Bitcoin Just Hit $500 For The First Time
http://www.theverge.com/2013/11/16/5111546/new-york-state-weighs-bitlicense-certification-for-bitcoin-traders
New York State considers licensing Bitcoin traders
On Friday, the New York State Department of Financial Services announced it will be holding a public hearing on virtual currency regulation, specifically considering whether a certification called "BitLicense" might help manage the spread of online currencies like Bitcoin. The new license would require consumer protection services, as well as anti-money laundering requirements, designed to make the currency less useful in cases of fraud and criminal activity.
The announcement emphasized that no decision has been made on the license, but the idea has raised crucial questions among both Bitcoin fans and Bitcoin skeptics. Thus far, Bitcoin exchanges have mostly evaded the money transmission regulations that banks and other currency exchanges are required to uphold, and many worry that the introduction of those regulations might make the currency less appealing, causing its value to decline. But for regulators, it's a necessary step towards bringing Bitcoin into the mainstream and avoiding large-scale fraud within the community, like the million-dollar TradeFortress heist that occurred earlier this month. As the Department of Finance put it, "it is in the long-term interest of the virtual currency industry to put in place appropriate guardrails that protect consumers, root out illegal activity, and safeguard our national security."
- VIAhttp://www.wired.com/wiredenterprise/2013/11/bitcoin_feds/
Feds Reveal What They Really Think About Bitcoin
- 11.15.13
- 8:08 PM
Photo: David Ryder/WIREDFirst, the feds shutdown Liberty Reserve, a Costa Rican digital currency service. Then, they busted the Silk Road, an online drug marketplace that used bitcoin, the world’s most popular digital currency. And, now, they’re really starting to think hard about this new breed of internet money.On Monday, bitcoin and other digital currencies will come under the glare of the Senate Committee on Homeland Security and Governmental Affairs. And ahead of next week’s hearings, the five federal agencies with the most skin in the virtual currency game sent the Committee their take on this hot-button issue. According to letters penned by the agencies — which the Committee made available on Friday (see below) — all five are watching these currencies very closely, though some realize internet money has very legitimate uses that have nothing to do with criminal activity.Last year, the letters say, the FBI created an inter-agency task force to tackle criminal use of digital currencies, called the Virtual Currency Emerging Threats Working Group. “The FBI recognizes that virtual currency’s ability to facilitate the global movement of funds by a wide array of illicit actors necessitates a comprehensive approach coordinated with our domestic and international partners,” wrote Peter Kadzik, Principal Deputy Assistant Attorney General with the Department of Justice.But the FBI doesn’t see digital currencies as a cesspool of criminal activity. “The FBI’s approach to virtual currencies is guided by a recognition that online payment systems, both centralized and decentralized, offer legitimate financial services,” Kadzik wrote.Those comments were echoed by the Treasury Department, which also acknowledged that digital money has legitimate uses, but said it was “following the emergence of virtual currencies and their potential for licit and illicit use very closely,” according to a letter from Alastair Fitzpayne, Treasury’s assistant secretary for legislative affairs.The toughest comments came from the Department of Homeland Security. “The anonymity of cyberspace affords a unique opportunity for criminal organizations to launder huge sums of money undetected,” wrote DHS Acting Assistant Secretary for Legislative Affairs Brian de Vallance. “With the advent of virtual currencies and the ease with which financial transactions can be exploited by criminal organizations, DHS has recognized the need for an aggressive posture toward this evolving trend.”The DHS has also targeted “virtual currency platforms and the network of virtual currency exchange makers,” de Vallance added. Earlier this year, the DHS seized about $5 million in bank accounts belonging to the world’s largest bitcoin exchange, Mt. Gox. Since then, the exchange has found itself shunned by much of the international banking community, and it has had difficulty moving money to its U.S. customers.Bitcoin businesses — particularly those involved in trading bitcoins for dollars — sometimes complain that they operate in a grey area, where it’s not entirely clear how or if they are in compliance with a patchwork of state and federal regulations.In August, Committee Chairman Thomas Carper (D-Del.) wrote the agencies, asking for their guidance on virtual currencies. The responses, dated between August 30 and November 12, come from the DHS, the Securities and Exchange Commission, Treasury, the DoJ, and the Federal Reserve.On reviewing the comments from the agencies, it’s clear that the feds are interested, but generally neutral on digital currencies, says Faisal Islam, director of Compliance Advisory Services with Centra Payments Solutions, a financial services consultancy. “Everyone is sort of saying, ‘Yeah, it has good purposes. But it also has the bad stuff,” he says. “You are just as unsure of it today as you were yesterday.”In an emailed statement, a spokeswoman for Senator Carper said: “Chairman Carper appreciates the agencies’ responses and we look forward to discussing these and other aspects of the federal government’s approach to virtual currencies at our hearing on Monday.”http://www.forbes.com/sites/kashmirhill/2013/11/15/bitcoin-companies-and-entrepreneurs-cant-get-bank-accounts/
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11/15/2013 @ 3:23PM |47,023 views
Bitcoin Companies and Entrepreneurs Can't Get Bank Accounts
Bitcoin is booming, but many start-ups can’t get or hold onto bank accounts for their USD.In the first week of July, Jay Shore got bad news. U.S. Bank and Chase informed him they were closing the accounts for his company, Coinabul, a San Diego-based precious metals buyer that sells silver and gold for Bitcoin. They didn’t want to house his half-million dollars. Chase was mum on the reason but Shore says a U.S. Bank compliance officer told him it was shutting down all small Bitcoin clients.“They tried to force me to take a cashier’s check but I refused,” said Shore who worried he wouldn’t be able to deposit it elsewhere. He made a dozen trips to U.S. Bank because they wouldn’t give him more than $30,000 at a time. “The money is now sitting in our corporate vaults along with our metals.”
