http://www.coindesk.com/bank-stops-working-bitcoin-exchange-campbx-regulatory-uncertainty/
Bank Stops Working With Bitcoin Exchange CampBX Due to ‘Regulatory Uncertainty’
US bitcoin trading platform CampBX has announced that it has temporarily halted automated clearing house (ACH) and wire transfers effective 31st January.
Alpharetta, GA-based CampBX indicated in a blog post to its users that its bank has “made a business decision to not work with bitcoins and bitcoin companies”. The bank cited regulatory uncertainty, as well as recent negative bitcoin news, as the driving force behind the decision.
Unfortunately we have some bad news regarding our ACH and WIRE processor. Please see the update here: https://campbx.com/achupdate.php
The decision is notable as CampBX became the first bitcoin website to obtain Payment Card Industry (PCI) certification in 2011, signifying that it implements specified controls and safeguards to protect consumer data. CampBX allows for quick buy and sell trades, provides customers with SMS notifications and secures its platform with two-factor authentication, its website says.
The company moved to also calm user concerns, stating that “all USD and BTC balances are accounted for”, and recommending that users “purchase bitcoins and withdraw them to their personal wallets” until standard services resume.
“We are working to find a replacement partner and resume these two services for our customers. In the meantime, please use alternate deposit or withdrawal methods available on CampBX,” the company wrote.
Regulation of exchanges
CampBX has tried to stay compliant with traditional financial service regulations, and the news is likely to further calls for regulatory clarity around such bitcoin businesses. Bitcoin investors lobbied for that at the New York Department of Financial Services (NYDFS) hearings this week, saying that a lack of a clear stance on this issue is pushing exchanges, and US jobs and business, abroad.
By day two, regulators seemed to have warmed to the idea of a New York-based exchange and to implementing the kind of regulations that would lead to its creation.
“Any regulation should help to secure cryptocurrencies and the wallets used to hold them.” – Charles Lee at the New York bitcoin hearings
— CoinDesk (@coindesk) January 28, 2014
Potential partners
Just which bank will join up with CampBX despite the regulatory uncertainty around its business is unclear, however, if past examples are any indication, CampBX may be able to find a partner.
Web payments service OKPAY suspended its support for virtual currencies at the request of its bank last April. This January, though, it was able to resume some services to the virtual currency community in the UK after it found a new partner.
http://www.coindesk.com/silk-road-seller-sues-stop-government-sale/
‘Innocent’ Silk Road Seller to Sue to Stop Sale of Seized Bitcoins
Pete Rizzo (@pete_rizzo_) | Published on January 31, 2014 at 20:59 GMT | Crime, Silk Road News
Former Silk Road merchant Peter Ward has announced his intention to hire a lawyer and file a claim for 100 bitcoins that he says were wrongly taken by the government during its seizure of online black market bazaar Silk Road.
The owner of Planet Pluto - a head shop in Devon, England, Ward says he earned the bitcoin – worth $85,000 at press time - lawfully, through the sale of drug accessories such as bongs, marijuana seeds and rolling papers, items he sells successfully online through other outlets.
Speaking to Forbes, Ward suggested that he has the ability to prove his transactions on the site were all legal, and as such, should not have been subject to forfeiture.
“I’m probably in a unique position in that I can prove my coins came from selling legal items. I sold on Silk Road because it had a large user base that matched my target customers. Where better to sell king-size rolling papers?”
Ward was also arrested on his 52nd birthday on 2nd October in connection with Silk Road. Law enforcement officials from the UK’s National Crime Agency entered his home and confiscated his personal stash of marijuana and cocaine, however, he was released on bail and has yet to be charged.
Impact on the Silk Road sale
For those more interested in the price of bitcoin, Ward hopes the action will keep the government from its forthcoming sale of $25m worth of bitcoins taken from the now-defunct website.
“It will be cool if an old hippy can throw a spanner in the big FBI machine,” Ward said.
Speaking to CoinDesk, Los Angeles-based asset forfeiture lawyer Dave Katten said Ward is unlikely to be successful in this goal, even if he has a legitimate claim to the money.
“If he’s really an innocent owner, they should return it, as long as they can’t find a specified unlawful activity to tie to it,” Katten said.
Katten believes the government, if it finds Ward innocent or settles with him out of court, is likely to reimburse Katten after the Silk Road sale. In this case, Ward would not receive his bitcoins, but would likely be compensated in US dollars and with interest similar to what consumers would receive on treasury bonds.
Legal reaction
Steven L. Kessler, an asset forfeiture lawyer Ward is considering for the case, told Forbes that the US government had an obligation to inform Ward of the sale, but that it did not follow through.
