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Coinbase, Circle and Overstock Testify on Bitcoin in New York to Persuade Regulators

“In a rapidly evolving landscape, the goal of digital currency regulation is to make sure this technology, like the Internet in the 90s, is allowed to flourish and bring all of it’s great efficiencies to the world in a safe manner.” — Fred Ehrsam, co-founder of Coinbase

The New York State Department of Financial Services conducted two days of hearings (January 28th and 29th) on virtual currencies.

The first day featured investors in Bitcoin companies and the second day heard testimony from entrepreneurs and legal experts. Video of the testimony recorded is available online for free viewing.

In this article, we recap a panel on the second day called Virtual Currency Commerce and Consumer Protections, Bitcoin’s interests were represented by entrepreneurs and industry leaders:

  • Fred Ehrsam, co-founder of Coinbase, a bitcoin wallet and platform where merchants and consumers can transact with the new digital currency bitcoin;
  • Jeremy Allaire, Founder, Chairman & CEO of Circle, a financial services company developing products that make it easy for consumers and businesses to exchange, store, send and receive digital currencies; and
  • John Johnson of Overstock.com, a discount online shopping retailer based in Salt Lake City, Utah that sells a broad range of products including furniture, rugs, bedding, electronics, clothing, jewelry and cars.

In the opening statements, Ehrsam stated that in a “rapidly evolving landscape” the goal of digital currency regulation “is to make sure this technology, like the internet in the 90s, is allowed to flourish and bring all of it’s great efficiencies to the world in a safe manner.” He referred to Bitcoin as an “extremely powerful technology” and stated that Coinbase’s goal is “to bring the efficiencies created by the Bitcoin network to the masses.” Ehrsam lauded Bitcoin’s ability to transfer and prove ownership without a third party.

Statue of Liberty

Circle Internet Financial CEO Jeremy Allaire’s opening statement listed the many benefits of digital currency: a significantly lower cost than credit card companies, a powerful open platform, global in scope, and nearly instant, verifiable transactions.

Allaire acknowledged that there are currently many risks associated with bitcoin, such as price volatility as well as a lack of consumer protections and safe guards around the theft of digital assets.

Executive Vice Chairman of Overstock.com Jonathan Johnson recounted that in early January, Overstock.com became the first major online retailer to accept bitcoin as payment for merchandise. On the first day, Overstock.com transacted 700 sales ($130,000) in bitcoin, and as of January 29th had recorded $600,000 of sales with 3000 customers, many of whom were new to Overstock.com.

What Does the Future Hold for Bitcoin?

Panelists were asked where they envision Bitcoin in a year. Eshram called Overstock.com “a great beacon” for the future adoption of Bitcoin, and he cited a demographic shift in Coinbase.com’s user base away from an early tech adopter crowd to one more representative of the mainstream.

New York Hearings Bitcoin

Pictured above: executives from Coinbase, Circle and Overstock.com testify in New York

Allaire stated that Bitcoin is entering a phase of being a commercially viable option. He anticipates that as the utility value of bitcoin increases  then people who have bought bitcoin, and are holding bitcoin, will stop holding and begin to spend more freely. Allaire stated that lack of clarity around regulation as potentially limiting to Bitcoin’s adoption. He listed potential pitfalls for Bitcoin: IRS tax issues, money laundering and anonymity issues.

Overstock.com stated that in a year, they hope that some suppliers are accepting bitcoin so as to be able to hold and spend bitcoin instead of immediately converting the crypto-currency to USD. Johnson said that, “as adoption increases, at some point we’ll reach a tipping point.

Is Bitcoin Really Anonymous?

The question of anonymity was addressed with all panelists saying that overall anonymity is not an issue. Allaire stated that Circle is heavily invested in compliance networks but emphasized the importance of a level of anonymity in order to prevent spying. Allaire explained that, without appropriate safeguards, the use of personal identifiable information could be used in ways that consumers may not want.

On the question of market volatility, all panelists envisioned that, with a shift away from speculation and towards commercial transactions, crypto-currency price stability would occur over time.

Allaire stated that for price stability, the “single most important thing we can do is get some serious exchanges established here in New York that are focused on being mature trading platforms that are able to be used both by retail investors but also by large institutional participants.” When this occurs, “We will see greater volume, greater liquidity, more sophisticated pricing tools, derivatives, hedging, etc which will allow price volatility to subsist a great deal.”

The NYDFS said that viewers from 108 different countries had watched the panel discussions on Bitcoin, and asked the panelists about the specific challenges businesses face due to the nature of a global market. The panelists said that regulation between states and countries is presently limiting the adoption of Bitcoin. Allaire said that digital currency is one of the first major Internet driven technology issues that will require collaboration on a world wide basis. Digital currency will require a degree of coordination in order to take hold. Overstock.com said they currently only accept bitcoin within the United States.