Bitcoin – invented in 2009 by a mysterious programmer – is a replacement for state-backed currency, “mined” from the Internet via complex computing. It’s been booming this fall; one Bitcoin is currently worth over $400, its value doubling over the last month. It has limited real world uses now but offers, as investor Peter Thiel says the “world-changing” promise of online transactions without fees, third parties or identity; it’s the online equivalent of paying someone in cash, and it works universally. Long popular with those using it to buy and sell illicit goods online, it’s now found new fans: the venture capital community, taking the place in their hearts left empty by social networking companies that have IPO’ed. Second Market, which sold Facebook shares before the company went public, now has an investment fund for the $4-billion Bitcoin market. The Winklevoss twins have put $1.5 million into Bitcoin exchange BitInstant, while also applying with the SEC to start a Bitcoin ETF. Union Square Ventures, Lightspeed Venture Partners, Jim Breyer, Accel, and Google Ventures are among those pouring millions into promising cryptocoin start-ups. But many Bitcoin start-ups have a big problem: they can’t get bank accounts. Shore is one of the many Bitcoin entrepreneurs sent packing in the last few months.“I’ve been kicked out of every major bank in New York,” says Charlie Schrem, the CEO of Bitinstant. “Chase, Wells Fargo, Citibank, U.S. Bank. And once they shut down your business account, they ban your social security number too meaning you can’t keep a personal account.”While in Hong Kong in April, Schrem got notice from Chase that Bitinstant’s account was being suspended immediately, meaning he had to race home on a hasty flight with four connections in order to get the money into a different bank to avoid shutting down the business. Bitinstant has since suspended operations. It’s hard to pay the rent or electricity bill if you don’t have a USD bank account (at least for now).“ Starting this summer, almost every U.S.-based startup who previously had banking was cut off if the word ‘bitcoin’ was mentioned, including simple checking for payroll and operational expenses like utilities and rent in USD,” said the Bitcoin Foundation in a statement. “The upcoming congressional hearings are timely as banks are unable to accurately asses risks without clear guidelines – leaving entrepreneurs bank less and forcing innovation overseas.”The Bitcoin banking casualty list is a long one: popular Bitcoin – USD exchanges Bitfloor and BitInstant, in New York; Tradehill, in California; and Bitbox, in Michigan, have been out of commission for months. All had registered as money exchangers with the Department of Treasury’s FinCen, per federal guidance. Mobile Bitcoin payment company Coinapult moved from Colorado to Panama to avoid the “murky, unpredictable, and onerous” regulatory environment in the U.S., says a company representative. Capital One even shut down the merchant account for Mulligan Mint, a commemorative coin maker, when it started making physical Bitcoin silver coins; the business was not in fact dealing with Bitcoins, just making fake models of them.“Saying Bitcoin in a bank is like yelling fire in a theater,” says Kinnard Hockenhull, the 23-year-old founder of Bitbox.Citibank, Bank of America, J.P. Morgan Chase and Wells Fargo declined to speak on the record about the issue. U.S. Bank didn’t respond to a request for comment. Steve Kenneally, VP of government relations at the American Bankers Association, says the banks are wary following two prominent pieces of government guidance this year. In March, the Department of Treasury’s FinCEN said that businesses doing Bitcoin exchanges were classified as “money services businesses,” meaning they need to be registered as such and conduct due diligence to know who their customers are and prevent money laundering. But for banks, having a MSB customers entails enhanced monitoring. On top of that, the FDIC issued guidance saying that banks face heightened responsibility around high risk businesses — such as those dealing in guns, fireworks or Bitcoin.“With virtual currency, there’s a lot of uncertainty out there and banks don’t like uncertainty,” says Kenneally. “Clearer regulation is needed as to the legality and treatment of virtual currencies.”Kenneally says what makes things harder for banks and policymakers is when virtual currency proponents promote Bitcoin’s anonymity, cross border ease, and frictionless transactions, all which set off red flags for regulators. At the same time, Bitcoin is a completely trackable and traceable currency with one big public ledger for every transaction. “That’s the neat thing with Bitcoin,” says Kenneally. “You can see every transaction that ever happened but it’s happening behind pseudonyms and email addresses that you don’t have a big directory to.”Coin Validation, a new start-up, wants to create that directory, but the proposal hasn’t been well-received by the Bitcoin community.