“The statute requires that if the government of the United States has knowledge of an individual with an asset subject to forfeiture, the owner has to get notice. Clearly after you’ve arrested a person, you have direct knowledge,” Kessler said.
Katten isn’t surprised, telling CoinDesk that Ward was likely to be “missed” by government, as his claim represents a small chunk of the total seizure. However, he stresses that this doesn’t mean Ward can’t file a claim or receive compensation, should it be owed.
As to whether such a claim would be worth it monetarily for Ward, Katten would only say that the legal process is likely to be lengthy, but that early action could be effective. Still, he says the government could fight such action on different grounds, should it choose.
“They may say the goods he’s selling are not illegal, but they may argue he’s using the system to hide the transactions rather than using a more common market. So they may not be so quick to given them back to him.”
Publicity stunt
Another lawyer familiar with Silk Road litigation, speaking on background, suggested Silk Road’s perception as a known drug bazaar could also lead the US government to take Ward’s case less seriously. The source further suggested that the case seems more like a publicity stunt than a legitimate claim given Silk Road’s reputation.
Still, Ward has taken to Twitter to find others who will help support his fight:
Any donations to my legal fund gratefully received, help me get my bitcoins back from the FBI 18bugRoYM6kz4dU2mHJuBnXMbU4SMQdnio
#silkroad
The announcement is just the latest development in the ongoing saga of Silk Road. For the latest updates, click here.
I will translate this short message to english.
"Bitcoin users must be very careful, this currency is not regulated by European Union or Lithuanian law. Bitcoin usage is not licensed, and users aren't protected. Because this type of currency is created and controlled by anonymous people or groups of people which aren't regulated. So this leads to the risk that "creators" of bitcoin can disappear with all people's money."
Vilnius Šapoka - Lithuanian central bank
The full article in lithuania: http://www.15min.lt/naujiena/verslas/finansai/lietuvos-bankas-perspeja-virtualiu-valiutu-naudojimo-niekas-nepriziuri-ir-nereguliuoja-662-402420#ixzz2rzRTUBE0
"Bitcoin users must be very careful, this currency is not regulated by European Union or Lithuanian law. Bitcoin usage is not licensed, and users aren't protected. Because this type of currency is created and controlled by anonymous people or groups of people which aren't regulated. So this leads to the risk that "creators" of bitcoin can disappear with all people's money."
Vilnius Šapoka - Lithuanian central bank
The full article in lithuania: http://www.15min.lt/naujiena/verslas/finansai/lietuvos-bankas-perspeja-virtualiu-valiutu-naudojimo-niekas-nepriziuri-ir-nereguliuoja-662-402420#ixzz2rzRTUBE0
http://www.coindesk.com/estonian-central-bank-warns-bitcoin-ponzi-scheme/
Estonian Central Bank Warns Bitcoin May be a ‘Ponzi Scheme’
A member of the Central Bank of Estonia has issued a warning to the country’s citizens about bitcoin and other virtual currencies.
Mihkel Nõmmela, who heads the bank’s Payment and Settlement Systems Department, called bitcoin a “problematic scheme” in an email to Bloomberg. Nõmmela echoed concerns raised at this week’s bitcoin hearings in New York, noting that all risks in the system are assumed by the user, and that consumers have nowhere to turn for support. He said:
“Already there have been cases where the owner of a trading virtual money has suddenly ceased to exist, so customers have also suffered losses.”
Nõmmela indicated Estonia’s Central Bank would continue to pay attention to developments in the virtual currency space, saying there are “grounds to assume that the use of virtual money schemes will expand in Estonia as well”. But, he did issue a firm warning to Estonians who seek to use it:
“All in all, virtual currency schemes are an innovation that deserves some caution, given the lack of any guarantees and responsible parties to back them in the longer term or evidence that this isn’t just a Ponzi scheme.”
Estonia follows Russia’s lead
With the statements, Estonia appears to be following its eastern neighbor Russia in taking a more skeptical approach to virtual currency. On 27th January, the Bank of Russia issued warnings suggesting bitcoin users could be unintentionally breaking laws by unknowingly aiding money launderers and terrorists.
However, not every influential economist in Russia has come out against virtual currencies. The head of Sberbank, the biggest bank in Russia and Eastern Europe, had previously urged Russia not to restrict the growth of virtual currencies. Sberbank’s head, German Gref, said:
“It’s a very interesting global experiment that breaks the paradigm of currency issuance.”
