Can an overseer overlook some basics? – The ECB on e-money and virtual currencies

ECB-smallIn October 2012 the European Central Bank published a remarkable study on “Virtual Currency Schemes”[1]. At that time, the Bitcoin exchange rate was still stable (about 12 USD per Bitcoin). But only a little later, in the beginning of 2013, the Bitcoin rally started reaching its peak rate of 237 USD in April. This rally led to an intensive worldwide discussion about the nature, challenges and threats of virtual currencies. The ECB report includes two case studies of the virtual currencies Bitcoin and Linden Dollar (of the Second Life virtual community). Based on its findings, it proceeds to discuss the relevance of such private unregulated (at least at the time being) currency schemes for central banks, published as an official view of the ECB.[2]

The ECB is not worried at the moment because the volume of virtual currencies is still low. Therefore it does not see them as a threat to financial stability. But the ECB notes that such virtual currencies could have a negative impact on the reputation of central banks.

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'Digital Asset' businesses embrace regulatory compliance with new industry group

dataAnnounced this week at the Inside Bitcoins conference  the new DATA industry group aims to represent businesses not just in the Bitcoin space but any digital asset including, “emerging payments, virtual currency, and other financial technology innovations”.

DATA, or the Digital Asset Transfer Authority’s founding members include the CEO’s of leading Bitcoin businesses such as BitInstant, BitPay, & BitStamp as well as the CEO’s of other digital currency businesses including Ripple’s OpenCoin and Ven.

However, the groups stated goals seem sure to heat up the regulation debate.

From DATA’s official announcement

To reach this potential, to inspire confidence in the services we offer, and to ensure fair and responsible treatment of consumers and merchants, we believe our industry must evolve in compliance with law and regulation. We must work proactively with regulators and policymakers to adapt their requirements to our technologies and business models. We must develop and implement common risk management and compliance standards that address the public policy concerns associated with our businesses. And our firms must build risk management and compliance programs that meet those standards.

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Bank of Thailand bans Bitcoin

BankofThailandOn Monday, Thailand based Bitcoin exchange Bitcoin Co. Ltd. ceased trading due to an advisement from the Bank of Thailand declaring Bitcoin transactions illegal.

Via the exchange’s site

At the conclusion of the meeting senior members of the Foreign Exchange Administration and Policy Department advised that due to lack of existing applicable laws, capital controls and the fact that Bitcoin straddles multiple financial facets the following Bitcoin activities are illegal in Thailand:

  • Buying Bitcoins
  • Selling Bitcoins
  • Buying any goods or services in exchange for Bitcoins
  • Selling any goods or services for Bitcoins
  • Sending Bitcoins to anyone located outside of Thailand
  • Receiving Bitcoins from anyone located outside of Thailand

The exchange had been operating on previous advice from the Bank of Thailand that Bitcoin was not a currency. However, the businesses had been in the process of registering with regulators in Thailand to ensure that they were operating lawfully.

This change in policy from the Bank of Thailand occurred after the exchange made a presentation to bank members in an attempt to explain the currency to them. The companies managing director gave a presentation on “the workings of Bitcoin, the benefits of Bitcoin, incite into the company’s operations and future implications of Bitcoin.” …I guess he got their attention!

Bitcoin, Regulators and Online Markets – a look at the World of Bitcoin Exchange

forexExchanges are the link between the old world of banking and the new world of crypto-currencies; they play a vital role in supporting the growing Bitcoin economy. If Bitcoin hopes to continue rapidly gaining new users it needs this bridge between the old and new systems to be up and functioning. While Bitcoin is in no way dependant on a link to the traditional banking system, its smooth transition into mainstream use certainly is.

Unfortunately these bridges which make up the exchange market are concentrated and often broken.  This leads to concerns over reliability and security, which can cause market panic and extreme volatility. As Bitcoin enters the mainstream a wave of new businesses, services and software developers have recently dedicated their efforts to solving this problem. Their task will not be easy, and the while the exchange rate has seen some recent stability, there is a long way to go before obtaining bitcoins can be called user friendly and reliable.

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The Real Asset Co: Backwardation, negative GOFO and the gold price

Continuing her look at the global gold market, the Real Asset Co.’s Jan Skoyles explains gold backwardation and how it could mean “a perfect storm for the gold price.”

