Topic: Business Bringing Bitcoin Legitimacy, Potential Regulation | FORBES REPORT (Read 791 times)

Earlier this year, the US Marshals Service auctioned 30,000 bitcoins confiscated in the FBI’s bust of the Silk Road online marketplace. Estimated at $17.4 million, they were all bought by one bidder.

To the delight of Jon Matonis, executive director of the Bitcoin Foundation, the Marshals’ auction proves that bitcoin is fungible, that it possesses a “market-based legitimacy.”

Further, the buyer was Tim Draper, of venture capital fund Draper Fisher Jurvetson. In spite of the cryptocurrency’s relatively low price for most of this year, Draper has reiterated his “pessimistic” target price for bitcoin in three year’s time: $10,000. (A bitcoin can be exchanged for a bit more than $400 as of this posting.)

Draper isn’t the only Wall Street type seeing money in this new type of money. A growing number of professional investors, private equity firms and venture capitalists have been working to institutionalize bitcoin.

Bitcoin investment funds include the Fortress-backed Pantera Capital, Barry Silbert’s Second Market, European-only fund Exante, and the Winklevoss bitcoin Trust. The Winklevoss trust expects regulatory approval this year before an IPO on the NASDAQ. After which it would trade just like an exchange-traded fund.

“Bitcoin ATM Plate” by Mrnett1974 – Own work. Licensed under Creative Commons Attribution-Share Alike 3.0 via Wikimedia Commons

On a daily basis, investors are putting capital into bitcoin businesses. “It is working … There’s a big industry around bitcoin,” Virgin Group CEO Richard Branson told Bloomberg News on September 10th. “It is quite volatile, but in volatility people can make money,” he said.

Coinbase, the self-described “world’s most popular bitcoin wallet,” just announced its first expansion beyond the US market, launching bitcoin buying and selling services in 13 countries across Europe. A market entry of this kind implies demand and opportunity. Internet entrepreneur Marc Andreessen, is backing Coinbase, via VC Andreessen-Horowitz.
But before Mergermarket starts covering bitcoin-denominated deals, the virtual currency would likely have to be regulated like a commodity.

New York state lawyers and legislators are leading the fight for bitcoin regulation; lately by proposing a ‘NY BitLicense’, which attracted criticism from China’s three biggest bitcoin players and libertarian-leaning bitcoin backers.

That’s important because yuan-denominated trades account for a greater portion of bitcoin trading volume than US dollars. Nevertheless, other countries are waiting for US legislation to happen before they act, Matonis said.

Whatever legislation comes, Matonis believes that it won’t favor bitcoin. The two systems are antitheses of each other.  Bitcoin is designed to bypass the big banks and circumvent the financial system.

Most likely, the currency could be used to buy and sell bitcoin businesses as CNBC has reported.

Bitcoin Foundation’s Matonis agrees that bitcoin could be used for acquisitions, but he cautions that wouldn’t eliminate the professional and broker fees related to a transaction.

SOURCE "http://www.forbes.com/sites/mergermarket/2014/09/25/business-bringing-bitcoin-legitimacy-potential-regulation/"