Boring Bitcoin Report

The US Marshals Service is auctioning off $2million worth of bitcoin and the registration is currently open for interested bidders. The Chamber of Digital Commerce announced that Matthew Mellon of MellonDrexel will serve as the Executive Committee Chairman of the Chamber. And the Bitcoin Foundation is pulling completely out of policy to focus on core development.

Click on the headlines for links to the full stories.

 Summary of Government Related Initiatives

US Marshals Service To Auction 50,000BTCs

The US Marshal Service is auctioning off 50,000 bitcoins (approx. $20mil worth) seized from Ross Ulbricht’s personal hardware. This is the second bitcoin auction resulting from the Silk Road case. The sale of Ulbricht’s bitcoins was agreed to in a court order signed by Ulbricht’s lawyers. Bidder registration opened on Nov. 17 and closes on Dec. 1.

CFTC Commissioner Wetjen Claims Jurisdiction over Bitcoin Market Manipulation

Last week at Bloomberg the Commodity Futures Trading Commission (CFTC) Commissioner Mark Wetjen stated the CFTC does have jurisdiction over any type of manipulative market behavior, not just those in strictly defined commodities. It is his interpretation of the state statute that bitcoin classifies as a commodity. The CFTC has already held one public briefing on bitcoin and multiple companies are seeking approval to offer hedging products.

Summary of Industry Initiatives

 Bitcoin Foundation Leaves Policy To Focus On Core Development

This past week, the Bitcoin Foundation announced they have found their true – and original – calling: Bitcoin core development. Under the leadership of their new Executive Director, Patrick Murck, plans are underway to focus on strengthening the core development and turn over the bulk of outreach, education and public policy to other organizations.

Matthew Mellon to Serve as Chamber’s Executive Committee Chairman

The Chamber of Digital Commerce announced Friday that Matthew Taylor Mellon II will serve as the Executive Committee Chairman. Mr. Mellon comes from a family whose knowledge in the banking industry dates back over 175 years. He is a prominent Bitcoin investor and entrepreneur, and is working to bring blockchain technology to billions of people around the world. “With the team Perianne Boring is assembling in Washington, the chamber is going to be the leading voice in advocating for digital commerce,” said Mellon.

Blockstream Raises $21Mil With Rockstar Team and Investors

Blockstream, the Bitcoin 2.0 company that introduced Sidechains, raised $21 million from a range of notable investors, including Reid Hoffman, LinkedIn co-founder. The implementation of Sidechains would allow developers to test out alternative uses of the blockchain (Bitcoin’s public ledger), like smart contracts, on parallel blockchains, decreasing risk to the core blockchain. Blockstream’s team includes bitcoin core developers and expert cryptographers, “Austin Hill and Adam Back have assembled a powerhouse team, with a big and thoughtful strategy on how to help scale the blockchain ― I bet Satoshi is smiling right now,” said Matthew Roszak, Founder of Tally Capital and Blockstream co-investor.

Bitcoin Thought Leader Wins World Technology Award

Vitalik Buterin, the famed developer of the 2.0 platform Etherum, and Bitcoin magazine co-founder, beat out Facebook founder Mark Zuckerberg to win the World Technology Network award for IT software. Back in June of this year, Buterin won the Thiel Fellowship award for $100,000 from Paypal co-founder and venture capitalist Peter Thiel.

CryptoLabs Makes Dedicated Bitcoin Wallet

CryptoLabs announced their first product, Case, a dedicated hardware, multi-sig, biometric enabled bitcoin wallet. Case aims to be the “most secure option” for storing coin and the first “Bitcoin wallet to replace your actual wallet.” Case has a fingerprint reader, QR scanner and is GSM-enabled. “We think there’s room for a superior hardware device to fight the security issues that Bitcoin faces. At the end of the day, multi-signature wallets on dedicated hardware offer the ultimate security,” said Melanie Shapiro, CEO of CryptoLabs. Case will be available for pre-sale in December.

