service wants to enable individuals, small businesses and large enterprises alike to comply with the new IRS regulations.
The IRS notice, announced March 25th, carries significant implications for people using bitcoin, even if they are regular users, rather than investors.
Under the guidance, people spending bitcoin are liable to declare capital gains on any increase in value on those coins. That means if you purchased one bitcoin in early October at $100 and spent it today at $440, then you’d be realising a capital gain of $340.
To add insult to injury, because you hadn’t held onto those bitcoins for more than a year and a day, that capital gains tax would be short term, making it equivalent to ordinary income tax. Investor holding onto their coins for longer than that period, however, will pay the long-term rate of 15%.
‘Critical issue’
Of course, people don’t always spend one whole bitcoin at a time. Instead, they’ll acquire and spend portions of a bitcoin over time. That means that technically, they have to keep track of lots of bitcoins that gained different amounts of value over different time periods.
Members of the bitcoin community are unhappy enough about the guidance to have filed a petition about the new guidance.
“Arguably, this is one of the most critical issues surrounding digital currencies,” Benson told CoinDesk. He added:
“When I noticed several months ago there was no comprehensive solution to address taxes, I knew it was an opportunity. Tax software might not be the sexiest business in the industry, but it is the most essential right now.”
Benson, who graduated from the University of Texas with a business degree in 2011, wants to cut through the whole tangled mess. Libra will start by obtaining transaction history for an individual, which he says can be done through automatic and manual means.
Simple solution
Then, the service will calculate the cost basis on a per-transaction level, before distinguishing between transactions subject to short-term or long-term capital gains.
Benson explained:
“Then, we output the calculated totals, and direct the user to which box to fill in on which tax form – we may even provide automatic form output for ultimate convenience.”
He is hoping to do the whole thing in a minimum of four to five clicks for tax novices, and longer term, wants to integrate with other tax software, including the big consumer titles, but also enterprise ERP systems.
The service will be able to handle book keeping retrospectively, so that people can refile for previous tax years if their bitcoin transactions extend back that far.
Extension ‘advisable’
The problem for bitcoin users today is that the tax filing deadline for the IRS is next Tuesday, and LibreTax won’t be launching its service until the third quarter.
Theoretically, this means that bitcoin users would have to do a lot of their paperwork themselves in the next few days, if they wanted to stay within the law by following the tax guidance. But Benson has an alternative, he said:
“Libra for individuals will be ready in the September timeframe. That will be right in time for the extended tax deadline, so we advise everyone to file for an extension this year.”
Future plans
In the meantime, Benson will be working with an initial round of seed capital from CrossCoin Ventures; his being the first company to be accepted by the Ripple Labs-funded accelerator program.
In time, he expects Libra to become a broader tax reporting tool, as many different stores of value from fiat through to cryptocurrencies become digitized.
Explained Benson:
“Imagine being able to automatically populate your income, itemized deductions, business expenses, etc, straight from the ledger – no matter what kind of currency was used! I see a tremendous amount of potential here.”
The service is purely for tax purposes and doesn’t include its own wallet yet, Benson concluded – although it would be a logical next step, he added.
Danny Bradbury (@dannybradbury) | Published on April 3, 2014 at 07:47 BST | News, US & Canada
Remember when we wondered whether someone would develop a service to help you keep track of the capital gains on bitcoins? Well, now it turns out that someone has – or, at least, wants to. Libra is a new venture that claims it can help you to keep the IRS happy.
Launched by Jake Benson, a former SAP HCM Consultant for Cap Gemini specialising in US and Canadian payroll, the service wants to enable individuals, small businesses and large enterprises alike to comply with the new IRS regulations.
The IRS notice, announced March 25th, carries significant implications for people using bitcoin, even if they are regular users, rather than investors.
Under the guidance, people spending bitcoin are liable to declare capital gains on any increase in value on those coins. That means if you purchased one bitcoin in early October at $100 and spent it today at $440, then you’d be realising a capital gain of $340.
To add insult to injury, because you hadn’t held onto those bitcoins for more than a year and a day, that capital gains tax would be short term, making it equivalent to ordinary income tax. Investor holding onto their coins for longer than that period, however, will pay the long-term rate of 15%.
‘Critical issue’
Of course, people don’t always spend one whole bitcoin at a time. Instead, they’ll acquire and spend portions of a bitcoin over time. That means that technically, they have to keep track of lots of bitcoins that gained different amounts of value over different time periods.
Members of the bitcoin community are unhappy enough about the guidance to have filed a petition about the new guidance.
“Arguably, this is one of the most critical issues surrounding digital currencies,” Benson told CoinDesk. He added:
“When I noticed several months ago there was no comprehensive solution to address taxes, I knew it was an opportunity. Tax software might not be the sexiest business in the industry, but it is the most essential right now.”
Benson, who graduated from the University of Texas with a business degree in 2011, wants to cut through the whole tangled mess. Libra will start by obtaining transaction history for an individual, which he says can be done through automatic and manual means.
Simple solution
Then, the service will calculate the cost basis on a per-transaction level, before distinguishing between transactions subject to short-term or long-term capital gains.
Benson explained:
“Then, we output the calculated totals, and direct the user to which box to fill in on which tax form – we may even provide automatic form output for ultimate convenience.”
He is hoping to do the whole thing in a minimum of four to five clicks for tax novices, and longer term, wants to integrate with other tax software, including the big consumer titles, but also enterprise ERP systems.
The service will be able to handle book keeping retrospectively, so that people can refile for previous tax years if their bitcoin transactions extend back that far.
Extension ‘advisable’
The problem for bitcoin users today is that the tax filing deadline for the IRS is next Tuesday, and LibreTax won’t be launching its service until the third quarter.
Theoretically, this means that bitcoin users would have to do a lot of their paperwork themselves in the next few days, if they wanted to stay within the law by following the tax guidance. But Benson has an alternative, he said:
“Libra for individuals will be ready in the September timeframe. That will be right in time for the extended tax deadline, so we advise everyone to file for an extension this year.”
Future plans
In the meantime, Benson will be working with an initial round of seed capital from CrossCoin Ventures; his being the first company to be accepted by the Ripple Labs-funded accelerator program.
In time, he expects Libra to become a broader tax reporting tool, as many different stores of value from fiat through to cryptocurrencies become digitized.
Explained Benson:
“Imagine being able to automatically populate your income, itemized deductions, business expenses, etc, straight from the ledger – no matter what kind of currency was used! I see a tremendous amount of potential here.”
The service is purely for tax purposes and doesn’t include its own wallet yet, Benson concluded – although it would be a logical next step, he added.
Online Payment Provider PayStand Exits Beta, Announces Bitcoin Support
Pete Rizzo (@pete_rizzo_) | Published on April 2, 2014 at 17:25 BST | News, Startups, US & Canada
California-based online payment processor PayStand has launched out of private beta to provide US-based websites and mobile applications another way to accept payments such e-checks, credit cards and bitcoin.
With the announcement, PayStand also revealed $1m in new investment as part of its initial seed-funding round.
Founded in 2009, PayStand aims to be a multi-payment gateway that eliminates merchant transaction fees, in part by supporting digital currency acceptance.
Said PayStand in its official announcement:
“PayStand is the first and only payments service to easily allow bitcoin and other digital [currencies] as well as more traditional payments all at the same time and eliminates merchant transaction fees with a unique ‘payments-as-a-service’ model.”
The Santa Cruz startup boasts an easy setup process and flexible commitments for merchants who want to test the waters with something new. The company notes its service “does not require any extra hosting accounts, payment processors, merchant accounts, programming [or] order management software”.
Notably, the news comes as more major payments tech startups are embracing bitcoin.
Within the last two weeks, web and mobile payments provider Stripe and mobile point-of-sale (mPOS) industry leader Square have both revealed new bitcoin initiatives.
Digital currency roots
Jeremy Almond, PayStand’s CEO, has indicated that the idea for his company grew out of his own investing and experiments with digital currencies.
However, although he was enthusiastic about the potential of bitcoin and its alternatives, he chose to incorporate additional services into PayStand, believing standalone solutions would not be widely adopted.
Even so, Almond is understanding of the big-picture implications of digital currencies, telling TechCrunch:
“We believe that the process of money movement is going through a massive evolution, and our goal is to support this broadly.”
How PayStand works
With PayStand, online merchants pay a monthly fee for the payment software, thereby avoiding transaction fees associated with its more traditional payment options. Merchants do not pay any added costs on bitcoin transactions.
Likewise, consumers enjoy a one-click payment process, meaning they don’t experience the added friction imposed by passwords and other security methods.
Unlike merchant processors such as BitPay or Coinbase, however, PayStand users who want to accept bitcoin need to first set up a bitcoin wallet address. Merchants can then have bitcoin deposited to their personal wallets or sent to an exchange to be converted into fiat currencies, reports say.
Perhaps most notably, the company states on its website that bitcoin acceptance may be part of further services in digital currency space, as it calls bitcoin just “the first digital currency in line for our eCash payment option”.
Pete Rizzo (@pete_rizzo_) | Published on April 2, 2014 at 17:25 BST | News, Startups, US & Canada
California-based online payment processor PayStand has launched out of private beta to provide US-based websites and mobile applications another way to accept payments such e-checks, credit cards and bitcoin.
With the announcement, PayStand also revealed $1m in new investment as part of its initial seed-funding round.
Founded in 2009, PayStand aims to be a multi-payment gateway that eliminates merchant transaction fees, in part by supporting digital currency acceptance.
Said PayStand in its official announcement:
“PayStand is the first and only payments service to easily allow bitcoin and other digital [currencies] as well as more traditional payments all at the same time and eliminates merchant transaction fees with a unique ‘payments-as-a-service’ model.”
The Santa Cruz startup boasts an easy setup process and flexible commitments for merchants who want to test the waters with something new. The company notes its service “does not require any extra hosting accounts, payment processors, merchant accounts, programming [or] order management software”.
Notably, the news comes as more major payments tech startups are embracing bitcoin.
Within the last two weeks, web and mobile payments provider Stripe and mobile point-of-sale (mPOS) industry leader Square have both revealed new bitcoin initiatives.
