MONEY alternative assets

New York Proposes Bitcoin Regulations

Bitcoin (virtual currency) coins
Benoit Tessier—Reuters

New regulations may make Bitcoin safer. But some people think they will also ruin what made virtual currencies attractive.

Bitcoin may have just taken a huge step toward entering the financial mainstream.

On Thursday, Benjamin Lawsky, superintendent for New York’s Department of Financial Services, proposed new rules for virtual currency businesses. The “BitLicense” plan, which if approved would apply to all companies that store, control, buy, sell, transfer, or exchange Bitcoins (or other cryptocurrency), makes New York the first state to attempt virtual currency regulation.

“In developing this regulatory framework, we have sought to strike an appropriate balance that helps protect consumers and root out illegal activity—without stifling beneficial innovation,” wrote Lawsky in a post on Reddit.com’s Bitcoin discussion board, a popular gathering places for the currency’s advocates.

“These regulations include provisions to help safeguard customer assets, protect against cyber hacking, and prevent the abuse of virtual currencies for illegal activity, such as money laundering.”

The proposed rules won’t take effect yet. First is a public comment period of 45 days, starting on July 23rd. After that, the department will revise the proposal and release it for another round of review.

Regulation represents a turning point in Bitcoin’s history. The currency is perhaps best known for not being subject to government oversight and has been championed (and vilified) for its freedom from official scrutiny. Bitcoin transactions are anonymous, providing a new level of privacy to online commerce. Unfortunately, this feature has also proven attractive to criminals. Detractors frequently cite the currency’s widely publicized use as a means to sell drugs, launder money, and allegedly fund murder-for-hire.

The failure of Mt. Gox, one of Bitcoin’s largest exchanges, following the theft of more than $450 million in virtual currency, also drew attention to Bitcoin’s lack of consumer protections. In his Reddit post, Lawsky specifically referenced Mt. Gox as a reason why “setting up common sense rules of the road is vital to the long-term future of the virtual currency industry, as well as the safety and soundness of customer assets.”

New York’s proposed regulations require digital currency companies operating within the state to record the identity of their customers, including their name and physical address. All Bitcoin transactions must be recorded, and companies would be required to inform regulators if they observe any activity involving Bitcoins worth $10,000 or more.

The proposal also places a strong emphasis on protecting legitimate users of virtual currency. New York is seeking to require that Bitcoin businesses explain “all material risks” associated with Bitcoin use to their customers, as well as provide strong cybersecurity to shield their virtual vaults from hackers. In order to ensure companies remain solvent, Bitcoin licensees would have to hold as much Bitcoin as they owe in some combination of virtual currency and actual dollars.

Cameron and Tyler Winklevoss, two of Bitcoin’s largest investors, endorsed the new proposal. “We are pleased that Superintendent Lawsky and the Department of Financial Services have embraced bitcoin and digital assets and created a regulatory framework that protects consumers,” Cameron Winklevoss said in an email to the Wall Street Journal. “We look forward to New York State becoming the hub of this exciting new technology.”

Gil Luria, an analyst at Wedbush Securities, also saw the regulations as beneficial for companies built around virtual currency. “Bitcoin businesses in the U.S. have been looking forward to being regulated,” Luria told the New York Times. “This is a very big important first step, but it’s not the ultimate step.”

However, this excitement was not universally shared by the internet Bitcoin community. Soon after posting a statement on Reddit, Lawsky was inundated with comments calling his proposal everything from misguided to fascist. “These rules and regulations are so totalitarian it’s almost hilarious,” wrote one user. Others suggested New York’s proposal would increase the value of Bitcoins not tied to a known identity or push major Bitcoin operations outside the United States.

One particularly controversial aspect of the law appears to ban the creation of any new cryptocurrency by an unlicensed entity. This would not only put a stop to virtual currency innovation (other Bitcoin-like monies include Litecoin, Peercoin, and the mostly satirical Dogecoin) but could theoretically put Bitcoin’s anonymous creator, known by the name Satoshi Nakamoto, in danger of prosecution if he failed to apply for a BitLicense.

One major issue not yet settled is whether other states, or the federal government, will use this proposal as a model for their own regulations. Until some form of regulation is widely adopted, New York’s effort will have a limited effect on Bitcoin business. “I think ultimately, these rules are going to be good for the industry,” Lawsky told the Times. “The question is if this will spread further.”

TIME Money

How Much Is a Bitcoin Worth? Let Google Tell You

Google Search now includes Bitcoin in its currency calculator, lending a little more legitimacy to the cryptocurrency.

If you need to know the current value of a Bitcoin, it’s now faster than ever to figure out through Google.

The search engine’s currency calculator now supports Bitcoin, so you can type “1 Bitcoin to dollars,” “10000 yen to BTC” or “How much is 500 Bitcoin worth?”

As Coindesk points out, Google added a Bitcoin currency tracker to its finance searches last month. Currency conversion is the next logical step, given that Microsoft’s Bing started calculating Bitcoin values in February. Though Bitcoin has struggled to gain recognition from some governments, support from the major search engines may help lend some legitimacy to the cryptocurrency.

