Wednesday, March 12, 2014

Bitcoin news - March 12 , 2014 -- Wall Street getting ready to snatch control of bitcoin -- High-speed telecommunications provider Perseus Telecom and digital currency trading platform Atlas ATS formally launched Wednesday a globally integrated bitcoin exchange system in New York, Hong Kong and Singapore to facilitate trading in the digital currency by high-frequency trading firms and other large financial institutions........ Bitcoin Derivatives Platform BTC.SX Resumes Trading After Mt Gox-Induced Freeze ........ Bank of Mexico Restricts Banks from Bitcoin Use, Reports Suggest ........ Chicago Court Freezes Assets of Mark Karpeles in the US ....Overstock CEO Patrick Byrne discusses Wall Street's greed and bitcoin's value - good stuff , his battles with short sellers were legendary !

Wednesday, March 12, 2014 12:56 PM

High Frequency Bitcoin Trading Coming Your Way; Reflections on "The Right Pedigree", Bitcoin is Here to Stay

Wall Street has officially embraced bitcoin. And why not? Wall Street can scalp fractions of bitcoins just as easily as fractions of pennies.

The Wall Street Journal reports Perseus, Atlas Launch Global Bitcoin Trading Platform 
 High-speed telecommunications provider Perseus Telecom and digital currency trading platform Atlas ATS formally launched Wednesday a globally integrated bitcoin exchange system in New York, Hong Kong and Singapore to facilitate trading in the digital currency by high-frequency trading firms and other large financial institutions.

The two firms' collaboration, first reported last month by The Wall Street Journal, marks a milestone in the evolution of bitcoin out of a retail-oriented, loosely regulated low-tech environment to one that is open to the high-volume and strictly regulated activities of Wall Street.

"Now, institutional investors and banks can see that there are known players with the right pedigree" engaged in bitcoin, said Jock Percy, chief executive officer of Perseus, whose high-bandwidth lines are used to connect securities exchanges around the world with institutional investors' trade execution platforms.
"Right Pedigree"

Sooner or later, where there's money to be scalped, front-run, or otherwise manipulated, Wall Street has the "right pedigree" and is sure to want a part of it.

Expect bitcoin futures, options, and options on bitcoin futures to follow. Bitcoin LIeBOR anyone? Why not?

Wall Street's embrace of bitcoin likely ensures its survival. No one will want to end a party that Wall Street has embraced. Bitcoin is here to stay.

Mike "Mish" Shedlock

Bitcoin Derivatives Platform BTC.SX Resumes Trading After Mt Gox-Induced Freeze

 (@dannybradbury) | Published on March 12, 2014 at 22:36 GMT | Companies,ExchangesNews
Derivatives trading site BTC.SX has resumed trading after a few weeks of downtime induced by the Mt. Gox collapse. The company has signed BitStamp as its new exchange partner, said BTC.SX CEO Joseph Lee.
BTC.SX suspended its operationsuntil further notice on February 25, after Mt. Gox imploded. At the time, Lee told CoinDesk that he had no prior warning from the exchange, even as a business partner. BTC.SX went to Gox to trade bitcoins on behalf of its customers, who were using Lee’s site to trade bitcoin-based derivatives.
The company was up to around $40m in brokered trades by the time Mt Gox collapsed.
“Counterparty risk is something that we spotted early in the business. It’s always been in our plan to partner with other exchanges,” said Lee, adding that he had originally planned to bring other exchanges on in April. The firm switched on BitStamp integration yesterday.
“We think celebration is premature, because at the end of the day we have 100% counterparty risk with one exchange,” Lee said. The firm is talking to others, including CoinsetterBitFinexItBit, and BTC-e. “We tend to pick exchanges based on who can provide the most liquidity. That’s what our customers want – good fill prices.”
When Mt. Gox imploded, BTC.SX lost all of the bitcoins that it had stored in the exchange’s wallet. However, Lee had begun withdrawing some funds earlier and reducing his exposure to the exchange based on worries about its future. “We do hold a trading reserve out at the exchanges, and that balance is getting moved in and out of,” he explained. “That money depends on the level of risk that we wanted.”
Counterparty risk is something that we spotted early in the business.
However, Lee maintains that BTC.SX is still a fully-funded reserve. “We would never ever run a fractional reserve,” he protested. “Businesses that want to run fractional reserves have to be very honest about that, especially in the world of bitcoin.”
BTC.SX’s reserves are held in a separate off-line wallet, he said, and the company doesn’t run a hot wallet at all. The firm has a withdrawal time of 24 hours. Whenever a withdrawal is requested, all account reconciliations are performed before it is processed. “It’s time-consuming for us, but security of customer funds should be considered paramount,” he said.
However, the company isn’t able to formally prove its reserves at present. An audit is “on our to do list,” Lee said. The company is now dually incorporated in Singapore and England, and its financial returns come out at the end of the year, so the order will have to appear before that, he said.
The firm relaunched quietly yesterday. Before that, it tested for a few days with its closest users to ensure that the BitStamp integration was running smoothly. Over the next few days, it will increase trading limits.
BTC-SX used its downtime to perform some upgrades that would ensure its ability to scale as a business. It more than doubled its server capacity, Lee said, and introduced more bookkeeping updates on the back end. It has increased its team to five people in recent months, including its London-based developer team.
Expect to see BTC.SX signing with another one or two exchanges in the next month, Lee concluded. The firm, which began with a $150,000 investment, will also announce the completion of its latest funding round later this month.