Digital currency roots
Jeremy Almond, PayStand’s CEO, has indicated that the idea for his company grew out of his own investing and experiments with digital currencies.
However, although he was enthusiastic about the potential of bitcoin and its alternatives, he chose to incorporate additional services into PayStand, believing standalone solutions would not be widely adopted.
Even so, Almond is understanding of the big-picture implications of digital currencies, telling TechCrunch:
“We believe that the process of money movement is going through a massive evolution, and our goal is to support this broadly.”
How PayStand works
With PayStand, online merchants pay a monthly fee for the payment software, thereby avoiding transaction fees associated with its more traditional payment options. Merchants do not pay any added costs on bitcoin transactions.
Likewise, consumers enjoy a one-click payment process, meaning they don’t experience the added friction imposed by passwords and other security methods.
Unlike merchant processors such as BitPay or Coinbase, however, PayStand users who want to accept bitcoin need to first set up a bitcoin wallet address. Merchants can then have bitcoin deposited to their personal wallets or sent to an exchange to be converted into fiat currencies, reports say.
Perhaps most notably, the company states on its website that bitcoin acceptance may be part of further services in digital currency space, as it calls bitcoin just “the first digital currency in line for our eCash payment option”.
Bank of Montreal Open to Rekindling Partnerships with Bitcoin Businesses
Pete Rizzo (@pete_rizzo_) | Published on April 2, 2014 at 21:49 BST | News
The Bank of Montreal, one of Canada’s “Big Five” banks and the fourth-largest in the country, issued new statements on 1st April suggesting that it may be open to working with bitcoin businesses again, provided it receives regulatory clarity from the nation’s lawmakers.
The comments were made by CEO Bill Downe as part of an interview at Bank of Montreal’s annual general meeting in Toronto this week.
Speaking to his company, Downe said:
“If you wanted a Swiss franc transaction or a Japanese yen transaction or a U.S. dollar transaction, we can do that for you. If bitcoin [can be] a reliable medium of exchange, then at that point in the future, we would be able to [conduct business] with bitcoin.”
The comments are particularly noteworthy, however, given that Bank of Montreal abruptly cut ties with Vancouver-based bitcoin exchange Cointrader earlier this February.
This decision, according to Cointrader, was part of a larger move by Bank of Montreal to end relations with all of the bitcoin businesses it served. At the time, Bank of Montreal did not comment publicly as to whether it had plans to freeze all of its bitcoin customer accounts.
Past bitcoin relationships
While the news has been positioned as if Bank of Montreal is looking to perhaps enter the bitcoin market, talks with major Canadian bitcoin businesses reveal it already has a history of working in the sector, one that changed earlier this year amid increasingly harsh government rhetoric.
A spokesperson for Toronto-based bitcoin exchange Vault of Satoshi told CoinDesk that it is no longer working with Bank of Montreal, though it said the company was “nothing short of fantastic” while they were in business together.
Said the representative:
“While we were working with the Bank of Montreal, they changed their stance on Bitcoin related-business recently and decided to halt their operations in that field until there is further regulation; not much unlike our decision to temporarily withdraw our US operations.”
A representative from Cointrader indicated that the recent statements from Bank of Montreal’s CEO were consistent with responses it received from the banking provider.
“They wanted to wait for clarification on regulation. But, the problem is, how long does that take? It could take years.”
He added that he believes Bank of Montreal is no longer working with bitcoin businesses, but that at one point, it was the go-to bank for such services.
Regulation in Canada
Notably, the news follows a report last week from The Ottawa Citizen, which stated that the latest version of Canada’s 2014 Federal Budget Implementation Act included new directives regarding digital currencies.
The budget act, if passed would require “dealers of virtual currencies, such as Bitcoin, to report suspicious transactions, or those over $10,000, to a government watchdog”.
Canada has been rumoured to be working on regulating digital currencies, however, Finance Minister Jim Flaherty, the official who was perhaps most active publicly on this front, recently resigned on 18th March.
Promising signs
Despite the tough talk on the regulatory front, Canada’s digital currency community has seen some encouraging signs recently that may signal less aggressive regulation may be forthcoming.
For example, on 26th March, Vault of Satoshi received its full money services license.
Further, the local industry is showing it has been able to innovate even in the face of challenges.
Vault of Satoshi announced its coin-to-coin trading system on 2nd April, which allows users to trade altcoins directly without first converting to LTC or BTC, while PocketPOS launched a new merchant-friendly point-of-sale tool meant to increase merchant adoption of bitcoin.
Pete Rizzo (@pete_rizzo_) | Published on April 2, 2014 at 21:49 BST | News
The Bank of Montreal, one of Canada’s “Big Five” banks and the fourth-largest in the country, issued new statements on 1st April suggesting that it may be open to working with bitcoin businesses again, provided it receives regulatory clarity from the nation’s lawmakers.
The comments were made by CEO Bill Downe as part of an interview at Bank of Montreal’s annual general meeting in Toronto this week.
Speaking to his company, Downe said:
“If you wanted a Swiss franc transaction or a Japanese yen transaction or a U.S. dollar transaction, we can do that for you. If bitcoin [can be] a reliable medium of exchange, then at that point in the future, we would be able to [conduct business] with bitcoin.”
The comments are particularly noteworthy, however, given that Bank of Montreal abruptly cut ties with Vancouver-based bitcoin exchange Cointrader earlier this February.
This decision, according to Cointrader, was part of a larger move by Bank of Montreal to end relations with all of the bitcoin businesses it served. At the time, Bank of Montreal did not comment publicly as to whether it had plans to freeze all of its bitcoin customer accounts.
Past bitcoin relationships
While the news has been positioned as if Bank of Montreal is looking to perhaps enter the bitcoin market, talks with major Canadian bitcoin businesses reveal it already has a history of working in the sector, one that changed earlier this year amid increasingly harsh government rhetoric.
A spokesperson for Toronto-based bitcoin exchange Vault of Satoshi told CoinDesk that it is no longer working with Bank of Montreal, though it said the company was “nothing short of fantastic” while they were in business together.
Said the representative:
“While we were working with the Bank of Montreal, they changed their stance on Bitcoin related-business recently and decided to halt their operations in that field until there is further regulation; not much unlike our decision to temporarily withdraw our US operations.”
A representative from Cointrader indicated that the recent statements from Bank of Montreal’s CEO were consistent with responses it received from the banking provider.
“They wanted to wait for clarification on regulation. But, the problem is, how long does that take? It could take years.”
He added that he believes Bank of Montreal is no longer working with bitcoin businesses, but that at one point, it was the go-to bank for such services.
Regulation in Canada
Notably, the news follows a report last week from The Ottawa Citizen, which stated that the latest version of Canada’s 2014 Federal Budget Implementation Act included new directives regarding digital currencies.
The budget act, if passed would require “dealers of virtual currencies, such as Bitcoin, to report suspicious transactions, or those over $10,000, to a government watchdog”.
Canada has been rumoured to be working on regulating digital currencies, however, Finance Minister Jim Flaherty, the official who was perhaps most active publicly on this front, recently resigned on 18th March.
Promising signs
Despite the tough talk on the regulatory front, Canada’s digital currency community has seen some encouraging signs recently that may signal less aggressive regulation may be forthcoming.
For example, on 26th March, Vault of Satoshi received its full money services license.
Further, the local industry is showing it has been able to innovate even in the face of challenges.
Vault of Satoshi announced its coin-to-coin trading system on 2nd April, which allows users to trade altcoins directly without first converting to LTC or BTC, while PocketPOS launched a new merchant-friendly point-of-sale tool meant to increase merchant adoption of bitcoin.
Congressional Hearing Explores Costs, Benefits Of Small Business Bitcoin Use
Stan Higgins | Published on April 2, 2014 at 22:32 BST | Analysis, News, Regulation, US & Canada
The US House of Representatives committee on small business held a hearing on 2nd April to discuss the growing use of bitcoin by the country’s small business owners (SMBs), and the pros and cons that using this technology as a payment option offers the demographic.
Entitled “Bitcoin: Examining the Benefits and Risks for Small Business”, a panel of experts spoke about the benefits and costs of the use of bitcoin by SMBs while also touching on hot topics like Silk Road and the recent IRS decision on the tax treatment of digital currencies.
Committee Chairman Sam Graves noted in his opening remarks that a great deal of uncertainty remains for small businesses thinking about accepting bitcoin as a form of payment, but that the hearing was meant to increase information about the topic.
Explained Graves:
“We hope that by providing information about bitcoin, small businesses will be in a better position to know whether adopting bitcoin as a payment system might be a way for small businesses to gain more customers. This hearing will also inform [congress] Members as we consider implications of policies affecting the use of virtual currency.”
In addition, he cited the collapse of Japan-based bitcoin exchange Mt. Gox and the prevalence of digital black markets which accept bitcoin as barriers for widespread adoption.
Overall, Graves struck a cautious tone for the hearing that was echoed by its panel of experts.
Bitcoin’s benefits
Jerry Brito, a senior research fellow at the Mercatus Center at George Mason University, suggested that the use of bitcoins can help SMBs avoid certain types of payment fraud that can result in significant repercussions, including the loss of access to card networks. Further, he said that businesses can tap into potential new markets simply because they can accept transactions from regions that are not included in current global payment networks.
Still, Brito noted that volatility remains a key barrier to adoption, but that he believes the technical aspects of bitcoin do not lend themselves to the currency’s well-known price swings.
Said Brito:
“There is nothing inherent in bitcoin’s design that makes it naturally volatile. Its volatility is likely attributable to the fact that it is a new currency, still in the process of discovering its stable price. Additionally, as a nascent currency, it is very thinly traded and as a result a single large-enough trade can affect the exchange price substantially.”
Bitcoin’s risks
Capital markets and risk management expert Mark T. Williams of Boston University’s Finance Department pointed out that bitcoin’s position as a payment system – as well as its price – is determined largely by current users.
Should these parties decide to move away accepting virtual currency, “bitcoin [would] become worthless,” Williams said.
Williams also said that, compared to other risky investments worldwide, bitcoin poses a much bigger threat to SMBs who lack the capital or infrastructure to withstand potential losses.
“It could be argued that small businesses that blindly accept bitcoin are not actually in commerce but are in the high-risk speculative trading business.”