Bitcoin’s value as of FridayIt’s not just businesses struggling with their banks. The Internet is littered with reports from individuals who have gotten calls from their banks after dabbling in Bitcoins, and not just in the U.S. A Swedbank customer says her account was frozen for 15 days after she sold 5 BTC through a local exchange.“I don’t think it’s realistic to create a disruptive instrument and expect the business you’re disrupting to greet you with open arms,” says Ryan Straus, a virtual currencies lawyer at Riddell Williams in Seattle. “The tension is undeniable between banks, regulators and Bitcoin businesses, but it shouldn’t surprise us because that’s the point of Bitcoin: to eliminate the need for banks.”Staus says there’s little upside for banks to work with Bitcoin businesses. Most are still tiny, generating little in fee income. (Shore says he was paying $40,000 per year in bank fees.) “Compare that with the risks,” says Straus. “With any given Bitcoin, how do banks and regulators know they’re not facilitating the transfer of funds obtained in conjunction with illicit activities?”“Bitcoins are not illegal in and of themselves and have known legitimate uses,” said an FBI criminal complaint when it shut down online drug bazaar Silk Road, and seized its holdings: nearly 500,000 Bitcoins or $30 million at the coin’s current valuation. (The FBI plans to sell them after judicial proceedings are over.) Guidance from the IRS, Department of Treasury, and SEC has all established that Bitcoins are legal, and that those dealing with them must simply follow existing tax and anti-money-laundering regulation, yet banks remain wary of the disruptive digital currency. There are regulatory uncertainties, the major one being whether or not Bitcoin exchanges need to get a money-transmitting license for every state, a laborious and expensive process.“Regulators are worried they won’t be able to protect consumers, that the systems aren’t trust worthy, and that they can’t prevent money-laundering,” says Adam Shapiro, a regulatory expert at Promontory Financial Group, LLC. New York’s state financial regulator subpoenaed 22 Bitcoin investors and companies in August expressing concerns about consumer protection. In November, an exchange in Hong Kong shut down overnight, taking $4 million in investors’ accounts with it, a nightmare from a consumer protection standpoint.In June, the New Jersey-based Internet Archive Federal Credit Union – a financial institution associated with the eponymous non-profit that archives the Web — stepped in like a techie-white knight. “We created the Credit Union in 2012 to help the unbanked and underbanked, such as Mexican residents in Brunswick,” says IAFCU president Jordan Modell. “When we learned that Bitcoin businesses were also without accounts, we invited them to bank with us. We told them, ‘We’re going to KYC (ed. note: “Know Your Customer”, a due diligence requirement) the heck out of you, make sure you’re not on a government terrorist list and that you don’t have illegitimate transactions.’ We wanted to try to help people do the right thing.”When a July Wired article applauded the credit union’s Bitcoin banking intervention – and its taking on over 100 Bitcoin businesses and individuals — it drew the attention of regulators who quickly made life difficult for the Union. Soon the IAFCU became like the rest of the banks, sending its cryptocoin customers packing because the regulation around money transmitters turned out to be more onerous than that around undocumented immigrants.“We finished our months-long integration with the IAFCU in August,” says Jered Kenna, CEO of Tradehill, a Bitcoin exchange that caters to high-net-worth individuals and institutional investors. “It lasted two days before they shut us down.”Tradehill has been defunct since then, with no way to store clients’ funds.“I deal only with accredited individuals and institutions. We’re as legit as it gets but I’ve called over 100 banks and no one will give me an account,” says Kenna, a former Marine who decided to get into Bitcoin upon returning from Afghanistan in 2008 in the height of the banking crisis. Bitcoin seemed like an attractive alternative to traditional banking institutions.Silicon Valley Bank is one of the few banks amenable to Bitcoin clients, according to industry sources, and the only major bank willing to speak on the record about the issue, but even they have pulled back.“We currently work with a couple bitcoin companies, providing deposit accounts,” says spokesperson Carrie Merritt. “Until regulatory guidance is clear on banking and payment processing for virtual currency companies, we are not adding new relationships in this sector to our client portfolio.”