Google does caution that conversion rates may not be accurate down to the minute, but you can always consult other sources like Coindesk if you need more detailed data.

TIME Bitcoin

Venture Capitalist Who Wants to Split California Into 6 States Just Bought $19 Million Worth of Bitcoin

Bitcoin
This picture taken on June 20, 2014, shows an entrance of La Maison du Bitcoin in Paris. Stephane De Sakutin—AFP/Getty Images

The massive pool of crypto-currency could help establish bitcoin trading platforms in emerging markets.

Tim Draper, a venture capitalist best known for his proposal to split California into six states, just bought millions of dollars worth of bitcoin that in a former life might have been used as drug money.

As Re/code reports, the U.S. Marshals Service was auctioning roughly 30,000 bitcoin that it had seized from the online drug marketplace Silk Road. Draper won the auction for the entire bitcoin pool, which is worth about $19 million now.

But he’s not using his newfound cryptocurrency purely for personal enrichment. Instead, he’s partnering with Vaurum, a firm that wants to create a bitcoin exchange for financial institutions. The goal with this new bitcoin pool, according to Vaurum CEO Avish Bhama, is to create some liquidity in emerging markets, which otherwise might struggle with their own weakening currencies.

“Of course, no one is totally secure in holding their own country’s currency,” Draper said in a statement on Bhama’s blog. “We want to enable people to hold and trade bitcoin to secure themselves against weakening currencies.”

Between that and the plan to split up California, give Draper some credit for trying shake things up, at least.

[re/code]

TIME technology

California Lifts Ban on Bitcoin

California Legalizes Bitcoin
California Gov. Jerry Brown looks on during a news conference at Google headquarters on September 25, 2012. Justin Sullivan—Getty Images

Technically, all transactions using digital or alternative currencies had been illegal in California until Monday

California lawmakers approved a bill Monday that lifted an outdated ban on the use of bitcoin and other alternative currencies, as more states seek to clarify and revise virtual currency laws.

AB 129, which Governor Jerry Brown had signed on Saturday, will ensure that “various forms of alternative currency such as digital currency” will be legal in purchasing goods and transmitting payments, according to the bill’s text. The bill reflects the growing use of digital currencies, revising Section 107 of California’s Corporations Code that prohibits use of “anything but the lawful money of the United States.”

“In an era of evolving payment methods, from Amazon Coins to Starbucks Stars, it is impractical to ignore the growing use of cash alternatives,” Democratic Assemblyman and the bill’s author Roger Dickinson said in a recent statement.

Dickinson noted that points and rewards programs function as digital currencies, and thus would not have been legal without the passage of AB 129, which legalizes these “community currencies,” that is, alternative payment systems between businesses and customers.

Other states have similarly sought to clarify their bitcoin laws. In March, the Texas Department of Banking stated that bitcoin transmissions, while permitted, are not technically “currency” transmissions. That month, the New York State Department of Financial Services announced the state will accept proposals for a virtual currency regulation system.

While bitcoin use is now legal in California, it is not technically legal tender, a status reserved for and defined federally as “United States coins and currency” under the Coinage Act of 1965. The IRS clarified in March that bitcoin functions more like property than currency, which means that taxes applying to property transactions also apply to bitcoin transactions.

Elsewhere in the world, only very few countries, notably Brazil and China, have specific regulations of bitcoin use.

TIME Bitcoin

King’s College Becomes First U.S. School to Accept Bitcoin

King's College Will Accept Bitcoin Payments
A Bitcoin medal. Karen Bleier—AFP/Getty Images

First accredited U.S. college to accept the digital currency

At King’s College, bitcoins—used to purchase items from satellite TV to illegal drugs—can now be used to pay tuition.

The New York City school announced Friday that it will accept bitcoin payments, the first accredited U.S. college to do so, according to a press release. Through a partnership with Coin.co, a company that facilitates bitcoin transactions, King’s College will allow use of the digital currency to pay tuition, submit donations and deal with other expenses.

The school hopes this move will immerse students in new technology, as bitcoin has become increasingly popular over the past year. It will also eliminate the 2-3% transaction fees charged to the college when students pay tuition via credit card, as Coin.co does not have transaction fees.

“Allowing bitcoin to be used to pay for a King’s education decreases our costs while simultaneously allowing our students to be a part of this exciting new technology,” King’s College President Dr. Gregory Alan Thornbury said in the statement.

The school follows the trend of two other higher education institutions that accept bitcoin: Cyprus’ University of Nicosia in November, and the UK’s University of Cumbria in January. The University of Puget Sound accepted an alumnus’ $10,0oo donation via bitcoin in February, though the Tacoma school does not have an official bitcoin payment policy.

Currently, a semester’s tuition at King’s College costs about 28 bitcoin.

TIME apps

Apple Takes a Cautious Step Towards Bitcoin

As part of its ongoing developer conference this week, Apple has added a section to its developer guidelines regarding apps for virtual currencies, including, possibly, Bitcoin.