The term ‘backwardation’ has suddenly popped up in the mainstream financial media and is being touted as the signal that the price of gold is on its way back up.

What does backwardation even mean?

 

Read The Real Asset Co’s “Backwardation, negative GOFO and the gold price

A possible Bitcoin fork? – Bitcoin 2: Freedom of Transaction

Those following the internal rift in the Bitcoin community over regulation have often discussed the possibility of a fork.  The Bitcoin world moves quickly.

Hitting the web only hours ago is a paper detailing the how and why of a proposed “Bitcoin 2”. The authors, and many in the Bitcoin community, are concerned that changes will be made to the Bitcoin protocol turning it into “a distributed PayPal instead of a censorship resistant currency”.  

The paper discusses inherent weaknesses and changes to the protocol currently being discussed which could see users lose the option of anonymity or see miners concentrate into larger centres of control. The proposed “Bitcoin 2” aims to increase Bitcoin’s resistance to centralization, censorship and political control and prevent it from being “absorbed by the established financial and regulatory environment.”

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Bitcoin Foundation Comments on Liberty Reserve Special Measures

After shutdown of Liberty Reserve in May this year FinCEN proposed an “Imposition of Special Measure Against Liberty Reserve S.A. as a Financial Institution of Primary Money Laundering Concern”. The primary purpose of the ‘Special Measure’ being to cut Liberty Reserve off from the banking system.

FinCEN noted Liberty Reserve’s irrevocable transactions and lack of ID verification as evidence that “Liberty Reserve’s system is structured so as to facilitate money laundering and other criminal activity,” these comments worried the digital currency community and was likely what scarred off many of their banking partners.

On the 19th, the Bitcoin Foundation responded to FinCEN’s proposed special measure urging them to clarify that not all virtual currency transactions are inherently suspect.

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SatoshiDice sells for $11mil

SatoshiDiceIn perhaps the first major acquisition of a Bitcoin company, the gambling site sold this week for 126,315BTC, or $11.47million.

The site was launched by Erik Voorhees in late April 2012 with shares being traded on MPEx, a Bitcoin securities exchange.

Voorhees announced the sale on Wednesday evening via Bitcointalk.

Dear Asset Holders,

I have some very important news to share with you. Some of you will be pleased, and some upset, but I believe this to be a solid, desirable, and fair outcome for those who have put their trust in S.DICE.

SatoshiDice is being sold, in full, to a new company that will take over all ownership, operations, and management.  The total sale price is 126,315 BTC, or 0.00126315 BTC per share.

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Inside the white hot Chinese gold market

Shanghai-Lead-Image-IIIJan Skoyles and the Real Asset Company are continuing their look at the global gold market, this time with review of the Shanghai Gold Exchange.

Released last week the review covers contracts, deliveries, Inventory, pricing and SEG members.

In the next part of our on-going look at the global gold market we now turn our attention to the Shanghai Gold Exchange. An exchange which has received more interest of late, than any other in the world of gold and silver.

Previously we have looked at the global gold market, COMEX, and more recently the London Gold Market. The next logical focus of our investigations is the Shanghai Gold Exchange. We also have a great infographic providing you with the top figures.

Given the significant rise of gold exports from Hong Kong to China, 68% yoy, this is a timely and informative research piece which shines a spotlight on the Eastern gold market in a time when many are declaring the end of the gold bull market. Given the huge demand for physical and reportedly high premiums on the gold price, we ask if this market may well be a better indicator of gold demand, and subsequently true gold prices, than either COMEX or London.

  Read the report here

Using M-Pesa to bring Bitcoin to Africa

The M-Pesa mobile payment system is huge in one of Africa’s biggest economies, Kenya. An estimated 31% of Kenya’s GDP travels through the person to person payment provider. The country has a large rural population making traditional branch banking an unattractive option. This is certainly one of the reasons that M-Pesa’s SMS based mobile payment system has caught on. But what is clear from the M-Pesa story is that the worlds ‘under-banked’ need better solutions.

Could Bitcoin be a solution for Africa’s under-banked? It’s certainly a possibility and why not start in Kenya with a population who both has a need for and a familiarity with digital money.

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