Tether Announces Private Beta With BitFinex

Tether, formerly branded as Realcoin, which has a 1-to-1-conversion rate with the dollar, has announced it will be opening its private beta. Tether operates on the Mastercoin protocol that is an exchange layer on top of Bitcoin’s protocol that allows asset exchange. Tether is partnering with Bitfinex, Expresscoin, GoCoin and ZenBox. “Our speciality at Tether is currencies on the blockchain, so Tether means a digital tie to a real-world asset and the digital assets that we’re focused on are currencies,” said Tether CEO Reeve Collins.

Wedbush Makes 1st Investment In Bitcoin Industry

The investment research firm, Wedbush Securities, announced its first investment in the digital asset industry with Buttercoin. Sheri Kaiserman of Wedbush says Buttercoin’s US banking partnership has allowed for seamless and reliable trades. Notable investors in Buttercoin also include Google Ventures, Y Combinator, and Alexis Ohanian the founder of Reddit. Cedric Dahl, Buttercoin CEO, contends that in the near future we could see Bitcoin in portfolios ranging from pension funds to university endowments, depending on future regulatory framework.

Bitcoin Mining Companies Form Group For Greater Transparency

A group of leading Chinese Bitcoin mining companies including ZeusMiner, Gridseed, and Rockminer have banned together to bring about better transparency, particularly in the world of cloud mining. The announcement made by Chinese mining companies states they will provide proof of the actual mining operations including the source of emerging coins and how the coins are paid out to customers who pay for cloud mining contracts. Prominent Bitcoin developer Gavin Andresen argued recently that cloud mining contracts make no sense. He suspects many of them will turn out to be Ponzi schemes. There has been a broad shift from home-based mining to hosted cloud mining systems. Alex Lam of Rockminer, hopes greater transparency will encourage more people to support digital currencies.

Quote of the Week

“It has not been tested, but I do believe we have the authority because if you think of any reasonable reading of our statute, bitcoin classifies as a commodity.” CFTC Commissioner Mark Wetjen

Picture of the Week

Tweet of the Week

Pay attention to bitcoin. It’s not a fad. It’s growing, gaining transparency and understands the imperatives of investor protection

— Arthur Levitt (@ArthurLevitt) November 23, 2014

 

Australia hosted the Group of Twenty’s (G20) annual summit last week in Brisbane to discuss the most important economic issues among world leaders. The Australian Digital Currency Commerce Association hosted a digital currency forum at its conclusion, gaining international attention which even Richard Branson weighed in on. Bitcoin received a tax exemption in Finland. Back in the US, the Consumer Financial Protection Bureau proposed nearly 900 pages of pre-paid card regulations that could create complications for Bitcoin.

Click on the headlines for links to the full stories.

Summary of Government Related Initiatives

CFPB Prepaid Card Regulations May Affect Bitcoin

The Consumer Financial Protection Bureau (CFPB) published an 870 page-long proposed regulation for prepaid cards last week, which could have implications for Bitcoin and digital currency wallets. “What it potentially means is that companies that are bitcoin wallet providers may end up having to treat the accounts that they manage on behalf of bitcoin holders as prepaid accounts”, according to Mercedes Tunstall of Pillsbury Winthrop Shaw Pittman LLP. The Government Accountability Office tasked the CFBP with imposing consumer protections on the digital currency industry earlier this year, and this is likely to be the first of many actions from the CFPB on this issue.

Finland Declares Bitcoin VAT Tax Exempt

The Finnish Central Board on Taxes has declared that digital currency exchanges are exempt from Value Added Tax (VAT). The services are viewed as banking, thus avoiding the tax. The EU VAT Directive has tried to synchronize the various VAT laws across the European Union, despite member states widely varying interpretations of the regulations. Poland has a 23% tax on all Bitcoin trades, while Finland, Britain and Belgium do not charge VAT on Bitcoin. The European Court of Justice is being asked for a preliminary ruling on whether digital currencies constitute a banking service or the “provision of a good or service,” which would make Bitcoin subject to VAT taxes across the European Union.