Estonia’s economic outlook
Estonia was hit hard by the global recession, as its economy shrank by more than one-fifth from 2008 to 2009. The development lead to an economic downturn that was “exacerbated by global slowdown”, according to the International Monetary Fund. The development all but wiped out the country’s 7% growth from 2000 to 2007. As a result, bitcoin’s sharp shifts in price have likely spooked regulators, who fear putting citizens at risk.
Nõmmela suggested that bitcoin users “can quickly lose it if, for example, his or her computer lacks the necessary anti-virus software or recovery options”.
Notably, Estonia also only recently joined the Euro, becoming a member in 2011.
Estonia’s bitcoin population
With a population of just over 1 million residents, the news is unlikely to spark market movements. But it could have ramifications in Estonia, which finds itself in the middle of the pack of countries when it comes to bitcoin interest, research suggests.
Estonia ranks 58th in terms of official downloads of the bitcoin client and wallet, behind Solvenia, but ahead of its southern neighbor Latvia, with 114 downloads. However, LocalBitcoins shows just a small number – less than 10 – Estonians are active users of its platform in the country.
Happy Chinese New Year, Bitcoin! Biggest exchange opens for business despite bank warning
Fireworks illuminate the city's skyline in Hong Kong (AFP Photo / Philippe Lopez)
The world’s biggest bitcoin exchange by volume has reopened allowing yuan-to-bitcoin deposits. This goes against an order by the People’s Bank of China, which said all bitcoin trading should stop before the Chinese New Year, January 31.
BTC China executive Bobby Lee said that as of Thursday, the exchange decided it could legally accept bitcoin deposits in its corporate bank account, and then transfer funds to customer accounts.
Shanghai-based BTC China stopped accepting deposits in Chinese yuan in December after the People’s Bank of China warned financial institutions not to sell or trade bitcoin. Government ministries told financial institutions dealing with bitcoin they must stop by January 31, the beginning of Chinese New Year holiday.
"We are definitely in compliance with the Dec. 5 memo, but the government and the government agencies can change the rules anytime in the future," Mr. Lee told the WSJ by phone. "So we are going to take a wait-and-see approach."
Bitcoin prices tumbled more than 50 percent when the exchange shut down just before the calendar new year holiday. According to Lee, the comeback was strategically planned around the beginning of the Chinese holiday, as not too draw too much attention.
"It is going to be slow in terms of trading value, so we just wanted to make sure the system is running smoothly, that there is not too much pressure and that it doesn't pick up too much attention."
According to Chinese officials, bitcoin has “no legal status or monetary equivalent” and financial institutions shouldn’t treat it as legal tender, however it can be traded as a commodity on the internet.
Bitcoin crackdown
Regulators worldwide are cracking down on the high profile cryptocurrency, which has won popularity with those distrusting of government influence in monetary policy as well as those who wish to remain anonymous when purchasing online.
A top official at Estonia’s national bank said on Friday that bitcoin “is a problematic scheme" because no central banking authority can protect any risk.
“All risks are assumed by the user, who has no one to turn to for help,” said Mikhel Nommela, who heads up the national bank’s payment and settlement systems department.
The Russian Central Bank also discourages bitcoin use on the grounds it lacks government regulation, which therefore gives it “a high risk of devaluation”.
Bitcoin hasn’t proven itself safe, as exchanges in China have disappeared overnight, and has even beenstolen on live television.
http://www.coindesk.com/vancouver-atm-operator-wants-leave-bitstamp-following-breakdown/
Vancouver ATM Operator Wants to Leave Bitstamp Following Breakdown
Joon Ian Wong (@joonian) | Published on January 31, 2014 at 11:30 GMT | Bitstamp, Companies, News,Technology
Customers were unable to buy bitcoin from Vancouver’s bitcoin ATM last weekend because its operator was unable to clear a backlog of buy orders.
The machine’s operator, Bitcoiniacs, said the problem arose because the ATM relies on Bitstamp to clear its orders, and the exchange had allowed orders amounting to more than 45 BTC to pile up without being processed.
Bitcoiniacs uses a Robocoin machine, which is able to buy and sell bitcoin in exchange for fiat currency. Robocoin machines perform trades on the Bitstamp exchange by default. According Mitchell Demeter, co-founder of Bitcoiniacs, the exchange stopped processing buy orders for bitcoin from the ATM on 21st January.
The unprocessed orders eventually piled up to more than 45 BTC, he added. “We had several clients very concerned as they had deposited thousands of dollars and days later there was no sign of their coins.”