Coinbase said that a scaling of requirements of state legislation is important in digital currency adoption. Allaire said that states are using outdated rules on transactions that do not account for the Internet. There was a call from the panelists for a common licensing model and examination to be established throughout the states. Allaire encouraged legislatures to have a “forward leaning posture.”

Overstock.com said that the greatest risk in using virtual currency is presently liquidity. Johnson said that the question is “Will bitcoin be immediately exchangeable for dollars?” Right now through a partnership with Coinbase, Johnson said, the answer is yes.

Can a bank or corporation go and create their own version of Bitcoin? The panel said this is highly unlikely. Bitcoin is an open protocol, which has allowed it to be peer reviewed for years. In a way the world has never seen before, no one owns Bitcoin, and, no one controls it. An institute trying to replicate it wouldn’t have the same impact as Bitcoin.

The panel stated that they would like banks and insurance companies to become involved in Bitcoin. However, Allaire said that established banks have very little interest in Bitcoin adoption due to its murky Silk Road history, but he did not feel it was an issue of risk. The panelists predicted that it will take awhile for the risk industry to be willing to get on board.

All panelists compared Bitcoin’s potential to that of the Internet in the 90s and expressed a hope that, with a growing global awareness, regulation doesn’t inhibit the “enormous potential” of the Bitcoin network but will instead put the necessary foundations in place to prevent crime, protect consumers and allow Bitcoin to thrive. The decisions made by the New York State Department of Financial Services will influence and set precedent for the way the rest of the United States deals with regulating digital currencies.

CC image by aa7ae.

@BitcoinLeah

About the author: Bitcoin Leah

Bitcoin Leah loves nerds and Bitcoin. Based in LA, she is a published author and YouTube vlogger. She is a regular contributor for On Bitcoin and tweets at @BitcoinLeah.

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Mint Adds Coinbase Bitcoin Balances to Investments Dashboard

Mint.com is a free web-based personal financial management service for the US and Canada created by entrepreneur Aaron Patzer and acquired by Intuit in 2009 for $170 million.

Mint is a dashboard to watch all of your investment accounts. The site gathers data from your Fidelity account, your Bank of America account, your credit cards, and even your car loan and mortgage so you can see, at a glance, a single view of your financials and spending.

As Bitcoin is increasing in adoption, and price, it’s important for investors to keep tabs on their Bitcoin holdings. Well, now you can watch your Coinbase balance on Mint.com. Coinbase announced the news on their blog.

“This partnership marks a milestone in the ongoing evolution of bitcoin as Mint becomes the first personal finance and money management tool enabling users to view their bitcoin transactions,” said Coinbase. “We’re proud to serve as Mint’s official wallet for these bitcoin transactions and look forward to seeing continued adoption of bitcoin.”

Mint Coinbase Bitcoin

To add your Coinbase account to Mint, you have to enable your API key and provide it to Mint.

Mint is not the first company to provide this monitoring capability. Venture-backed Bitcoin services company BitGo allows users to monitor all of their Bitcoin balances in one dashboard by entering public Bitcoin addresses.

“BitGo offers Bitcoin portfolio management services for BitGo users. Keep track of all your Bitcoin holdings, even cold storage,” says BitGo’s product description. “Set up email and mobile alerts for activity on any Bitcoin account.”

Bitcoin Week: BitGo CEO, NYC Hearings, TigerDirect, Charlie Shrem

Bitcoin Week

Here is a roundup of the top Bitcoin news from last week.

BitGo CEO Will O’Brien and Bitcoin Foundation General Counsel Patrick Murck appeared on TV in an interview with KING5 tech anchor Renay San Miguel. O’Brien shares his vision of building a “Charles Schwab for Bitcoin” and Murck comments on what it is needed to build stability in the Bitcoin ecosystem. Watch the video footage to learn more.

BitGo Interview with KING5

In news that shocked the Bitcoin world, Bitcoin entrepreneur Charlie Shrem was arrested for conspiracy to commit money laundering. Shrem was vice chairman of the Bitcoin Foundation and CEO of BitInstant, a Bitcoin exchange funded by the Winklevoss twins. Shrem has since stepped down from his post at the Bitcoin Foundation.

In merchant news, Overstock.com has reportedly processed over $1 million in Bitcoin since launching Bitcoin payment processing earlier this month. Overstock.com processed $124,000 on its first day.

Overstock.com CEO Bitcoin

Another major online retailer, TigerDirect, also launched Bitcoin payments this past week and processed $250,000 in its first day.

This week, New York State’s top financial regulator, Benjamin M. Lawsky, is hosting a public hearing to discuss the implications and potential of Bitcoin with an invited group of Bitcoin entrepreneurs and investors. In November, the public hearings held in Washington D.C. saw positive sentiment from a Senate Committee. We will see how this hearing plays out.