“Banks are by their nature conservative and Bitcoin is very new,” says Jacob Farber, a Perkins Coie lawyer in D.C. who works on virtual currency issues. “There is not a well established risk profile to say the least. It’s taking banks a while to get comfortable with it and it’s not making it any easier with the media coverage Bitcoin gets. They hear about Bitcoin being used to buy drugs on Silk Road and not about the 10,000 merchants signing on to accept Bitcoin for non-illegitimate purposes. There’s that same amount of discomfort from government regulators. That feeling flows down to their regulated banks.”Some major Bitcoin businesses have managed to land banking relationships including San Francisco’s Coinbase, which has 300,000 people using its Bitcoin “wallets” to buy, sell, and store Bitcoin; and Atlanta BitPay, the PayPal of Bitcoin, which has set up over 20,000 (TK) merchants to take Bitcoin, facilitating over $2 million in transactions per month, from which it takes a 1% cut. Veteran entrepreneur Jeremy Allaire, the founder of new Bitcoin company Circle, which has $9 million in funding, told me he does have a bank account but is “contractually obligated” not to say who his bank is.“If you show up as a serious credentialed business person, and they know you are, and you do everything right, businesses have had success getting a banking relationship,” says Farber. “But it is really hard and a real problem for the industry. It is the major problem that needs to be solved to spark the next level of Bitcoin adoption.”Bitcoin is a baby currency. When it grows up, it could do serious damage to the banking hegemony, but only if the banking industry is willing to nurse it to adulthood.“The real question is why Bitcoin businesses think they need banks,” says Riddell Williams’ Straus. “The point is to enable electronic financial transactions without a third party. There will be no need for banks; that’s the power of Bitcoin.”http://www.scmp.com/business/banking-finance/article/1358150/hong-kong-entrepreneurs-could-win-slice-bitcoin-pieHong Kong entrepreneurs could win a slice of the bitcoin pie
While America wavers over use of virtual currency, entrepreneurs are keen to jump on gravy train, and city could cash in on boomPUBLISHED : Sunday, 17 November, 2013, 5:03amUPDATED : Sunday, 17 November, 2013, 8:38amDanny Lee in SingaporeBitcoin e-wallets can store money. Photo: SCMPAn influential digital currency evangelist says Hong Kong can grab a huge slice of the controversial multibillion-dollar bitcoin industry as US hostility towards virtual money increases.
Roger Ver, 34, a bitcoin millionaire, told theSouth China Morning Post that efforts to disrupt the digital currency money market would be futile."It's not stoppable. They can delay it within their own jurisdictions [states] but that's going to be incredibly short-sighted and damaging."If the US government tries to restrict or clamp down, that just means there will be many more bitcoin businesses in Hong Kong and Singapore and all those Americans will miss out on all the opportunities."Tomorrow the US Senate Committee on Homeland Security and Governmental Affairs will hear regulators articulate the risks and dangers of digital currencies, while fans try to convince lawmakers otherwise.Last month US authorities seized the illicit Silk Road website, and arrested its founder. For two years, critics including US Senator Charles Schumer had been pointing to the ease with which drugs and guns could be bought on the site using bitcoin.Ver made the comments before he addressed the faithful at the Bitcoin Singapore conference organised by Hong Kong-based investor Eddy Travia.Bitcoins began circulating in 2009 and have since become the most prominent of several digital currencies. The electronic money is transferred independently of traditional banks. Its total market capitalisation is about US$5 billion - only one thousandth the value of the global cash in circulation, says Johann Gevers of online payment platform Monetas.Hong Kong has plenty of room to play a bigger role as a virtual financial hub, according to those creating bitcoin services.One area is the remittance market to the Philippines and Indonesia, in which operators aim to send bitcoins instantly for a significantly smaller fee than traditional methods.Mainland Chinese are among the biggest bitcoin believers. The currency lets them avoid capital controls and move the equivalent of thousands of yuan outside the financial system.Anthony Hope, a former British government finance official now involved in virtual money compliance, said it was unlikely Hong Kong would rush to regulate bitcoins without following the US approach to