Bank of Mexico Restricts Banks from Bitcoin Use, Reports Suggest

 | Published on March 12, 2014 at 19:32 GMT | NewsRegulation
Following a number of statements by other central banks regarding the dangers of digital currencies, the Bank of Mexico has issued its first statement on the issue, reports say.
The bank warned the public via a statement on its website about the “the inherent risks of acquiring these assets and using them as substitutes for conventional methods of payment”, though most notable were potential restrictions for domestic financial institutions.
Translations of the statements suggest that financial institutions regulated in Mexico “are not authorized to use or carry out any operations with [digital currencies]“.
Specifically mentioning bitcoin and litecoin, digital currencies, the bank said, “are not legal tender currency in Mexico, since the Bank of Mexico does not issue nor back them”. Furthermore, “their use as a form of payment is not guaranteed, since businesses and anyone else are not required to accept them”.
Like other central bank warnings, the bank felt it necessary to warn users of the perceived links between digital currencies and crime, saying, “In other jurisdictions, they have been allegedly used in illicit operations, including fraud and money laundering”.

Bank restrictions

The restrictions on financial institutions, while potentially indicating that domestic banks may be discouraged from dealing with digital currency businesses, are similar to past statements from China, which barred its payment processors from using bitcoin in December.
However, Ben Peters, CTO at Mexican bitcoin exchange Bitso, is not overly concerned:
“My understanding,” he told CoinDesk, “is that the announcement from the Bank of Mexico is very similar to that made by other countries – in essence consisting of a warning to the public, and a restriction on financial institutions from dealing directly in Bitcoin.”
“After consultation with our legal council, we do not believe this impacts on our business directly, nor would it in principle have any effect on banking relationships with bitcoin-related companies.”

Regulation rumors

Pablo Gonzalez, CEO of Bitso agreed that the statement is nothing to worry about just yet.
“This is the first announcement from the Bank of Mexico regarding bitcoin or other cryptocurrencies,” he said. “They are warning the public, letting them know that the use and acquisition [of digital currencies] can have a high risk of depreciation and monetary losses.”
However, the bank’s wording might hint at things to come regarding cryptocurrencies and regulation. Gonzalez points out that:
“They state that the Bank of Mexico, along with other authorities in Mexico, will closely observe their development and infiltration in the country, and, if deemed necessary, they will look into regulating these virtual assets.”

Global impact

In recent months, there have been a host of similar warnings from central banks around the world, with some recent examples being Cyprusthe Philippines, andHungary.
The statements from Mexico, while negative, could eventually give way to an understanding. For example, Russia seemed to have banned bitcoin, only to backtrack, saying it was merely investigating how best to deal with digital currencies and avoid their use in crime.
Most recently, the US seemed to be reversing its negative stance, as New York has indicated it will have regulation in place for bitcoin exchanges by the second quarter of 2014.

Chicago Court Freezes Assets of Mark Karpeles in the US

 | Published on March 12, 2014 at 10:30 GMT | CrimeExchangesLawMt. Gox
A Chicago judge has reportedly frozen all US-based assets controlled by Mark Karpeles, the CEO of the now defunct bitcoin exchange Mt. Gox.
US District Judge Gary Feinerman made the decision to freeze Karpeles’ assets, along with assets belonging to companies tied to both Mt. Gox and Karpeles, according to the Wall Street Journal. The order is temporary, but the assets will remain frozen for at least two weeks.
This move doesn’t appear to be directly related to the exchange’s Chapter 15bankruptcy proceedings. It is, in fact, the result of a prior lawsuit filed against Karpeles by Mt. Gox customers seeking compensation. It is not yet a class action, but it might soon become one.
As reported yesterday, Chapter 15 bankruptcy will not stop the case from moving forward and the asset freeze proves it is going ahead.

Will the asset freeze help customers?