Williams, known for his often inflammatory critiques of bitcoin, went on to say that bitcoin is perhaps better used by Wall Street trading firms that have experienced staffs that can handle the associated risk.
IRS ruling
Later in the hearing, both Williams and Brito voiced support for the IRS decision to designate virtual currencies as a type of property for tax treatment.
Brito noted that the IRS looked at the characteristics of bitcoin and judged it as more of a commodity compared to a currency. Looking ahead, he suggested that Congress and federal regulators could create a special tax category for virtual currencies that takes into consideration the extraordinary aspects of bitcoin.
Adam White, director of business development and sales at Coinbase, and L. Michael Couvillion, associate professor of economics at Plymouth State University’s College of Business Administration, also addressed the committee.
Stan Higgins | Published on April 2, 2014 at 22:32 BST | Analysis, News, Regulation, US & Canada
The US House of Representatives committee on small business held a hearing on 2nd April to discuss the growing use of bitcoin by the country’s small business owners (SMBs), and the pros and cons that using this technology as a payment option offers the demographic.
Entitled “Bitcoin: Examining the Benefits and Risks for Small Business”, a panel of experts spoke about the benefits and costs of the use of bitcoin by SMBs while also touching on hot topics like Silk Road and the recent IRS decision on the tax treatment of digital currencies.
Committee Chairman Sam Graves noted in his opening remarks that a great deal of uncertainty remains for small businesses thinking about accepting bitcoin as a form of payment, but that the hearing was meant to increase information about the topic.
Explained Graves:
“We hope that by providing information about bitcoin, small businesses will be in a better position to know whether adopting bitcoin as a payment system might be a way for small businesses to gain more customers. This hearing will also inform [congress] Members as we consider implications of policies affecting the use of virtual currency.”
In addition, he cited the collapse of Japan-based bitcoin exchange Mt. Gox and the prevalence of digital black markets which accept bitcoin as barriers for widespread adoption.
Overall, Graves struck a cautious tone for the hearing that was echoed by its panel of experts.
Bitcoin’s benefits
Jerry Brito, a senior research fellow at the Mercatus Center at George Mason University, suggested that the use of bitcoins can help SMBs avoid certain types of payment fraud that can result in significant repercussions, including the loss of access to card networks. Further, he said that businesses can tap into potential new markets simply because they can accept transactions from regions that are not included in current global payment networks.
Still, Brito noted that volatility remains a key barrier to adoption, but that he believes the technical aspects of bitcoin do not lend themselves to the currency’s well-known price swings.
Said Brito:
“There is nothing inherent in bitcoin’s design that makes it naturally volatile. Its volatility is likely attributable to the fact that it is a new currency, still in the process of discovering its stable price. Additionally, as a nascent currency, it is very thinly traded and as a result a single large-enough trade can affect the exchange price substantially.”
Bitcoin’s risks
Capital markets and risk management expert Mark T. Williams of Boston University’s Finance Department pointed out that bitcoin’s position as a payment system – as well as its price – is determined largely by current users.
Should these parties decide to move away accepting virtual currency, “bitcoin [would] become worthless,” Williams said.
Williams also said that, compared to other risky investments worldwide, bitcoin poses a much bigger threat to SMBs who lack the capital or infrastructure to withstand potential losses.
“It could be argued that small businesses that blindly accept bitcoin are not actually in commerce but are in the high-risk speculative trading business.”
Williams, known for his often inflammatory critiques of bitcoin, went on to say that bitcoin is perhaps better used by Wall Street trading firms that have experienced staffs that can handle the associated risk.
IRS ruling
Later in the hearing, both Williams and Brito voiced support for the IRS decision to designate virtual currencies as a type of property for tax treatment.
Brito noted that the IRS looked at the characteristics of bitcoin and judged it as more of a commodity compared to a currency. Looking ahead, he suggested that Congress and federal regulators could create a special tax category for virtual currencies that takes into consideration the extraordinary aspects of bitcoin.
Adam White, director of business development and sales at Coinbase, and L. Michael Couvillion, associate professor of economics at Plymouth State University’s College of Business Administration, also addressed the committee.
Chinese Bitcoin Exchanges OKCoin, FXBTC Report New Deposit Freezes
Pete Rizzo (@pete_rizzo_) | Published on April 2, 2014 at 20:27 BST | Analysis, Asia, Exchanges, News, Prices, Regulation
Following on the heels of the news that China-based bitcoin exchange BTC38 would suspend fiat-to-digital currency trading, rival China-based exchanges OKCoin and FXBTC have received official notices from financial partners notifying them that certain accounts will be terminated.
The new announcements are the latest indication that China’s central bank, the People’s Bank of China (PBOC), may be following through on its decision to more actively enforce prior rulings related to how domestic financial service providers can interact with the bitcoin exchanges.
For example, while OKCoin was contacted by its third-party processor, FXBTC has been contacted by commercial banking providers.
China previously banned third-party payment services from dealing with bitcoin exchanges this past December. However, its domestic bitcoin exchanges had found a workaround for this issue by accepting payment into corporate accounts.
A new report from The Financial Times has suggested that the PBOC is now looking to close this loophole.
Notifications received
OKCoin revealed via its website that it had been contacted by one of its third-party payment processors, and that as a result, it will stop servicing deposits via prepaid card. Debit cards and yuan withdrawals, however, are not affected.
FXBTC’s situation at press time was perhaps more dire. It posted an emergency notification on its website that noted that it has received word from commercial banking partners who are looking to terminate certain accounts.
FXBTC indicated that it would stop debit card deposits as of 3rd April, and temporarily halt withdrawals after Sunday, 6th April. As of press time, however, it said its third-party processing channel – operated by Tencent’s TenPay – was still active.
Huobi reported that it had not received official notification that any of its accounts were affected.
Still no official notice
Together with the day’s earlier announcement from BTC38, the reports suggest that the PBOC may be pressuring the country’s commercial banks and payment companies to close bitcoin trading accounts.
Earlier reports had suggested that all accounts would need to be shut down by 15th April. However, the PBOC has yet to make an official announcement regarding any changes in policy.
This official notice may be unlikely, however, as BTC China CEO Bobby Lee has indicated that the PBOC is simply following a “stricter interpretation of the written rules” regarding bitcoin and digital currencies.
Community reaction and prices implications
Reaction to the news on reddit was still skeptical, with many indicating that the announcements don’t actually confirm that the PBOC will be looking to enforce the broad crackdown that has been suggested.
As of press time, the price of bitcoin on the CoinDesk USD Bitcoin Price Index (BPI) was down 8.41% on the news, having fallen $40 from the day’s opening total of $478.
Screen Shot 2014-04-02 at 2.33.34 PM
Prices in China were affected similarly, according to the CoinDesk CNY BPI, which at press time was down 7.25% from the day’s open of ¥2,861 at ¥2,653.74.
Pete Rizzo (@pete_rizzo_) | Published on April 2, 2014 at 20:27 BST | Analysis, Asia, Exchanges, News, Prices, Regulation
Following on the heels of the news that China-based bitcoin exchange BTC38 would suspend fiat-to-digital currency trading, rival China-based exchanges OKCoin and FXBTC have received official notices from financial partners notifying them that certain accounts will be terminated.
The new announcements are the latest indication that China’s central bank, the People’s Bank of China (PBOC), may be following through on its decision to more actively enforce prior rulings related to how domestic financial service providers can interact with the bitcoin exchanges.
For example, while OKCoin was contacted by its third-party processor, FXBTC has been contacted by commercial banking providers.
China previously banned third-party payment services from dealing with bitcoin exchanges this past December. However, its domestic bitcoin exchanges had found a workaround for this issue by accepting payment into corporate accounts.
A new report from The Financial Times has suggested that the PBOC is now looking to close this loophole.
Notifications received
OKCoin revealed via its website that it had been contacted by one of its third-party payment processors, and that as a result, it will stop servicing deposits via prepaid card. Debit cards and yuan withdrawals, however, are not affected.
FXBTC’s situation at press time was perhaps more dire. It posted an emergency notification on its website that noted that it has received word from commercial banking partners who are looking to terminate certain accounts.
FXBTC indicated that it would stop debit card deposits as of 3rd April, and temporarily halt withdrawals after Sunday, 6th April. As of press time, however, it said its third-party processing channel – operated by Tencent’s TenPay – was still active.
Huobi reported that it had not received official notification that any of its accounts were affected.
Still no official notice
Together with the day’s earlier announcement from BTC38, the reports suggest that the PBOC may be pressuring the country’s commercial banks and payment companies to close bitcoin trading accounts.
Earlier reports had suggested that all accounts would need to be shut down by 15th April. However, the PBOC has yet to make an official announcement regarding any changes in policy.
This official notice may be unlikely, however, as BTC China CEO Bobby Lee has indicated that the PBOC is simply following a “stricter interpretation of the written rules” regarding bitcoin and digital currencies.
Community reaction and prices implications
Reaction to the news on reddit was still skeptical, with many indicating that the announcements don’t actually confirm that the PBOC will be looking to enforce the broad crackdown that has been suggested.
As of press time, the price of bitcoin on the CoinDesk USD Bitcoin Price Index (BPI) was down 8.41% on the news, having fallen $40 from the day’s opening total of $478.
Screen Shot 2014-04-02 at 2.33.34 PM
Prices in China were affected similarly, according to the CoinDesk CNY BPI, which at press time was down 7.25% from the day’s open of ¥2,861 at ¥2,653.74.
Judge Orders Mark Karpeles to Submit to Questioning in US
Jon Southurst (@southtopia) | Published on April 2, 2014 at 03:19 BST | Companies, Exchanges, Law, Mt. Gox, News
Mark Karpeles, the CEO of troubled Japan-based bitcoin exchange Mt. Gox, must travel to Dallas, Texas, this month to take part in his formal deposition, a form of sworn testimony that will lay the groundwork for his future defense.
Karpeles had previously suggested that the deposition take place in Taipei, Taiwan, though this motion was strongly opposed by lawyers representing US-based former exchange users.
Further, Karpeles will have compelling reason to make the trip, as the judge suggested that the journey will be necessary if he wants an extension of the company’s bankruptcy protection in the US.