New Zealand Reserve Bank Official Foresees Bitcoin As A Realistic Substitute For Cash

New Zealand Reserve Bank Deputy Governor Grant Spencer recently commented on Bitcoin at a payments conference in Auckland. Like the Bank of Canada, he specified that the Reserve Bank does not feel threatened by Bitcoin, because it is more like a commodity than a currency. While emphasizing New Zealand’s stance on economic freedom, Spencer predicts future digital currencies will likely become substitutes for cash.

Summary of Industry Initiatives

Coinbase Is Raising Additional 40-60 Million In Venture Capital

According to Re/code, Coinbase is expected to raise an additional $40 to 60 million in venture capital. Coinbase has already raised $30 million to date and Andresseen Horowitz led their Series B round last December. This next round is rumored to bring in a new investor, DFJ Ventures. Coinbase currently hosts over two million e-wallets and supports more than 37,000 merchants including Dell, Dish Network and Overstock.com. Earlier accounts had predicted Coinbase to raise as much as 100 million, however slower adoption, regulatory uncertainty, and a slumping bitcoin price have hindered the company’s growth rate.

Digital Currency Group Hosts Australian Forum To Coincide With G20 Summit

The Australian Digital Currency Commerce Association hosted a digital currency forum on Sunday and Monday of this week to coincide with the closing of the G20 summit in Brisbane, Australia. Ron Tucker, ADCCA’s Chairman is looking to bridge the digital currency industry with public policymakers to discuss building a pro-growth regulatory framework in Australia. Speakers included members of the Australian Senate, industry experts, including Chamber of Digital Commerce’s Perianne Boring, and former Central Bank of Ireland director Peter Oakes.

OneName Closes Seed Round To Decentralize Identity Protocol

OneName, the self proclaimed “Digital Passport” provider, which allows users to create a web identity for sending bitcoin, has closed their seed funding round. OneName’s investors include Union Square Ventures, Barry Silbert, and AngelList CEO Naval Ravikant. The company plans to use the funding to make improvements to the online authentication process and login systems, and believes it can build the foundation for solving Know-Your-Customer identity challenges. OneName core developer Muneeb Ali states their investors are committed to creating open-source communities.

HP Study Shows Promising Future For Bitcoin

Hewlett-Packard announced the results of a study on the IT community’s use of digital currencies. 79 percent of IT professionals surveyed said they plan on using electronic payments, such as Bitcoin. Forty-six percent of respondents believe that digital currencies will take over paper currencies within the next five years. Consumer opinion stated that the biggest hindrance to digital currency adoption was security.

Photo of the Week

 Quote of the Week

“Trust and integrity is really essential in the Bitcoin community.” –Tessa Hoser at the GDCC forum in Brisbane

Tweet of the Week

World’s first #Bitcoin forum is set to take place in Brisbane, coinciding with G20: http://t.co/qeCEN04xEg pic.twitter.com/qPR0utzlws

— Richard Branson (@richardbranson) November 13, 2014

Last week marked a series of crack downs and arrests on illegitimate Bitcoin-related companies. The message the government is sending is clear: the laws apply to Bitcoin too. Some Bitcoin companies, such as Robocoin, are even ramping up compliance efforts to mitigate prosecutorial risk. The Chamber of Digital Commerce is hosting a complimentary webinar this Wednesday to help Bitcoin companies navigate the regulatory landscape.

Click on the headlines for links to the full stories.

Summary of Government Related Initiatives

Multi Gov Cooperation Seizes Dozens Of Online Drug Sites And Arrest Defcon

In a world-wide sting operation the FBI, US Homeland Security Department, US Department of Justice, US Immigration and Customs Enforcement, Europol, and Eurojust brought down dozens of dark net websites last week and arrested Blake Benthall alleged operator of Silk Road 2.0. Manhattan US Attorney Preet Bharara said, “Let’s be clear – this Silk Road, in whatever form, is the road to prison.”