Zero response
Bitcoiniacs contacted Bitstamp repeatedly, but received “zero response” according to a reddit post by Bitcoiniacs announcing the ATM shutdown. The post read:
“Unfortunately, due to a massive delay in processing at Bitstamp, and ZERO response to repeated contact requests from anyone in the management or customer service there, we’ve had to shut down the buying option at Vancouver’s bitcoin ATM at Waves Coffee.”Bitcoiniacs stopped allowing buy trades through its ATM from the afternoon of 24th until the morning of 27th January. According to Demeter, around 80 clients were affected by the delayed transaction.He said he received another 50 inquiries from customers who wanted to know when the ATM would resume executing buy orders for bitcoin. However, Demeter added that his customers responded calmly to the delay.“The delay was fairly well received by most clients. Most people understand when dealing with a third-party, some things are out of our control.”When CoinDesk contacted Bitstamp chief executive Nejc Kodric to corroborate Bitcoiniacs’ claims, he refused to comment. Another inquiry, to Bitstamp’s, general support e-mail address, was also met with a refusal to comment:“Unfortunately, Bitstamp is unable to comment any of the points in your inquiry. For more information we kindly suggest you contact the ATM service directly.”Solutions
Both Robocoin and Bitstamp could have implemented measures to prevent the backlog of transactions from building up, Demeter argued. One method would have been to create a ‘hot wallet’ which would allow coins to accumulate in the ATM operator’s Bitstamp account.This would effectively create a ‘buffer’ of a number of bitcoins to service withdrawal transactions. Withdrawals would come from this hot wallet, as opposed to sales from Bitstamp’s open market. One drawback, however, is that hot wallets have been targeted by hackers in the past.The other method Demeter suggested was for Bitstamp to ‘whitelist’ the ATM operator’s account. This would signal to the exchange that the account was vouched for, and activity (such as an unusually large number of transactions) would not set off a red flag.“[Being whitelisted] would mean our account would not get flagged as spam due to a large frequency of withdrawals.”Bitcoiniacs said it would leave Bitstamp in response to the recent uncleared backlog and other problems it experienced in the past. It launched an exchange called Cointrader last month to handle transactions for its ATMs.The exchange will also be aimed at other bitcoin businesses operating ATMs or brokerages. Demeter said the exchange will have bank accounts in the UK and Canada to service European and North American customers respectively.It will also be able to take AstroPay transactions for customers in South America. Cointrader is set for a relaunch on 10th February to gain more exposure and liquidity, Demeter said, adding:“As soon as we have enough liquidity built up on Cointrader, we will be switching all of our ATMs and brokerage offices over to that.”The Vancouver machine is the world’s first bitcoin ATM. It was installed in the Waves coffee house last October. It attracted attention when it reportedly took more than $1m Canadian dollars within its first 29 days of operation. Operators have sprung up around Canada since then.
http://www.coindesk.com/community-debates-whats-next-new-york-hearings/
Community Debates What’s Next After New York Hearings
Danny Bradbury (@dannybradbury) | Published on January 31, 2014 at 07:10 GMT | Analysis, Regulation,US & Canada
The dust has settled from the virtual currency hearings in New York City this week. We saw a mixture of speakers, including law enforcement agents warning of digital currencies’ many potential dangers, VCs gettinghot under the collar over the regulation debate, regulators musing about whether they should license miners or not, and one vehemently anti-bitcoin academic.
New York state has almost 20 million people – around 6% of the US population – and houses the heart of its financial services industry. It was a good place for the first state-level inquiry into the regulation of decentralized digital currencies, which is the area of greatest uncertainty for companies trying to operate in the space.
The whole purpose of the hearings was to better inform a financial regulator that is planning to introduce regulation on digital currencies this year. Nominally termed ‘Bitlicenses’, it’s likely that they’ll differ in form from existing regulation. But is that what people want? And now that the hearings are over, what happens next?
“Existing regulation is too cumbersome and takes too long for companies in the cryptocurrency space,” said Charles Lee, inventor of litecoin, and an employee at Coinbase, who testified at the hearings.
Lee favours a Bitlicense approach, with caveats. “One year is a really long time in this space, so new licenses would be good as long as they are easier to obtain. The key thing though is that the new licenses should replace the current money transmitter licenses,” he said.
“If the bitcoin/litecoin company had to apply for both a bitlicense and a money transmitter license, then that will make things worse and not better.”
Marco Santori, chair of the regulatory affairs committee at the Bitcoin Foundation and an attorney at NYC law firm Nesenoff & Miltenberg LLP, submitted written testimony to the hearings but didn’t speak personally. He takes an opposing view.
“We should applaud DFS for joining the conversation on digital currency that has been going on at the federal level for some time. Federal regulators have uniformly stated – and the Foundation agrees – that no new regulations are required for digital currency businesses,” he said.