A Reuters report today quoted US Bankruptcy Judge Stacey Jernigan as saying:
“If he avails himself of this court, my God, he is going to get himself over here.”
More details
Under Chapter 15 of US bankruptcy law, protection from creditors is not granted or extended automatically. However, Mt. Gox KK, the company’s Japanese entity was granted an initial stay by the courts earlier this March. The stay has thus far prevented lawsuits from threatening this part of the company’s assets and shielded it from fact-finding.
That stay was not granted to Mt. Gox Inc., its US entity, Tibanne KK or Mark Karpeles personally.
A hearing is scheduled for 20th May to decide whether Mt. Gox deserves to continue with such protection, and courts are likely to view the matter less favorably if they don’t have Mt. Gox management’s full cooperation.
Karpeles will have to appear at the offices of Baker & McKenzie, the firm representing Mt. Gox both in the US and Japan, in Dallas on 17th April, according to Jernigan’s order.
Mt. Gox’s Chapter 15 bankruptcy was filed in Dallas, though depositions are informal and generally take place outside of a court.
A reluctant witness
To date, Karpeles has shown a strong reluctance to appear personally in the US since his once-dominant bitcoin exchange imploded in February, though he did allegedly meet with lawyers in the US around the time of Mt. Gox’s initial bankruptcy filing.
Karpeles had offered to hold the deposition in Taiwan instead, suggesting US representatives unable to question him there could use a video link instead.
The bankruptcy hearings are separate to Mt. Gox’s other legal problems in the US, such as Illinois resident Gregory Greene’s class action suit. Mt. Gox also wants to delay any US action until after its bankruptcy proceedings in Japan are completed.
Further, these cases are joined by its as-yet-unresolved dispute with former partner Coinlab, which dates back to early last year.
Losing patience
There was a hint of frustration in Jernigan’s words, particularly when Baker & McKenzie attorney John Mitchell said Mt. Gox may replace Karpeles as its ‘foreign representative’ in US bankruptcy court. “He filed the case,” she replied.
Mt. Gox has been fulfilling its local legal obligations and doing most of its communicating in Japanese first recently, but its largest customer base by far was the US.
Karpeles, who was born in France and lives in Japan, speaks English as a second language and may be unsettled at the prospect of facing questioning from a US court, or even angry US customers in person. He is, however, probably also the only person with any idea of what truly happened to Mt. Gox’s finances.
According to previous reports from company employees, who were all on short-term contracts, no-one outside management had any access to the Gox’s records and attempts to ask Karpeles to prove the company’s reserves were rebuffed.
Jon Southurst (@southtopia) | Published on April 2, 2014 at 03:19 BST | Companies, Exchanges, Law, Mt. Gox, News
Mark Karpeles, the CEO of troubled Japan-based bitcoin exchange Mt. Gox, must travel to Dallas, Texas, this month to take part in his formal deposition, a form of sworn testimony that will lay the groundwork for his future defense.
Karpeles had previously suggested that the deposition take place in Taipei, Taiwan, though this motion was strongly opposed by lawyers representing US-based former exchange users.
Further, Karpeles will have compelling reason to make the trip, as the judge suggested that the journey will be necessary if he wants an extension of the company’s bankruptcy protection in the US.
A Reuters report today quoted US Bankruptcy Judge Stacey Jernigan as saying:
“If he avails himself of this court, my God, he is going to get himself over here.”
More details
Under Chapter 15 of US bankruptcy law, protection from creditors is not granted or extended automatically. However, Mt. Gox KK, the company’s Japanese entity was granted an initial stay by the courts earlier this March. The stay has thus far prevented lawsuits from threatening this part of the company’s assets and shielded it from fact-finding.
That stay was not granted to Mt. Gox Inc., its US entity, Tibanne KK or Mark Karpeles personally.
A hearing is scheduled for 20th May to decide whether Mt. Gox deserves to continue with such protection, and courts are likely to view the matter less favorably if they don’t have Mt. Gox management’s full cooperation.
Karpeles will have to appear at the offices of Baker & McKenzie, the firm representing Mt. Gox both in the US and Japan, in Dallas on 17th April, according to Jernigan’s order.
Mt. Gox’s Chapter 15 bankruptcy was filed in Dallas, though depositions are informal and generally take place outside of a court.
A reluctant witness
To date, Karpeles has shown a strong reluctance to appear personally in the US since his once-dominant bitcoin exchange imploded in February, though he did allegedly meet with lawyers in the US around the time of Mt. Gox’s initial bankruptcy filing.
Karpeles had offered to hold the deposition in Taiwan instead, suggesting US representatives unable to question him there could use a video link instead.
The bankruptcy hearings are separate to Mt. Gox’s other legal problems in the US, such as Illinois resident Gregory Greene’s class action suit. Mt. Gox also wants to delay any US action until after its bankruptcy proceedings in Japan are completed.
Further, these cases are joined by its as-yet-unresolved dispute with former partner Coinlab, which dates back to early last year.
Losing patience
There was a hint of frustration in Jernigan’s words, particularly when Baker & McKenzie attorney John Mitchell said Mt. Gox may replace Karpeles as its ‘foreign representative’ in US bankruptcy court. “He filed the case,” she replied.
Mt. Gox has been fulfilling its local legal obligations and doing most of its communicating in Japanese first recently, but its largest customer base by far was the US.
Karpeles, who was born in France and lives in Japan, speaks English as a second language and may be unsettled at the prospect of facing questioning from a US court, or even angry US customers in person. He is, however, probably also the only person with any idea of what truly happened to Mt. Gox’s finances.
According to previous reports from company employees, who were all on short-term contracts, no-one outside management had any access to the Gox’s records and attempts to ask Karpeles to prove the company’s reserves were rebuffed.
Central Bank of Colombia Says ‘Bitcoin is Not a Currency’
Pete Rizzo (@pete_rizzo_) | Published on April 1, 2014 at 22:57 BST | News, Regulation
On Tuesday, 1st April, Banco Central de Colombia, the central bank of the South American nation, issued new statements regarding bitcoin, confirming that the digital currency is not considered a currency or a means of legal tender in the country.
The news comes roughly one week after the Superintendencia Financiera de Colombia (SFC), the government body with jurisdiction over the Colombian financial system, issued a ruling that domestic banks would be barred from holding, investing in or brokering bitcoin transactions.
Said the central bank, according to reports:
“The bitcoin is not a currency in Colombia and, therefore, not a means of payment of unlimited legal tender with a discharge power. Then there is no obligation to receive it as a means of fulfilling the obligations.”
The central bank also reiterated the SFC’s 26th March finding that bitcoin does not meet the definition of a currency because it is not backed by a central bank.
Colombia’s bitcoin discussions continue
Colombia has been increasingly active on matters relating to digital currencies in recent weeks, following the 20th March rumors that the SFC would move to ban bitcoin transactions altogether.
This report later turned out to be exaggerated, as Colombia issued guidance similar to that originally posed by China and Mexico, barring its banks from interacting with the sector.
Speaking to CoinDesk, members of the local Colombian digital currency community were optimistic at the time that this represented a first step in relations between regulators and local enthusiasts.
Community reaction
Roman Parra, CEO and founder of Colombia-based bitcoin buying and selling service Bitcoin Suramérica, confirmed the statements were a continuation of past guidance. However, Parra found them particularly troubling given that they represent what he considers a lack of interest from the government in developing or building the local bitcoin ecosystem.
Still, he notes, the question of whether bitcoin is money in Colombia does have an impact on local business.
According to Parra, as in much of the world, it’s still unclear how bitcoin transactions completed in Colombia should be treated for tax purposes.
Explained Parra:
“We are trying to find out the best way to handle this legal topic. At the present time we are acting like a commerce company.”
Bitcoin in South America
Research from BitLegal suggests that only a few South American governments have spoken out about bitcoin and digital currencies. Its records show Colombia. Brazil and Argentina have all issued guidance to their local communities.
Further research from the US Law Library of Congress indicates Chile has also issued formal statements.
However, even countries that haven’t addressed digital currencies, such as Venezuela, have seen a recent rise in bitcoin enthusiasm, suggesting more countries in the region may need to follow suit.
Pete Rizzo (@pete_rizzo_) | Published on April 1, 2014 at 22:57 BST | News, Regulation
On Tuesday, 1st April, Banco Central de Colombia, the central bank of the South American nation, issued new statements regarding bitcoin, confirming that the digital currency is not considered a currency or a means of legal tender in the country.
The news comes roughly one week after the Superintendencia Financiera de Colombia (SFC), the government body with jurisdiction over the Colombian financial system, issued a ruling that domestic banks would be barred from holding, investing in or brokering bitcoin transactions.
Said the central bank, according to reports:
“The bitcoin is not a currency in Colombia and, therefore, not a means of payment of unlimited legal tender with a discharge power. Then there is no obligation to receive it as a means of fulfilling the obligations.”
The central bank also reiterated the SFC’s 26th March finding that bitcoin does not meet the definition of a currency because it is not backed by a central bank.
Colombia’s bitcoin discussions continue
Colombia has been increasingly active on matters relating to digital currencies in recent weeks, following the 20th March rumors that the SFC would move to ban bitcoin transactions altogether.
This report later turned out to be exaggerated, as Colombia issued guidance similar to that originally posed by China and Mexico, barring its banks from interacting with the sector.
Speaking to CoinDesk, members of the local Colombian digital currency community were optimistic at the time that this represented a first step in relations between regulators and local enthusiasts.
Community reaction
Roman Parra, CEO and founder of Colombia-based bitcoin buying and selling service Bitcoin Suramérica, confirmed the statements were a continuation of past guidance. However, Parra found them particularly troubling given that they represent what he considers a lack of interest from the government in developing or building the local bitcoin ecosystem.
Still, he notes, the question of whether bitcoin is money in Colombia does have an impact on local business.
According to Parra, as in much of the world, it’s still unclear how bitcoin transactions completed in Colombia should be treated for tax purposes.
Explained Parra:
“We are trying to find out the best way to handle this legal topic. At the present time we are acting like a commerce company.”