regulation."Asia will wait and see what happens on the US and EU side before it makes a very firm move. But what you see from the Hong Kong and Singaporean governments is realism … to attempt to make regulation as it comes."Consumer protection to prevent fraud and theft within the digital currency world would drive regulation, Hope said.Last month, Hong Kong-registered online bitcoin exchange Global Bond Limited (GBL) shut down, taking US$3.3 million of clients' money and affecting more than 1,000 people on the mainland. GBL launched in May.Police said 14 mainland victims claimed "they had made investments through an investment company registered in Hong Kong that ceased operation from October 26 and they suspected they had been deceived". Technology Crime Division officers are investigating.Zennon Kapron, from Shanghai advisory firm Kapronasia, said China would "make or break" bitcoins. He said the GBL case was not unique.Lo Ken-bon, managing director of Hong Kong-based Asia Nexgen Bitcoin Exchange, said the GBL saga would affect confidence in bitcoins and it showed there was still "a lot of risk" in the digital currency.But if investors are wary, it is not showing. The price of one BTC extended its bull run by more than US$110 as speculators, spurred on by a healthy Chinese appetite, piled in for a profit. Last night one BTC cost US$439 on Japan-based Mt Gox, the world's largest bitcoin exchange - up from US$315 a week ago.http://www.zerohedge.com/news/2013-11-17/bitcoin-rises-over-500
Bitcoin Rises Over $500
Submitted by Tyler Durden on 11/17/2013 12:03 -0500
One day before the Senate's digital currency hearing titled "Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies", Bitcoin is largely oblivious to any potential regulatory threats, either at the legislative or the city level, where as reported previously the New York superintendent is in a rush to enforce BitLicenses on businesses that accept BitCoin, and moments ago crossed $500 for the first time ever. Instead, it appears that as we also reported previously, the Chinese Bitcoin craze has reached the parabolic threshold, going so far as making Bitcoin an acceptable payment for real estate, which means that while for the time being Bitcoin becomes the alternative inflation protection medium for hundreds of millions of Chinese, all bets on how high it can get are off.Intraday chart:
1 Year Chart:
1 Year log chart:
Curious where the demand is coming from? Aweek ago we showed a handy utility, FiatLeak, which shows where the BitCoin transactions are taking place:
Finally, for those curious what a "fair value" on Bitcoin may be, here is what we presenteda week ago, courtesy of Global Macro Investor's Raoul Pal:So yes: Bitcoin is volatile. Very. That much is clear. But what is not so clear, and perhaps a key reason for this volatility, is just what the fundamental, or intrinsic value of BitCoins is when one strips away the pure euphoric momentum to the upside or downside.To answer that question, we go to Raoul Pal, head of the Global Macro Investor, and his November 1st recommendation to "Buy Bitcoins"(when BTC was $210 so nearly a 100% return in 1 week) which among other things attempts to "value BTC using a macro framework" or, in other words, the first supply-demand driven fair value assessment of BTC.His take, and price target, in a nutshell:A fudge, but not a stupid oneLet’s use a broad guesstimate. One Bitcoin should theoretically be worth 700 ounces of gold or pretty close to $1,000,000, if we adjust existing supply of both to equal eachother.One BTC is currently worth 0.14 ounces of gold.That gives BTC an upside of 5000 times to equal the current price of gold, supply adjusted. Clearly, I and everyone else believes that Gold may well be much higher than here in the next 5 to 10 years, thus versus the US Dollar the upside for BTC could be multiples of that.Now, before you shake your head, simply go back to the chart of Gold versus the US Dollar and just recognise that it has risen 8750% since the 1920s. And just remember that Microsoft rose 61,000% from its IPO to it’s peak.Considering what we know about the world, I personally believe that Bitcoin may well explode in value as more and more people begin to use it.If you stuck $5,000 into Bitcoins and each Bitcoin did go up to a gold equivalent of let’s say, only 100 ounces of gold (not the potential fair value of 700), then at current prices your Bitcoin stash would be worth $3.3m.Now that’s what I call a tail-risk option. It’s either worth zero or it’s worth a truly outstanding amount of money.I bet you never thought you’d see this in a macro publication. But I’m serious. This just might work.Read on in the attached pdf below (link)