 

Charlie Shrem of Bitcoin Foundation and BitInstant Arrested for Money Laundering

Charlie Shrem is a veteran in the Bitcoin space and currently operates two high-level roles: vice chairman of the Bitcoin Foundation and CEO of BitInstant.

In breaking news, Shrem was arrested on charges of conspiring to commit money laundering and operating an unlicensed money-transmitting business, along with a Silk Road user Robert Faiella.  In a statement, the DOJ said that Shrem and Faiella were involved in a scheme to sell over $1 million in Bitcoins to users of “Silk Road,” the underground website that enabled its users to buy and sell illegal drugs anonymously and beyond the reach of law enforcement.

Read: The Fall of Silk Road

Shrem (pictured below) was arrested at Kennedy airport in New York, while Faiella was arrested at his home in Cape Coral, Florida.

Bitcoin Foundation Charlie Shrem Arrested

Manhattan U.S. Attorney Preet Bharara said in the statement: “As alleged, Robert Faiella and Charlie Shrem schemed to sell over $1 million in Bitcoins to criminals bent on trafficking narcotics on the dark web drug site, Silk Road. Truly innovative business models don’t need to resort to old-fashioned law-breaking, and when Bitcoins, like any traditional currency, are laundered and used to fuel criminal activity, law enforcement has no choice but to act. We will aggressively pursue those who would coopt new forms of currency for illicit purposes.”

Shrem was CEO of BitInstant, a Bitcoin exchange that raised funding from the Winklevoss twins and later suspended operations. The Winklevosses issued this statement today.

When we invested in BitInstant in the fall of 2012, its management made a commitment to us that they would abide by all applicable laws – including money laundering laws – and we expected nothing less.  Although BitInstant is not named in today’s indictment of Charlie Shrem, we are obviously deeply concerned about his arrest.  We were passive investors in BitInstant and will do everything we can to help law enforcement officials. We fully support any and all governmental efforts to ensure that money laundering requirements are enforced, and look forward to clearer regulation being implemented on the purchase and sale of bitcoins.

If these allegations are true, this is bad news for the Bitcoin ecosystem. Charlie Shrem was deeply involved and well known in the ecosystem as a founding member of the Bitcoin Foundation and a CEO of a premier Bitcoin startup. While it is positive news when the government arrests criminals who are misuing Bitcoin, such as Silk Road’s operator, this news is not inspiring when the person involved has a high-profile position in the community.

On Reddit, users were scrambling to understand the implications of this news. One user called Shrem’s case a witch hunt, saying “The US government case against Charlie Shrem is full of legal contradictions.” Another user criticized the government for letting big banks get away with money laundering and making an example of people like Shrem and Faiella, “So are they going to do what they did to HSBC? Just fine them and move along? Or, let me guess, they’re going to get screwed to the wall, financially drained, and serve prison sentences.”

In a trailer for the upcoming documentary The Rise and Rise of Bitcoin posted in May 2013, Shrem was quoted saying “I spend thousands of dollars, every day, on lawyers just to make sure I don’t go to jail.” Shrem’s part starts at 1:20 below.

Below is the full DOJ complaint against Shrem and Faiella.

Entrepreneur Mines Bitcoin Phenomenon – BitGo CEO Talks to KING5 Seattle

Veteran technology entrepreneur Will O’Brien recently took the job as CEO of BitGo, a venture-backed Bitcoin services company offering the industry’s first multi-signature digital wallet.

Having spent the last 4 years in Seattle at casual games juggernaut Big Fish Games, Seattle’s premier TV news station KING5 wanted to catch up with O’Brien to find out about the move to the Bitcoin industry.

“This was the beginning of the Internet all over again,” said O’Brien in an interview with KING. “This was something magical, where companies could be built and an entrepreneur wanting to take a big risk could go after an opportunity here.”

KING5 tech anchor Renay San Miguel interviewed O’Brien and Bitcoin Foundation General Counsel Patrick Murck in a Tech Talk segment that aired on Monday, January 20.

BitGo Interview with KING5

O’Brien said that BitGo has foundational multi-signature technology that is positioning his company to build the Charles Schwab for Bitcoin. “You need two signers – just like two missile keys or two signers on a bank account – to unlock or transfer the (Bitcoin) funds,” he said. “With that foundational technology, we believe we can build a suite of services for both businesses and consumers around monitoring and managing your portfolio, around corporate treasury services, around escrow and other types of services that need to be part of the core infrastructure around financial services based on digital currency.”

Related: James Hong Explains Why BitGo Multi-Signature Wallets Are Most Secure

Watch the video below to see the full segment with Will O’Brien, CEO of BitGo, and Patrick Murck, General Counsel of the Bitcoin Foundation.

Visit bitgo.com and bitcoinfoundation.org to learn more about each organization.