Bitcoin in South America
Research from BitLegal suggests that only a few South American governments have spoken out about bitcoin and digital currencies. Its records show Colombia. Brazil and Argentina have all issued guidance to their local communities.
Further research from the US Law Library of Congress indicates Chile has also issued formal statements.
However, even countries that haven’t addressed digital currencies, such as Venezuela, have seen a recent rise in bitcoin enthusiasm, suggesting more countries in the region may need to follow suit.
Bitcoin User Files White House Petition to Amend Latest IRS Notice
Pete Rizzo (@pete_rizzo_) | Published on April 1, 2014 at 22:23 BST | News, Regulation, US & Canada
A petition to amend Internal Revenue Service (IRS) Notice 2014-2, the new guidance released on 25th March that announced digital currencies would be treated as property for tax purposes, has been filed on WhiteHouse.gov.
Managed by the presiding presidential administration, the official website of the White House allows for the filing of public petitions on all manner of subjects, from whether Election Day should be a designated holiday to whether Alaska should secede from the US and join Russia.
Petitions that cross a certain threshold of signatures then generally garner a White House response.
Filed on 28th March, the new petition argues that the IRS’s recent ruling on digital currencies is “overly burdensome,” and that by imposing capital gains on all transactions, the policy will hurt innovation in the sector. The positioning is not unlike the one voiced by major industry investors when defending against the prospect of new regulation earlier this year.
Reads the petition:
“This treatment of VC is overly burdensome as it will create onerous record-keeping issues and unnecessary costs that will stifle the development and advancement of this important technology.”
To date, the IRS ruling has garnered varying responses. Bitcoin Foundation director Jon Matonis has said that the classification affirms bitcoin’s status as digital gold, though others allege that the IRS notice will adversely affect many aspects of bitcoin ownership and use.
More details
Perhaps the biggest impact the ruling will have is on bitcoin’s role in payments, as each transaction will require capital gains reporting.
While even bitcoin’s detractors view its underlying technology as perhaps its biggest advantage, the guidance seems to discourage its use as a payment system, a fact that the petition acknowledges.
Reads the petition:
“Under this interpretation, when Bitcoin is spent, the owner will have the tenuous responsibility of calculating their capital gains or losses, as well as the Seller of the goods or services.”
Community response
The petition gained significant attention on Reddit this weekend, garnering nearly 200 comments from bitcoin users who greeted the initiative with varying amounts of enthusiasm. Many voiced uncertainty that the petition would be ultimately effective, while others took issue with what they considered the poor wording and limited argument of the petition itself. The petition was still circulating on social media as of 1st April.
Still, others like SecondMarket and Bitcoin Investment Trust CEO Barry Silbert suggest this ruling was the best possible outcome for the bitcoin community.
Speaking to CoinDesk, he acknowledged the ruling represents a short-term burden for the industry, but he says innovation will help bitcoin users abide by the new rules.
“It clearly creates a new record-keeping requirement which in the near term is going to be overly burdensome, but I’m highly confident that by tax time a year from now, there will be plenty of automated solutions that will eliminate any headaches of managing this process.”
To date, the petition has received only 403 signatures. Its goal is to obtain 100,000 signatures by 27th April.
IRS asks for comment
Though the filing is a noteworthy sign of community concern, it is unclear how useful it will be given that the US Treasury Department and the IRS have asked the public for comments on the measure. Though, the petition could theoretically come to the attention of the IRS should it reach a sizable amount signatures.
The IRS would not comment on whether such a petition would or would not impact its decision, but stated that it considers information from a variety of sources when soliciting feedback for notices that have yet to become final rules.
Bitcoin users who are interested in providing feedback to the IRS may be better served by sending feedback via standard mail or by email to the government tax body. All entries will be posted for public inspection in their entirety.
For more information on the recent IRS ruling and its implications for the industry, read our full report here.
Pete Rizzo (@pete_rizzo_) | Published on April 1, 2014 at 22:23 BST | News, Regulation, US & Canada
A petition to amend Internal Revenue Service (IRS) Notice 2014-2, the new guidance released on 25th March that announced digital currencies would be treated as property for tax purposes, has been filed on WhiteHouse.gov.
Managed by the presiding presidential administration, the official website of the White House allows for the filing of public petitions on all manner of subjects, from whether Election Day should be a designated holiday to whether Alaska should secede from the US and join Russia.
Petitions that cross a certain threshold of signatures then generally garner a White House response.
Filed on 28th March, the new petition argues that the IRS’s recent ruling on digital currencies is “overly burdensome,” and that by imposing capital gains on all transactions, the policy will hurt innovation in the sector. The positioning is not unlike the one voiced by major industry investors when defending against the prospect of new regulation earlier this year.
Reads the petition:
“This treatment of VC is overly burdensome as it will create onerous record-keeping issues and unnecessary costs that will stifle the development and advancement of this important technology.”
To date, the IRS ruling has garnered varying responses. Bitcoin Foundation director Jon Matonis has said that the classification affirms bitcoin’s status as digital gold, though others allege that the IRS notice will adversely affect many aspects of bitcoin ownership and use.
More details
Perhaps the biggest impact the ruling will have is on bitcoin’s role in payments, as each transaction will require capital gains reporting.
While even bitcoin’s detractors view its underlying technology as perhaps its biggest advantage, the guidance seems to discourage its use as a payment system, a fact that the petition acknowledges.
Reads the petition:
“Under this interpretation, when Bitcoin is spent, the owner will have the tenuous responsibility of calculating their capital gains or losses, as well as the Seller of the goods or services.”
Community response
The petition gained significant attention on Reddit this weekend, garnering nearly 200 comments from bitcoin users who greeted the initiative with varying amounts of enthusiasm. Many voiced uncertainty that the petition would be ultimately effective, while others took issue with what they considered the poor wording and limited argument of the petition itself. The petition was still circulating on social media as of 1st April.
Still, others like SecondMarket and Bitcoin Investment Trust CEO Barry Silbert suggest this ruling was the best possible outcome for the bitcoin community.
Speaking to CoinDesk, he acknowledged the ruling represents a short-term burden for the industry, but he says innovation will help bitcoin users abide by the new rules.
“It clearly creates a new record-keeping requirement which in the near term is going to be overly burdensome, but I’m highly confident that by tax time a year from now, there will be plenty of automated solutions that will eliminate any headaches of managing this process.”
To date, the petition has received only 403 signatures. Its goal is to obtain 100,000 signatures by 27th April.
IRS asks for comment
Though the filing is a noteworthy sign of community concern, it is unclear how useful it will be given that the US Treasury Department and the IRS have asked the public for comments on the measure. Though, the petition could theoretically come to the attention of the IRS should it reach a sizable amount signatures.
The IRS would not comment on whether such a petition would or would not impact its decision, but stated that it considers information from a variety of sources when soliciting feedback for notices that have yet to become final rules.
Bitcoin users who are interested in providing feedback to the IRS may be better served by sending feedback via standard mail or by email to the government tax body. All entries will be posted for public inspection in their entirety.
For more information on the recent IRS ruling and its implications for the industry, read our full report here.
ZipZap CEO: Argentina’s Volatility Makes Bitcoin Look Stable
Jon Southurst (@southtopia) | Published on April 1, 2014 at 16:47 BST | Analysis, Companies, Investors, News, Regulation
CoinDesk spoke to Alan Safahi, CEO of cash-to-bitcoins service ZipZap, about its big entry into the Latin American market, bitcoin as a ‘leapfrog technology’ in the world’s more volatile economies, and whether the company’s recent issues with payment processor PayPoint would have any impact in future.
Safahi
Alan Safahi has just come back from San Francisco’s CoinSummit where he says he spent far too much time fending off questions about whether his company would continue operations, after recent media articles.
“Rumors of our death were exaggerated,” he laughs, paraphrasing Mark Twain. “I was surprised at the power of the press.”
On the contrary, ZipZap is looking to expand in many new areas, while maintaining existing ones. Last month’s issue was simply one of a payment processor who expected a slow trickle of bitcoin-related business, but instead got a tsunami – too much of a good thing, if you will.
ZipZap is still working with PayPoint to address the processor’s concerns about bitcoin’s exact legal status in the UK, while at the same time diversifying its options both commercially and geographically.
Into Brazil
ZipZap already operates in five countries, and has just quietly slipped into a sixth and major one: Brazil. Having run first a closed, and then open, beta there for a few weeks, the service went live last week, with a Portuguese language site inviting locals to try it out.
The company has also worked as a payment option supporting exchange partners in the country for about two years, including the now-defunct BitInstant.
All without doing much marketing to promote it – yet.
ZipZap decided to move out of the background and promote its services under its own name, doing its own KYC (know your customer) procedures and allowing consumers to buy bitcoin directly. Exchanges often just aren’t in the business of new customer acquisition, Safahi indicates.
“We talked to exchanges and a lot of them really didn’t want to go after Latin America,” he said. “Everybody’s focused on Europe and Asia.”
“We have a very aggressive plan to educate and acquire new customers. We thought Brazil would be a good market for that, it’s a huge powerhouse in Latin America,” he added.
Commercial street in São Paulo
Commercial street in São Paulo
“Brazil has a bitcoin-friendly environment, with banking and so forth,” Safahi continued. “And we think there’s a lot of good potential use cases with remittances for Latin America that Brazil could help us get into.”
As is often the case with bitcoin, much of the promise lies in weaknesses with current financial and economic structures: instability, poverty, and lack of access to banking services – including credit cards, even for large sections of the middle class.
“I see a lot more potential in Latin America,” he said. “Eighty-five per cent in some countries are unbanked. In these unbanked economies, people will just jump over the existing payment options, like Visa and MasterCard, and just go to the next generation: digital currency.”
Said Safahi:
“It’s just like in Kenya and other places where they don’t have landline phones. But they have a lot of mobile phones; it’s easier for them to just leapfrog one technology, go to the next one. So I think that’s what’s going to happen in Latin America.”
What volatility?
There’s no point talking about the risks of bitcoin’s volatility to the people of Latin America, as most of them have experienced far worse with their own national currencies.
“We see a lot of pent-up demand for bitcoin in Argentina.” said Safahi. “I was there a couple of months ago – people in the streets come up to you and try to convert your dollars into bitcoin. They say ‘cambio, cambio’; they know how to do currency conversion with bitcoin.”