Santori criticized the DFS for not taking a firm position on how or whether existing laws apply to digital currency businesses. “Before we ask whether we ought to have new regulation and special licenses, though, shouldn’t we first decide whether and how the current laws apply?”
From cryptocurrency 1.0 to 2.0
That’s like trying to tie red tape around a moving bullet. The signs are that technology development in the already dynamic decentralized currency space is accelerating. Bitcoin is not even yet mainstream, and yet there is already a second generation of digital currencies emerging that are already promising new features.
Initiatives like Mastercoin and Ethereum are offering more flexible block chain structures, with fundamentally different ways of operating, including apps and storage mechanisms that migrate on and off of the block chain. In some cases, these mechanisms are morphing on the drawing board. In the meantime, regulators this week were still pondering whether regulations should require cryptocurrencies to have a block chain.
“They’ve spent the last 50 years very carefully building a system to control the flow of money, and many billions of dollars went into this,” said Charlies Hoskinson, who is leading Ethereum.
All that is about to be turned on its head, he argued. “They understood this was going to be big, but they have no idea what to do about it.”
Let the code take care of it?
So, why not simply let the technology take care of the problem? Some people believe in reducing the policy-level regulation to a bare minimum, and instead prefer the idea of driving regulation into the code itself. Let the technology handle it – it’s more scalable that way, said Union Square Ventures’ Fred Wilson. Lamenting having to fill out five forms to open a bank account recently, he advocated something that could handle AML and KYC in code, rather than relying on archaic paperwork.
Will that work? Best ask a coder.
“To a certain degree, yes. But because bitcoin/litecoin is a decentralized system, any thing that is put into code can be rejected by the community,” said Lee, whose employer is a portfolio firm of Wilson’s. But it depends how it’s done.
“For example, if you were to force everyone to have KYC in each address in the bitcoin block chains, the community would likely fork bitcoin to not have that or just support another crypto currency that doesn’t have it. So there’s only so much you can do in code.”
Yet those on the side of more stringent regulation are certainly eager to drive ID and verification further into the block chain, closer to the technology itself. District Attorney Cy Vance, Jr recommended at the hearing that the state verifies the owners of specific bitcoin addresses.
That made the founders of CoinValidation happy. That firm, which we wrote aboutin November, wants to offer that service, although it’s a suggestion that angered community commenters when CoinValidation first announced itself.
Nevertheless CoinApex, an incubator which houses the firm, highlighted Vance’s comments on its blog, inviting companies to get in touch.
Outsourced compliance
Others seek to outsource the whole compliance effort for startups in less controversial ways, helping them to handle the paperwork associated with federal (and, when it’s finally thrashed out, state) licensing. The Winklevoss brothers floated the idea of outsourcing compliance at the hearings.
Brian Stoeckert, co-founder of NYC-based coin compliance consulting firmCoinComply, launched the firm last May. It handles the operational side of compliance, enabling young digital currency companies to concentrate on the other aspects of their business.
“Lobbyists might come through and say 'hey, why are you carving out new rules for these groups?'”
Stoeckert addressed one aspect of the debate, which was the need for consistency across the various states. Members of the Conference of State Bank Supervisors (CSBS), which help to co-ordinate banking rules in various states, are exploring digital currency compliance rules.
Be warned, said Stoeckert – incumbent financial services firms in those states would be unlikely to let that go without a fight.
“You have the traditional remittance businesses that have had to invest significant resources,” he said. “That’s an area where lobbyists might come through and say ‘hey, why are you carving out new rules for these groups?’.”
Federal and state law
Even getting to a uniform state policy may be tricky. Wilson suggested ‘on-ramp’ regulation that would impose gentler requirements on startup firms providing digital currency services in the financial services space. It seems unfair for theCoinsetters of the world to jump through the same regulatory hoops as the JP Morgans, for example.
“One thing that regulators have learned over the years is that regulations should be scaled to the size of the company they apply to,” agreed Houman B. Shadab. The associate professor of law at the New York Law School and co-director of the Center for Business and Financial Law is a member of the Bitcoin NYC meetup group that convenes at 40 Broad Street, the heart of the city’s bitcoin community.
“If they are not, incumbents will have the advantage over startups, and that would seem to be particularly harmful for the bitcoin economy,” he added.
But Santori argues that this could balkanize states and hinder the inter-state consistency that digital currency firms are looking for. “I think we ought to question whether that would be a genuine benefit if it would just lead to more uneven treatment among the states and further entrench the 50-state licensing requirement in the US,” he warned.
You can watch regulators trying to thrash out the issues with representatives from the community in the archived webcast here.
Charts ......
No comments:
Post a Comment