Courts impose asset freezes in situations like this to secure plaintiffs and make sure the defendants don’t funnel money elsewhere. However, in this particular case it probably won’t go a long way toward reassuring customers, as Karpeles’ holdings in the US appear to be limited.
In court, lawyers for exchange customers alleged that Karpeles is moving funds which are claimed lost by Mt. Gox. One of the attorneys involved in the case, Jay Edelson, argued that every day the customers wait there will be “less and less money”. Christopher Dore, another Edelson attorney, said:
“The main thing we hope to achieve is to finally see what the web of things that Karpeles has put together over the last few years and to start unwinding it as to where things are and what happened.”
The asset freeze targets bank accounts used by Mt. Gox and Karpeles, as well as servers located in the US. However, even the judge admitted there might be no assets to freeze. “It may turn out there are no such assets,” Feinerman said.

More questions than answers

Judge Feinerman has scheduled a status conference for 20th March. Lead plantiff’s lawyer Jay Edelson said he is looking to question Karpeles under oath immediately, Bloomberg reports.
“We can finally get some real answers,” Edelson said.
Attorney Steven Woodrow believes the court order could freeze between $2.1m and $5m in assets controlled by Karpeles. In its Chapter 15 filing Mt. Gox claimed to have approximately $63.9m in liabilities and $37.7m in assets.

Overstock CEO Sheds Light On Wall Street Greed and Bitcoin’s Value as the New Currency.

Posted 16 hours ago 

I saw an alert on BitcoinTalk about an email from the CEO of It was sent to all 41 million plus US customers.
As you can see here, it is another good one from him with a link to the story Wired did on him recently.
“Dear Valued Customer,
Enclosed, please find the Wired Magazine article, “Meet Patrick Byrne: Bitcoin Messiah, CEO of Overstock, Scourge of Wall Street”. It concerns the decade-long battle Overstock has waged to expose Wall Street mischief.
The backstory is as follows: Overstock went public in 2002. Between 2002 and 2005 I found myself mingling with various Wall Street bankers, hedge funds, and journalists, and began to form an impression (and hear) of unsavory activity. I made it my hobby to study it, and in 2005, I went public about what I had learned. For several years thereafter, the New York financial press derided and distorted my claims, often to the point of appearing to engage in a cover-up. When in 2008 what I had been saying became indisputable, Wall Street went silent about this episode. The enclosed Wired article recounts that history, and explains how it is related to Overstock’s recent decision to accept Bitcoin.
I understand that you may not be interested in tales of corruption in Wall Street and Washington, DC, and if so, please simply enjoy the coupon above. However, if you read this piece from Wired, which effectively ends a cover-up regarding the Battle of Overstock versus Wall Street, I think you will understand why I chose to share this article with 41.7 million of my closest friends.
Your humble servant,
Patrick M. Byrne, CEO
“Scourge of Wall Street”
As you can see it links to a Wired article and what caught my eye was the very first line fromCade Metz.
Patrick Byrne says the zombie apocalypse is coming, and there’s one thing that can save us: bitcoin.
With Overstock recently reporting Bitcoin sales in excess of 1 million dollars in such a short time, and the average Bitcoin purchase being higher than the average standard currency purchase not only is that sentence telling, but it is also proving out to be on the way to being correct, as well.
With Patrick Byrne’s contentious history with Wall Street, he has made a lot of detractors but also a lot of supporters and with his latest venture into Bitcoin he is proving once again to be a savvy businessman who is also plugged in to what is going on in the tech world.
I think not only do his words and actions send a clear message to Wall Street that Bitcoin is here to stay and is viable he is proving it as well with hard numbers and record sales.
His calling out of Wall Street that he was so vilified for turned out to be prophetic with the 2008 market fall and the subsequent details of many of the behind the scenes goings on of the big banks and Wall Street traders came to light.
His loud claims of naked trading were met with derision, years later after the fall of so many banks the SEC made rules to stop this in it’s tracks.
His championing of Bitcoin and thinking beyond to using the Bitcoin framework for transferring securities as well shows forward and innovative thinking.
This all bodes well for Bitcoin and crypto currencies as large players in the game are going to follow his lead into it. Some may go kicking and screaming such as Wall Street. Wall Street dislikes it for being unable to control it and does not understand it. Others like OverstockTiger DirectVirgin Galactic and so many others are embracing it with open arms.
Patrick M. Byrne, CEO
Patrick M. Byrne, CEO “Scourge of Wall Street”
All the places that accept Bitcoin are the one’s I look to first when I am going to buy something. I am glad to see it grow and have such a vociferous champion as Patrick Byrne his faults, and all as he is no Mark Karpeles. Patrick fights for his customers he does not steal from them like Karpeles does.
It is an exciting time to be involved in Bitcoin and crypto currencies.