“Taxi drivers there know about bitcoin,” he added. “I’ve never seen a country where people are so in tune with financial services as they are in Argentina.”
Then there are countries like Venezuela and Nicaragua, with their closed economies and strict financial controls that do nothing to encourage real commerce or small businesses.
“Those are the markets where bitcoin volatility actually looks really good!” said Safahi. ”At the conference, people kept asking ‘What can we do to manage the volatility of bitcoin?’ and I said, ‘just take bitcoin to markets where volatility doesn’t look bad’.”
He added:
“There are probably about 60-70% of countries in the world you could go to right now, where bitcoin actually looks stable.”
First-world problems
The problem with developed countries is that there often doesn’t seem to be any urgent need for a new payment system. The average consumer doesn’t understand the economic case for sound, non-government controlled money and local fiat currencies have been stable enough to provide a sense of security.
It’s difficult to get consumers in the developed world to switch to bitcoin, Safahi said, because they’re not particularly inconvenienced now. People may complain sometimes, but they’re generally satisfied with credit cards, both in-store and online.
Even merchants, who may gripe about chargeback fraud and processing fees, seem more comfortable in the current system and aren’t rushing en masse to adopt or encourage bitcoin use. Few offer discounts for digital currency, treating it almost as a favor to enthusiasts or a gimmick to attract a bit more business and attention.
Safahi said:
“Libertarians, die-hard fans, will flock to a store that accepts bitcoin. But that novelty wears off. So what are you going to do, two months later, when another competitor comes in?”
Remittances and micropayments
Safahi sees remittances and micropayments as being far more significant bitcoin use cases to consider than regular e-commerce in developed countries.
“While everyone here is into e-commerce and they get all excited about Overstock.com,” he said, “we’re looking at building railways that can get rid of Moneygram and Western Union.”
Explained Safahi:
“Globally there’s $540bn in remittances, and $70bn in fees. If we could get rid of that, and just do it through bitcoin, [...] then we’d add about $70bn in cash to those countries.”
Even though affordable remittances is one of the more obvious applications for digital currencies, and one that could help humanity, it too is riddled with regulatory pitfalls that have prevented several efforts so far, thanks to money laundering and terrorism financing concerns.
Then there is regular e-commerce on a smaller, yet international, scale. Bitcoin allows small amounts of money to be sent anywhere at almost no cost, which could be a boon for anyone in the developing world with something to sell – whether it’s a manufactured product, creative work or service that can be arranged or delivered online. Even a few more dollars here and there could lift a lot of people out of poverty.
ZipZap’s role
For payments like those above to work, especially remittances, there needs to be reliable on and off ramps at each end. ZipZap aims to be the facilitator for this, working not just with bitcoin, but also Ripple and other digital currencies.
“ZipZap is currently focused only on the on-ramp,” said Safahi, ”but in the next few months we have plans to offer cash-out options, in 90-plus countries.”
money
There’s also a need for education. Money-changers and taxi drivers on the streets of Buenos Aires might love bitcoin, but there’s still a lot of curious people who need to be guided gently into what sometimes looks like a daunting new system.
“When I got into the Internet in the early ’90s,” Safahi said, ”there was a saying that everyone needs a brother-in-law in the Internet business, someone you could go to, to ask all those kinds of beginner questions.”
“Now everyone needs a brother-in-law in the bitcoin business, he continued. “We want to be that person, to educate and teach them. So we’re not going after high-frequency traders, we’re going after noobs, first-time buyers, making it really easy for them to buy their first $15-$20 worth of bitcoin.”
Added Safahi:
“At the [CoinSummit] conference, Andreas Antonopoulos told me he bought his first bitcoins through ZipZap [...] Imagine how many more Andreases we could be cultivating if we were bringing more people into the ecosystem.”
Familiar systems
ZipZap has tapped into an existing payment option that’s very popular in Brazil known as Boleto Bancário or just Boleto – a payment ticket system allowing customers to print receipts and pay with cash at over 3000 convenient outlets like post offices, banks, even some stores. You can also transfer funds online from a bank account.
“Familiarity breeds trust, so if we tap into a system they’re already used to, it’s much easier to gain trust,” Safahi said.
“Brazil’s just our first stop in Latin America, in the next few weeks we’re adding about eight more countries including Peru, Chile, Colombia, Mexico, and others,” he went on. “Our goal is to really go deep and go heavy into Latin America.
“Our goal is to build a network and encourage people to use it for remittances. Even if we don’t go after the remittance market directly, we want other people to build solutions for it on top of our railway.”
Rest of the world
ZipZap is also active in other regions, and is talking to people in places like India and Southeast Asia, to name a few. Safahi says he doesn’t subscribe to the notion that you should find one physical location and focus on it. Bitcoin’s ever-changing regulatory environment makes it unwise for a company to put all its resources in one place.
“That’s what you have to do to build this kind of thing,” said Safahi. “The corridors have to be built on both sides and conditions can turn on a dime. You have to be ready to do business in multiple locations.”
Funding and locations
ZipZap is funded primarily by Blumberg Capital and TriplePoint Ventures. It’s undergoing a seed extension round to facilitate growth in these new markets – not just Brazil, but the UK and even the US. It then hopes to go for Series A funding after a few more months.
This means the new international focus isn’t going to divert ZipZap’s attention away from the UK. On the contrary, it plans to announce a deal with a new payment processor in the coming week and is maintaining its relationship with PayPoint.
On top of that, it’s already formed a new entity in nearby e-commerce and gambling haven, the Isle of Man.
“We’re not down,” said Safahi. “It’s going to take a lot more than that to get us out of the UK. And Isle of Man is really interesting. They’re very friendly with bitcoin.”
The company looked at other small jurisdictions, from Gibraltar to Singapore, but settled on the Isle of Man due to its “progressive” approach to technology and banking, as well as its proximity to the UK and Ireland.
“We’re doubling down on the UK. We’re not going anywhere.”
Jon Southurst (@southtopia) | Published on April 1, 2014 at 16:47 BST | Analysis, Companies, Investors, News, Regulation
CoinDesk spoke to Alan Safahi, CEO of cash-to-bitcoins service ZipZap, about its big entry into the Latin American market, bitcoin as a ‘leapfrog technology’ in the world’s more volatile economies, and whether the company’s recent issues with payment processor PayPoint would have any impact in future.
Safahi
Alan Safahi has just come back from San Francisco’s CoinSummit where he says he spent far too much time fending off questions about whether his company would continue operations, after recent media articles.
“Rumors of our death were exaggerated,” he laughs, paraphrasing Mark Twain. “I was surprised at the power of the press.”
On the contrary, ZipZap is looking to expand in many new areas, while maintaining existing ones. Last month’s issue was simply one of a payment processor who expected a slow trickle of bitcoin-related business, but instead got a tsunami – too much of a good thing, if you will.
ZipZap is still working with PayPoint to address the processor’s concerns about bitcoin’s exact legal status in the UK, while at the same time diversifying its options both commercially and geographically.
Into Brazil
ZipZap already operates in five countries, and has just quietly slipped into a sixth and major one: Brazil. Having run first a closed, and then open, beta there for a few weeks, the service went live last week, with a Portuguese language site inviting locals to try it out.
The company has also worked as a payment option supporting exchange partners in the country for about two years, including the now-defunct BitInstant.
All without doing much marketing to promote it – yet.
ZipZap decided to move out of the background and promote its services under its own name, doing its own KYC (know your customer) procedures and allowing consumers to buy bitcoin directly. Exchanges often just aren’t in the business of new customer acquisition, Safahi indicates.
“We talked to exchanges and a lot of them really didn’t want to go after Latin America,” he said. “Everybody’s focused on Europe and Asia.”
“We have a very aggressive plan to educate and acquire new customers. We thought Brazil would be a good market for that, it’s a huge powerhouse in Latin America,” he added.
Commercial street in São Paulo
Commercial street in São Paulo
“Brazil has a bitcoin-friendly environment, with banking and so forth,” Safahi continued. “And we think there’s a lot of good potential use cases with remittances for Latin America that Brazil could help us get into.”
As is often the case with bitcoin, much of the promise lies in weaknesses with current financial and economic structures: instability, poverty, and lack of access to banking services – including credit cards, even for large sections of the middle class.
“I see a lot more potential in Latin America,” he said. “Eighty-five per cent in some countries are unbanked. In these unbanked economies, people will just jump over the existing payment options, like Visa and MasterCard, and just go to the next generation: digital currency.”
Said Safahi:
“It’s just like in Kenya and other places where they don’t have landline phones. But they have a lot of mobile phones; it’s easier for them to just leapfrog one technology, go to the next one. So I think that’s what’s going to happen in Latin America.”
What volatility?
There’s no point talking about the risks of bitcoin’s volatility to the people of Latin America, as most of them have experienced far worse with their own national currencies.
“We see a lot of pent-up demand for bitcoin in Argentina.” said Safahi. “I was there a couple of months ago – people in the streets come up to you and try to convert your dollars into bitcoin. They say ‘cambio, cambio’; they know how to do currency conversion with bitcoin.”
“Taxi drivers there know about bitcoin,” he added. “I’ve never seen a country where people are so in tune with financial services as they are in Argentina.”
Then there are countries like Venezuela and Nicaragua, with their closed economies and strict financial controls that do nothing to encourage real commerce or small businesses.
“Those are the markets where bitcoin volatility actually looks really good!” said Safahi. ”At the conference, people kept asking ‘What can we do to manage the volatility of bitcoin?’ and I said, ‘just take bitcoin to markets where volatility doesn’t look bad’.”
He added:
“There are probably about 60-70% of countries in the world you could go to right now, where bitcoin actually looks stable.”
First-world problems
The problem with developed countries is that there often doesn’t seem to be any urgent need for a new payment system. The average consumer doesn’t understand the economic case for sound, non-government controlled money and local fiat currencies have been stable enough to provide a sense of security.
It’s difficult to get consumers in the developed world to switch to bitcoin, Safahi said, because they’re not particularly inconvenienced now. People may complain sometimes, but they’re generally satisfied with credit cards, both in-store and online.