First Bitcoin-Related Federal Criminal Securities Fraud Charges Filed

Manhattan US Attorney and the FBI brought a second case against Trendon Shavers of Texas. He was arrested last week and charged with wire and securities fraud for his part in Bitcoin Savings and Trust. The Securities and Exchange Commission brought civil action against Shavers earlier this year in a separate suit, where he was ordered to pay $40 million in disgorgement and prejudgment interest. The new filings mark the first time federal criminal charges have been brought against a Bitcoin-related securities fraud case.

SEC Investigating Bitcoin Stock Offerings

Wired Magazine interviewed Garret Keirns, recipient of an SEC action letter, who started the Bitcoin Emerging Markets Fund and sold 150,000 shares via the Global Bitcoin Stock Exchange in 2012. Keirns told Wired that the Security and Exchange Commission is currently investigating him for “violations of the federal securities laws.” Keirns says he made less than five figures USD on the Bitcoin fund.

Summary of Industry Initiatives

Robocoin Ramps Up Compliance In Light Of Increased Government Scrutiny

In response to government’s aggressive moves towards enforcement, Robocoin is now requiring all of its ATM/Kiosk operators to collect Know-Your-Customer (KYC) information, regardless of their local laws. Robocoin CEO Jordan Kelley told CoinDesk that the move was made to stay on the right side of recently clarified regulations. He also asserted that the extra compliance will aid Robocoin in gaining more legitimacy and wider business partners.

BitPay Releases Bitcoin Checkout App

BitPay released a new point-of sale app aimed at making it easier for mobile devices to accept bitcoin payments. BitPay demoed the app at Money 20/20 in Las Vegas last week and announced that Bitcoin Checkout app will be available in 40 languages and orders can be priced in over 150 currencies. The app is available for iOS and Android. Bitcoin Checkout supports NFC technology allowing payments to be completed and instantly verified with a simple tap.

Devastating Fire At Bitcoin Mining Plant Causes Drop In Entire Network’s Hashrate

A Thailand Bitcoin mining facility that operated over 2,000 miners burned down in a fire on November 10 causing a drop in the Bitcoin network’s hashrate. The cause of the fire is still unknown and facility operators have not ruled out foul play. The owners of the farm are a group of European expatriates who live in Thailand and call themselves the Cowboyminers. The company did not have any insurance, but Spondoolies-Tech is helping the mine recover by salvaging some of the miners.

Dominic Frisby Says Bitcoin Is As Revolutionary As Cellphones

Dominic Frisby, the author of Bitcoin: The Future of Money, draws upon the comparison of cellphones and Bitcoin in a recent post on Virgin Entrepreneur. Cellphones reduced barriers to entry in the communications industry by scaling back the size and scope of physical infrastructure. This gave billions access to communications technology, similar to how Bitcoin could potentially give billions access to financial services. In Kenya, digital currency already accounts for 80 percent of the population’s access to financial services through M-PESA.

Boost VCs Gives Startup Accelerator $6.6 Million in Funding

This week the startup accelerator announced that it has received $6.6 million in funding from Boost Venture Capitalists. Boost enables startups to get advice from entrepreneurs in their field, investment for expansion, and even provides housing and office space in Silicon Valley. Adam Draper, the founder of Boost, is interested in companies innovating with blockchain technology and believes there are many opportunities to improve Bitcoin in the areas of scale, usability, and security. In Boost’s fourth session for startups he showed off companies such as Hedgy, Pylon, and Blockscore that exemplify innovative solutions to concerns in the Bitcoin ecosystem. Boost VC started in 2011, and has worked with 69 startups, most of which are still in operation today. Draper hopes to work with 250 companies by 2017.

Dogetipbot Receives $445,000 in Investments

Dogetipbot, a tipping program for the digital currency dogecoin has received nearly $500,000 in a funding round led by Blackbird Ventures. The tipping service allows for internet users to tip other users on social networks such as Reddit, Twitter and video game streaming service Twitch. As of this week, Dogetipbot has processed over 650,000 microtransactions. Credit card fees do not make this type of micropayment feasible. Now users can reward content producers using small payments. Dogetipbot creator Mohland plans on using the investment for continued improvement of user experience on rising markets such as Twitter.