If you look for Bitcoin apps in the App Store right now, you’ll notice most of them are tickers that monitor Bitcoin’s exchange rate. But if you use Bitcoin yourself and want to move some of that money around, there aren’t any apps that’ll let you do that just yet.

That may all change soon, provided that transmitting virtual currencies is allowed in your neck of the woods.

Apple’s new guideline reads as follows:

Apps may facilitate transmission of approved virtual currencies provided that they do so in compliance with all state and federal laws for the territories in which the app functions.

TechCrunch co-editor Matthew Panzarino posits that Apple will probably take a cautious approach with such apps:

Does this mean Apple will start accepting bitcoin apps that transmit currency in the App Store immediately? Probably not, unless there have been rulings declaring the currency “legal” in a given region. If there is no ruling, I wouldn’t count on it.

And note that Apple doesn’t explicitly mention Bitcoin by name — just “virtual currencies,” though Bitcoin is currently the highest-profile of the virtual currencies out there.

TIME Money

DISH Network Says It Will Accept Bitcoin

The company says it's the largest to date to accept the online currency.

Satellite television operator Dish Network said Thursday it will accept bitcoin as a form of payment beginning later this year, making it the largest company yet to accept the digital currency.

DISH, which provides pay-TV to about 14 million subscribers, said it will add the payment method as a convenience to customers.

“Bitcoin is becoming a preferred way for some people to transact and we want to accommodate those individuals,” executive vice president Bernie Han said in a statement.

The company said it will use the bitcoin platform Coinbase to process transactions.

Bitcoin, a digital currency once used only by a small group of supporters, has become increasingly mainstream over the past year or so. Bitcoin ATMs have been popping up across the U.S. and elsewhere, and the Federal Elections Commission recently ruled that political campaigns can accept small donations of bitcoin.

TIME Campaign Finance

PACs Can Take Bitcoin, Regulator Says

Regulators said political action committees can accept small amounts of donations in bitcoin, a digital currency that's increasingly popular despite turbulent valuation fluctuations. PACs will have to convert bitcoin into cash before spending it, though

Political candidates and committees can accept contributions in the form of bitcoin, a regulator said Thursday, the first time the digital currency has been formally blessed for political spending.

The Federal Election Commission unanimously agreed that political committees can legally accept bitcoin donations under $100, acknowledging that the digital currency counted as a broadly defined “contribution.” Responding to an inquiry from the Make Your Laws PAC, the commission said political committees could accept a limited bitcoin donation as long as it could identify the donor. In the opinion, which amounts to a guideline but not a law, the FEC also said political action committees could invest in bitcoin as they might stocks.

But the FEC stopped short of allowing PACs to spend bitcoin, requiring instead that PACs convert them into dollars first first. The FEC is notorious for its gridlock and lax enforcement of existing campaign finance regulations, and its decision doesn’t necessarily mean political committees won’t test and stretch the limits by using bitcoin for more political spending.

Commissioner Ellen Weintraub, a Democratic appointee, told the Washington Post that the $100 limit—a figured proposed in the Make Your Laws inquiry—facilitated the decision.

“The $100 limit was really important to us,” said said. “We have to balance a desire to accommodate innovation, which is a good thing, with a concern that we continue to protect transparency in the system and ensure that foreign money doesn’t seep in.”

TIME Money

SEC Warns Investors on Bitcoin

US-IT-FINANCE-BITCOIN
This May 1, 2014 photo taken in Washington, DC shows bitcoin medals. Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. AFP PHOTO / Karen BLEIER (Photo credit should read KAREN BLEIER/AFP/Getty Images) KAREN BLEIER—AFP/Getty Images

The warning reflects regulatory agencies' growing concern about the dangers of the new and virtually unregulated market

The U.S. Securities and Exchange Commission (SEC) issued an alert to investors Wednesday warning about the risks of trading Bitcoins and other virtual currencies.

The SEC said that investors might be lured by the potential investments in something “novel, new and cutting-edge” but that Bitcoin represents a significant risk. “A new product, technology, or innovation – such as Bitcoin – has the potential to give rise both to frauds and high-risk investment opportunities,” the SEC said. New technologies make Bitcoin ripe for fraudulent schemes, and the victims of theft may have limited options for recovering lost currency. In addition, Bitcoins are not insured and transfers of the currency are difficult to trace.

“Scam artists take advantage of Bitcoin users’ vested interest in the success of Bitcoin to lure these users into Bitcoin-related investment schemes,” the notice warns.

TIME

MIT Students To Get Free Bitcoins This Fall

It's not quite free money, but it's close

+ READ ARTICLE

Next year, MIT undergrads will pay $43,498 in tuition year, but hey, at least they’re getting 1oo free Bitcoins.

MIT’s Bitcoin Club arranged the giveaway in hopes of turning the cryptocurrency into a viable payment model.

The Bitcoin Club raised $500,000, most of it coming from a wealthy MIT alumnus, to make the project a reality.

Few stores in the Cambridge area currently accept the currency, but with 4,528 undergrads having 100 Bitcoins burning a hole in their digital pocket, that could yet change.

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