Even merchants, who may gripe about chargeback fraud and processing fees, seem more comfortable in the current system and aren’t rushing en masse to adopt or encourage bitcoin use. Few offer discounts for digital currency, treating it almost as a favor to enthusiasts or a gimmick to attract a bit more business and attention.
Safahi said:
“Libertarians, die-hard fans, will flock to a store that accepts bitcoin. But that novelty wears off. So what are you going to do, two months later, when another competitor comes in?”
Remittances and micropayments
Safahi sees remittances and micropayments as being far more significant bitcoin use cases to consider than regular e-commerce in developed countries.
“While everyone here is into e-commerce and they get all excited about Overstock.com,” he said, “we’re looking at building railways that can get rid of Moneygram and Western Union.”
Explained Safahi:
“Globally there’s $540bn in remittances, and $70bn in fees. If we could get rid of that, and just do it through bitcoin, [...] then we’d add about $70bn in cash to those countries.”
Even though affordable remittances is one of the more obvious applications for digital currencies, and one that could help humanity, it too is riddled with regulatory pitfalls that have prevented several efforts so far, thanks to money laundering and terrorism financing concerns.
Then there is regular e-commerce on a smaller, yet international, scale. Bitcoin allows small amounts of money to be sent anywhere at almost no cost, which could be a boon for anyone in the developing world with something to sell – whether it’s a manufactured product, creative work or service that can be arranged or delivered online. Even a few more dollars here and there could lift a lot of people out of poverty.
ZipZap’s role
For payments like those above to work, especially remittances, there needs to be reliable on and off ramps at each end. ZipZap aims to be the facilitator for this, working not just with bitcoin, but also Ripple and other digital currencies.
“ZipZap is currently focused only on the on-ramp,” said Safahi, ”but in the next few months we have plans to offer cash-out options, in 90-plus countries.”
money
There’s also a need for education. Money-changers and taxi drivers on the streets of Buenos Aires might love bitcoin, but there’s still a lot of curious people who need to be guided gently into what sometimes looks like a daunting new system.
“When I got into the Internet in the early ’90s,” Safahi said, ”there was a saying that everyone needs a brother-in-law in the Internet business, someone you could go to, to ask all those kinds of beginner questions.”
“Now everyone needs a brother-in-law in the bitcoin business, he continued. “We want to be that person, to educate and teach them. So we’re not going after high-frequency traders, we’re going after noobs, first-time buyers, making it really easy for them to buy their first $15-$20 worth of bitcoin.”
Added Safahi:
“At the [CoinSummit] conference, Andreas Antonopoulos told me he bought his first bitcoins through ZipZap [...] Imagine how many more Andreases we could be cultivating if we were bringing more people into the ecosystem.”
Familiar systems
ZipZap has tapped into an existing payment option that’s very popular in Brazil known as Boleto Bancário or just Boleto – a payment ticket system allowing customers to print receipts and pay with cash at over 3000 convenient outlets like post offices, banks, even some stores. You can also transfer funds online from a bank account.
“Familiarity breeds trust, so if we tap into a system they’re already used to, it’s much easier to gain trust,” Safahi said.
“Brazil’s just our first stop in Latin America, in the next few weeks we’re adding about eight more countries including Peru, Chile, Colombia, Mexico, and others,” he went on. “Our goal is to really go deep and go heavy into Latin America.
“Our goal is to build a network and encourage people to use it for remittances. Even if we don’t go after the remittance market directly, we want other people to build solutions for it on top of our railway.”
Rest of the world
ZipZap is also active in other regions, and is talking to people in places like India and Southeast Asia, to name a few. Safahi says he doesn’t subscribe to the notion that you should find one physical location and focus on it. Bitcoin’s ever-changing regulatory environment makes it unwise for a company to put all its resources in one place.
“That’s what you have to do to build this kind of thing,” said Safahi. “The corridors have to be built on both sides and conditions can turn on a dime. You have to be ready to do business in multiple locations.”
Funding and locations
ZipZap is funded primarily by Blumberg Capital and TriplePoint Ventures. It’s undergoing a seed extension round to facilitate growth in these new markets – not just Brazil, but the UK and even the US. It then hopes to go for Series A funding after a few more months.
This means the new international focus isn’t going to divert ZipZap’s attention away from the UK. On the contrary, it plans to announce a deal with a new payment processor in the coming week and is maintaining its relationship with PayPoint.
On top of that, it’s already formed a new entity in nearby e-commerce and gambling haven, the Isle of Man.
“We’re not down,” said Safahi. “It’s going to take a lot more than that to get us out of the UK. And Isle of Man is really interesting. They’re very friendly with bitcoin.”
The company looked at other small jurisdictions, from Gibraltar to Singapore, but settled on the Isle of Man due to its “progressive” approach to technology and banking, as well as its proximity to the UK and Ireland.
“We’re doubling down on the UK. We’re not going anywhere.”
Why Goldman Sachs Got it Wrong on Bitcoin
Ariel Deschapell | Published on April 1, 2014 at 17:18 BST | Analysis, Bitcoin protocol, News
“Bitcoin likely can’t work as a currency, but some sense that the ledger-based technology that underlies it could hold promise,” concludes a Goldman Sachs report titled “Top of Mind”.
Bitcoin has attracted major league attention in the finance world, and most seem to share the views expressed in the report. While increased research and interest from Wall Street is good for bitcoin overall, the report misses the mark with its conclusion and underscores several systematically flawed views of the digital currency and its future role in finance.
While credit should be given to Goldman Sachs for taking a more in-depth look at cryptocurrencies, its report showcases inaccurate commentary of bitcoin’s current and future hurdles, often reflecting common argumentative fallacies that have been rampant amongst analysts and pundits alike.
One-sided view
Bitcoin lies at the intersection of technology and economics, and the fallacious arguments against it span both these areas. This is really no surprise, as most economists and financial analyst don’t have extensive technological knowledge, and are prone to making errors in reasoning because of this.
Yet the technological significance of the Bitcoin protocol – in particular, its ability to transmit ownership between individuals without a third party – is hard for even the harshest critics to downplay.
Similarly, the accompanying high-speed and ultra-cheap transactions of this system are real achievements with measurable benefits.
To be fair, the GS report does conclude the block chain ledger system that underlies bitcoin indeed has real promise, not just in monetary transactions but in countless other fields. However, this is where most of the praise stops.
Wrote Dominic Wilson and Jose Usrua, two of the report’s authors:
“Bitcoin currently shows more promise in terms of its payments technology than as a stable store of value.”
They have a point, given the current state of bitcoin. While volatility may be rampant, transaction fees for merchants are much lower, and money movement is much cheaper and faster.
One could argue this makes it likely that bitcoin is destined take on a role more like that of Paypal, than to replace any entrenched currency. In fact, the report even goes on to illustrate the pure potential of the efficiency of these transactional advantages by estimating that the global economy could save more than $210bn annually if bitcoin became the default means of payment and remittances.
Problem solved
Yet despite this staggering number, in regard to bitcoin’s potential as a store of value, Jeffrey Currie, head of commodities research at Goldman Sachs, remarks:
“The replacement of an old commodity with a new commodity typically occurred precisely because the new commodity solved an economic problem that the old commodity could not. For example, coal replaced wood when fuel was needed for steam engines. So the question is: is there an economic problem with gold as a store of value that bitcoin solves? The short answer is no.”
Wood did not fail in itself as a store of energy, coal was simply much more efficient and suitable for growing and changing industrial demands. Similarly bitcoin – as we can clearly see from the Goldman Sachs’ own report – is vastly more efficient, and able to meet the demands of a global economy in a way that a patchwork of national fiat currencies cannot, let alone chunks of gold.
The latter two require trust in third parties – including national governments – as well as clunky traditional financial infrastructure that takes days to transfer funds between owners.
To borrow Curries’ analogy, if the transition from wood to coal is what allowed the industrial revolution to really take off, then the transition from national currencies to cryptocurrency is what will allow an explosion of global trade and development with little precedent.
Highs and lows
Yet detractors would rightly point out that there is still the lingering problem of volatility. A currency that suffers from frequent swings in value on a regular basis can’t, and indeed shouldn’t be adopted by the mass market as a means to move value around.
The average consumer can’t afford to gamble whether they will be able to afford basic necessities tomorrow on the value of a fluctuating currency.
This is the insurmountable problem with bitcoin cited by many economists and financial analysts, and is one of the reasons another of the report’s authors, Eric Posner, remarks:
“Twenty years from now, use of the bitcoin – or other similar, perhaps improved networks – could very well be part of the process where you send money from one place to another, but an unobservable part of the process. In other words, firms that transfer money may find it in their interest to use this technology to transfer money, but it is not going to look that different to ordinary consumers. I think that is the most likely way that this plays out.”
For Posner and many others, the solution is as simple as stripping the ‘technology’ that allows bitcoin to be so frictionless and implementing it in the current financial infrastructure. UBS has recently made similar statements as well.
What they fail to grasp, however, is that Bitcoin the protocol and bitcoin the currency are inseparable. Bitcoins are units that exist only in the block chain, and aren’t tied down to any existing financial infrastructure. It is because bitcoin is separate from the traditional ways of moving money that it is so frictionless.
Cryptocurrencies aren’t going to simply improve the current financial system, they threaten to uproot it completely.
Adoption is key
The Bitcoin protocol can’t function without its own independent unit or share, this is why you can’t use the same technology to move fiat around, and also why volatility isn’t a long term problem.
Merchants are already flocking to bitcoin in exponential fashion due to its low 1% transaction costs. The savings are a no brainer. Meanwhile consumers are adopting it for everything from lowering travel expenses by eliminating the need for expensive and cumbersome currency exchanges, to greater economic and financial freedom.
While the trend is clear, “inevitability is not a strategy” points out Adam Hanft in a recent CoinDesk article, and there are things that can be done to further spur consumer adoption of bitcoin.
As the transactional usage of bitcoin continues to increase, however, taking advantage of the payment system side that Goldman Sachs has identified, the price will undoubtedly continue to stabilize. As this process continues, merchants will feel comfortable keeping some bitcoin instead of converting it immediately to fiat.