MIT Bitcoin Study Launches

The MIT Bitcoin Project has begun! Participating students were given $100 in Bitcoin with free reign to spend it as they wish. The research team plans on using the Blockchain, Circle and Coinbase digital wallets to track spending across the university and beyond. The number of students in the study has not been disclosed, but it has been reported to be a sizeable number ranging from enthusiasts, to first-time users. The project goals include research, creation of a Bitcoin ecosystem at MIT and hopefully the creation of new applications.

Inside Bitcoins Paris

November 20-21, 2014, Paris, France

Inside Bitcoins Conference and Expo will be launching in Paris next week! Thought leaders and Bitcoin experts will converge at Espaces Cap 15 to discuss topics ranging from Crypto-Law and Regulatory Compliance to e-Commerce challenges and The Developing World. Sessions will be held in both French and English. Interested in attending? Get 10% OFF 2-Day Passes when you register using the discount code CHAMBER! Register now!

Picture of the Week

Cowboyminers fire damage to bitcoin mining equipment. Photo credit @Gizmodo

Quote of the Week

“Those looking to follow in the footsteps of alleged cybercriminals should understand that we will return as many times as necessary to shut down noxious online criminal bazaars. We don’t get tired.” Manhattan U.S. Attorney Preet Bharara

Don’t forget to sign up for the Chamber of Digital Commerce’s free “Risky Business” Webinar.

Wednesday, November 12, 1:00 pm PST

For companies operating in the digital currency industry, this vital briefing will address current legal and regulatory risks to help you better understand how to minimize your exposure and protect your business. Click here to register.

Last week multiple federal agencies moved towards aggressive enforcement on digital currency companies. In response, the Chamber of Digital Commerce launched an initiative to educate and organize the industry. Former SEC Chairman Arthur Levitt joined the advisory board of two Bitcoin companies. And the Executive Director of the Bitcoin Foundation abruptly stepped down from his role.

Click on the headlines for links to the full stories.

Summary of Government Related Initiatives

FinCEN Moves Toward Aggressive Enforcement

In an assertive push towards enforcement, the Financial Crimes Enforcement Network (FinCEN) issued two rulings providing clarification on certain digital currency business models which are now required to register with FinCEN as money service businesses. Some Bitcoin businesses, including payment processors and exchanges that originally thought they would be exempt are now subject to FinCEN’s strict compliance obligations.

SEC Allegedly Sends Action Letters To 2.0 Companies

Last week it was widely reported that the Securities and Exchange Commission (SEC) issued a significant number of action letters to companies in the digital currency ecosystem who may have broken securities law by offering “crowdsales.” These digital crowdsales allow companies to raise funds through creating digital currency platforms. Mastercoin and the Ethereum project contend that these are digital tokens, software with no contractual rights — not securities, thus should not be subject to SEC regulations.

Summary of Industry Initiatives

Chamber of Digital Commerce Launched Initiative To Educate and Organize Industry

To help educate and protect the interests of the digital currency industry, the Chamber launched an initiative to help the industry prepare for heightened government oversight and potential enforcement actions. The Chamber is holding a free webinar on November 12, and a series of compliance boot-camps in San Francisco and New York. For more information click here.

Ex SEC Chairman Arthur Levitt Advises Bitpay and Vaurum

Arthur Levitt, the longest serving Chairman of the Securities and Exchange Commission joined the advisory board of Bitcoin payment processor BitPay, and Bitcoin exchange Vaurum. In an interview with Bloomberg Levitt stated “the more I learned about [Bitcoin] the more fascinated I was with the concept and the entrepreneurs that stand behind them.” Levitt believes regulations will add legitimacy to the industry.