This reddit post illustrates how one business is already doing this, and paying its first invoice with bitcoin too. Once this starts happening en masse, and bitcoin begins flowing steadily around the global economy without touching exchanges, the digital currency will truly start to become a stable and independent store of value.
That’s when things will start getting interesting. When this tipping point is reached, there is no reason bitcoin shouldn’t be considered a fully fledged currency – one that is far more efficient and attractive than current fiat monies to boot.
Borrowing from bitcoin
Now can a government theoretically create its own currency using the open-source code of bitcoin? In other words, ‘adapt’ the technology of bitcoin as the authors of the Goldman Sachs report expect is likely? Of course, but then just like any other altcoin it would have to compete in the marketplace.
In fact Eric Posner stipulated that:
“Probably the most important reason why [bitcoin] would not be a good substitute is that we actually do want the government to control the money supply.”
This, of course, is fundamental to the closed nature and centralized decision making of central banks like the Federal Reserve, and the constant annual devaluation of currencies to ‘stimulate’ the economy and endlessly fund expanding government debt.
What Posner doesn’t seem to grasp is that these ‘selling points’, if you can call them that, are irrelevant to the average individual who just wants to save costs and move money around more efficiently. Individuals want a currency for its ability to stimulate trade and store wealth, not so central authorities can test out their monetary theories on an economy.
Maintaining a monopoly
Even if this wasn’t the case, the very argument that annual inflation can stimulate the economy is nonsense. And when the conversion and exchange costs are removed from the Goldman Sachs estimates, global savings from bitcoin increase from $210bn to $326bn annually. If that isn’t an economic stimulus, then what is?
A new coin in the fiercely open and competitive cryptocurrency market based on the centralized and inflationary design of current national currencies would, simply put, be slaughtered. It would lose every time to decentralized coins with a stable and eventually static money supply when it comes to consumer choice.
With a ready and superior alternative like bitcoin available, assuming it can sustain a stable value and widespread merchant acceptance, in the long term there is ultimately no reason to keep using fiat currencies.
The monetary policies that have been all the rage in academia for decades cannot be implemented without a total monopoly of money by the governments. Can governments outlaw cryptocurrency to try and maintain its monopoly on the money supply, and thus control over monetary policy? Not likely.
That nonetheless brings us to an important question. If the only thing keeping fiat currency and monetary policy functioning is forceful use, then which is the real ponzi scheme here again?
Ariel Deschapell is a freelance opinion and news writer for CoinDesk: his opinions do not necessarily reflect those of CoinDesk.
Ariel Deschapell | Published on April 1, 2014 at 17:18 BST | Analysis, Bitcoin protocol, News
“Bitcoin likely can’t work as a currency, but some sense that the ledger-based technology that underlies it could hold promise,” concludes a Goldman Sachs report titled “Top of Mind”.
Bitcoin has attracted major league attention in the finance world, and most seem to share the views expressed in the report. While increased research and interest from Wall Street is good for bitcoin overall, the report misses the mark with its conclusion and underscores several systematically flawed views of the digital currency and its future role in finance.
While credit should be given to Goldman Sachs for taking a more in-depth look at cryptocurrencies, its report showcases inaccurate commentary of bitcoin’s current and future hurdles, often reflecting common argumentative fallacies that have been rampant amongst analysts and pundits alike.
One-sided view
Bitcoin lies at the intersection of technology and economics, and the fallacious arguments against it span both these areas. This is really no surprise, as most economists and financial analyst don’t have extensive technological knowledge, and are prone to making errors in reasoning because of this.
Yet the technological significance of the Bitcoin protocol – in particular, its ability to transmit ownership between individuals without a third party – is hard for even the harshest critics to downplay.
Similarly, the accompanying high-speed and ultra-cheap transactions of this system are real achievements with measurable benefits.
To be fair, the GS report does conclude the block chain ledger system that underlies bitcoin indeed has real promise, not just in monetary transactions but in countless other fields. However, this is where most of the praise stops.
Wrote Dominic Wilson and Jose Usrua, two of the report’s authors:
“Bitcoin currently shows more promise in terms of its payments technology than as a stable store of value.”
They have a point, given the current state of bitcoin. While volatility may be rampant, transaction fees for merchants are much lower, and money movement is much cheaper and faster.
One could argue this makes it likely that bitcoin is destined take on a role more like that of Paypal, than to replace any entrenched currency. In fact, the report even goes on to illustrate the pure potential of the efficiency of these transactional advantages by estimating that the global economy could save more than $210bn annually if bitcoin became the default means of payment and remittances.
Problem solved
Yet despite this staggering number, in regard to bitcoin’s potential as a store of value, Jeffrey Currie, head of commodities research at Goldman Sachs, remarks:
“The replacement of an old commodity with a new commodity typically occurred precisely because the new commodity solved an economic problem that the old commodity could not. For example, coal replaced wood when fuel was needed for steam engines. So the question is: is there an economic problem with gold as a store of value that bitcoin solves? The short answer is no.”
Wood did not fail in itself as a store of energy, coal was simply much more efficient and suitable for growing and changing industrial demands. Similarly bitcoin – as we can clearly see from the Goldman Sachs’ own report – is vastly more efficient, and able to meet the demands of a global economy in a way that a patchwork of national fiat currencies cannot, let alone chunks of gold.
The latter two require trust in third parties – including national governments – as well as clunky traditional financial infrastructure that takes days to transfer funds between owners.
To borrow Curries’ analogy, if the transition from wood to coal is what allowed the industrial revolution to really take off, then the transition from national currencies to cryptocurrency is what will allow an explosion of global trade and development with little precedent.
Highs and lows
Yet detractors would rightly point out that there is still the lingering problem of volatility. A currency that suffers from frequent swings in value on a regular basis can’t, and indeed shouldn’t be adopted by the mass market as a means to move value around.
The average consumer can’t afford to gamble whether they will be able to afford basic necessities tomorrow on the value of a fluctuating currency.
This is the insurmountable problem with bitcoin cited by many economists and financial analysts, and is one of the reasons another of the report’s authors, Eric Posner, remarks:
“Twenty years from now, use of the bitcoin – or other similar, perhaps improved networks – could very well be part of the process where you send money from one place to another, but an unobservable part of the process. In other words, firms that transfer money may find it in their interest to use this technology to transfer money, but it is not going to look that different to ordinary consumers. I think that is the most likely way that this plays out.”
For Posner and many others, the solution is as simple as stripping the ‘technology’ that allows bitcoin to be so frictionless and implementing it in the current financial infrastructure. UBS has recently made similar statements as well.
What they fail to grasp, however, is that Bitcoin the protocol and bitcoin the currency are inseparable. Bitcoins are units that exist only in the block chain, and aren’t tied down to any existing financial infrastructure. It is because bitcoin is separate from the traditional ways of moving money that it is so frictionless.
Cryptocurrencies aren’t going to simply improve the current financial system, they threaten to uproot it completely.
Adoption is key
The Bitcoin protocol can’t function without its own independent unit or share, this is why you can’t use the same technology to move fiat around, and also why volatility isn’t a long term problem.
Merchants are already flocking to bitcoin in exponential fashion due to its low 1% transaction costs. The savings are a no brainer. Meanwhile consumers are adopting it for everything from lowering travel expenses by eliminating the need for expensive and cumbersome currency exchanges, to greater economic and financial freedom.
While the trend is clear, “inevitability is not a strategy” points out Adam Hanft in a recent CoinDesk article, and there are things that can be done to further spur consumer adoption of bitcoin.
As the transactional usage of bitcoin continues to increase, however, taking advantage of the payment system side that Goldman Sachs has identified, the price will undoubtedly continue to stabilize. As this process continues, merchants will feel comfortable keeping some bitcoin instead of converting it immediately to fiat.
This reddit post illustrates how one business is already doing this, and paying its first invoice with bitcoin too. Once this starts happening en masse, and bitcoin begins flowing steadily around the global economy without touching exchanges, the digital currency will truly start to become a stable and independent store of value.
That’s when things will start getting interesting. When this tipping point is reached, there is no reason bitcoin shouldn’t be considered a fully fledged currency – one that is far more efficient and attractive than current fiat monies to boot.
Borrowing from bitcoin
Now can a government theoretically create its own currency using the open-source code of bitcoin? In other words, ‘adapt’ the technology of bitcoin as the authors of the Goldman Sachs report expect is likely? Of course, but then just like any other altcoin it would have to compete in the marketplace.
In fact Eric Posner stipulated that:
“Probably the most important reason why [bitcoin] would not be a good substitute is that we actually do want the government to control the money supply.”
This, of course, is fundamental to the closed nature and centralized decision making of central banks like the Federal Reserve, and the constant annual devaluation of currencies to ‘stimulate’ the economy and endlessly fund expanding government debt.
What Posner doesn’t seem to grasp is that these ‘selling points’, if you can call them that, are irrelevant to the average individual who just wants to save costs and move money around more efficiently. Individuals want a currency for its ability to stimulate trade and store wealth, not so central authorities can test out their monetary theories on an economy.
Maintaining a monopoly
Even if this wasn’t the case, the very argument that annual inflation can stimulate the economy is nonsense. And when the conversion and exchange costs are removed from the Goldman Sachs estimates, global savings from bitcoin increase from $210bn to $326bn annually. If that isn’t an economic stimulus, then what is?
A new coin in the fiercely open and competitive cryptocurrency market based on the centralized and inflationary design of current national currencies would, simply put, be slaughtered. It would lose every time to decentralized coins with a stable and eventually static money supply when it comes to consumer choice.
With a ready and superior alternative like bitcoin available, assuming it can sustain a stable value and widespread merchant acceptance, in the long term there is ultimately no reason to keep using fiat currencies.
The monetary policies that have been all the rage in academia for decades cannot be implemented without a total monopoly of money by the governments. Can governments outlaw cryptocurrency to try and maintain its monopoly on the money supply, and thus control over monetary policy? Not likely.
That nonetheless brings us to an important question. If the only thing keeping fiat currency and monetary policy functioning is forceful use, then which is the real ponzi scheme here again?
Ariel Deschapell is a freelance opinion and news writer for CoinDesk: his opinions do not necessarily reflect those of CoinDesk.
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