LedgerX Aims To Become The ‘Real’ Bitcoin Exchange

A New York bitcoin exchange, LedgerX aims to be the first Bitcoin options exchange, with fundraising provided by Lightspeed Venture Partners and Google Ventures. The founders believe Bitcoin price volatility could be reduced with a US based bitcoin options exchange, allowing customers to hedge their bets on Bitcoin and more financial institutions to engage in Bitcoin trading. Former CFTC Chairman Jim Newsome, is serving as chairman of LedgerX.

Coinbase Releases Multi-signature Wallet

Coinbase announced this week that they have added multi-signature technology to its Vault wallet. Vault differs from its regular wallet by creating features intended for larger storage of bitcoins, such as delayed withdrawals, multiple approvals, and disabling subscription payments. Coinbase’s multi-sig features add a heightened layer of security to compete with established multi-sig giants.

Kraken Launches Japanese Exchange

Bitcoin exchange Kraken launched in Japan last week. Hummingbird Ventures has invested $5 million in the company and has released a proof of audit system showing they hold 100% of the bitcoins on their platforms for customer balances. “We look forward to bringing our expertise and service to Japan, where we will fulfill the overdue need for an exchange that puts its clients’ interests first and is dedicated to building relationships based on trust,” said Jesse Powell, Kraken CEO.

Changing Of The Guard At The Bitcoin Foundation

This past Thursday Jon Matonis, Executive Director of the Bitcoin Foundation announced he has stepped down from his role. Patrick Murck, the organization’s general counsel, will succeed Matonis. The Bitcoin Foundation suffered setbacks when multiple members of their board had to step down due to legal scandals that significantly hurt the entire industry’s reputation. Moving forward, Patrick Murck seeks to repair the organization’s relationship with the Bitcoin community by providing more communication and transparency, and operating the Foundation like a business.

Norwegian Banks Shut Out Bitcoin Businesses

Justcoin, a Norwegian Bitcoin exchange, recently announced their closure due to changing bank policies. Norwegian banks seem to be working together to freeze out Bitcoin users. Since their announcement, Justcoin has refunded the vast majority of its funds to its users.

Bitcoin Mining Pool BTC Guild To Be Sold

BTC Guild, a popular bitcoin mining pool used since 2011, may be sold and moved out of the United States. The pool’s operator blamed confusing regulations and increased risks of hacks for the move. Pool centralization is a growing concern in the Bitcoin community and the proposed solutions are few and far between. 

Mintpal Sues Moolah And Says 4,000BTC Were Stolen

Alex Green, the CEO of the now bankrupt exchange Moolah, faces a lawsuit from Mintpal contending that he stole roughly 4,000 BTC, approximately $1.3 million. Issues arose when Green’s Moolah exchange took control of Mintpal, which eventually led to a failed re-launch. The bitcoin from Mintpal’s wallet remains in the possession of Green, Syscoin and Moolah. The creditor has filed an injunction against Green, preventing him from selling any bitcoins, even those he legally owns. Despite all of this, Green says he has refunded over $900,000 to customers and most customers have been able to withdraw their money from the exchange.

Surgery Center of Oklahoma Now Accepting Bitcoin Payment

Surgery Center of Oklahoma is semi-famous in the healthcare industry for breaking the mold by posting prices to their services on their website and accepting direct payments from patients who may not have a health insurance provider. Last week the Surgery Center took another step in non-traditional healthcare practices by performing their first surgery for bitcoin payment.

Tweet of the Week

Just accepted our first bitcoin payment! Very easy using Coinbase. More on this to follow. GKS

— Surgery Center of OK (@SurgeryCenterOK) October 28, 2014

Picture of the Week

Photo credit: Nic Cary, Blockchain CEO

Quote of the week

“A company that has transparency and passes regulatory scrutiny is going to do much better than a company which is fighting regulators. ” -Former SEC Chair Arthur Levitt talking about bitcoin on BloombergTV

Don’t forget to sign up for the Chamber of Digital Commerce’s free “Risky Business” Webinar.

Wednesday, November 12, 1:00 pm PST

For companies operating in the digital currency industry, this vital briefing will address current legal and regulatory risks to help you better understand how to minimize your exposure and protect your business. Click here to register.