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virtual currencies

This tag is associated with 16 posts

“My Taxes Pay Regulators, so I Expect Them to Treat Me With Respect”

[Reading Time: 9 minutes]

Interview with Aaron Greenspan, Harvard graduate, original creator of “The Facebook,” payments innovator, and autodidact non-lawyer.  (PART THREE)

Aaron was generous both in his time and in his responses, which led me to split the interview into three parts:  In PART ONE: REGULATION AND INNOVATION IN THE UNITED STATES, Aaron talks about United States money transmitters laws and identifies, with unusual clarity and depth, what he believes is wrong with them.

In PART TWO: BITCOIN, COMMUNISM AND THE SURVEILLANCE STATE, Aaron lays out his controversial point of view on Bitcoin.

Read on for PART THREE: A YOUNG FINTECH ENTERPRENEUR’S DAY OF RECKONING, the final and most controversial one, in which Aaron has no qualms about naming and shaming some of the individuals that have not “treated him with respect.”  Again, here is a brief intro on Aaron, for the benefit of those who haven’t read the previous posts.

Having been a teen tech entrepreneur, during college at Harvard in 2003 Aaron created the predecessor to Facebook, Inc., which also happened to be called “The Facebook.”  In 2009, he entered into a settlement Continue reading

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“Bitcoiners Are Repeating Forgotten History, and Are Accordingly Doomed”

[Reading Time: 8 minutes]

Interview with Aaron Greenspan, Harvard graduate, original creator of “The Facebook,” payments innovator, and autodidact non-lawyer.  (PART TWO)

Aaron was generous both in his time and in his responses, which led me to split the interview into three parts.  In PART ONE: REGULATION AND INNOVATION IN THE UNITED STATES, Aaron talks about United States money transmission laws and identifies, with uncommon clarity and depth, what he believes to be wrong with them.

Read on for Aaron’s point of view on Bitcoin, preceded by the intro to the first post for the benefit of those who haven’t read it, yet.

Having been a teen tech entrepreneur, during college at Harvard in 2003 Aaron created the predecessor to Facebook, Inc., which also happened to be called “The Facebook.”  In 2009, he entered into a settlement agreement with Facebook, Inc. as well as his classmate Mark Zuckerberg, and then had the opportunity to figure out what he wanted to do next, so he followed a long-standing interest in payment Continue reading

“US Money Transmission Laws Are Worthless and Unconstitutional”

[Reading Time: 10 minutes]

Interview with Aaron Greenspan, Harvard graduate, original creator of “The Facebook,” payments innovator, and autodidact non-lawyer.  (PART ONE)

Having been a teen tech entrepreneur, during college at Harvard in 2003 Aaron created the predecessor to Facebook, Inc., which also happened to be called “The Facebook.”  In 2009, he entered into a settlement agreement with Facebook, Inc. as well as his classmate Mark Zuckerberg, and then had the opportunity to figure out what he wanted to do next, so he followed a long-standing interest in payment systems and decided to try and tackle mobile payments.  From 2008 through early 2011, he invested essentially every piece of time, energy and capital at his disposal into making his payments initiative, called FaceCash, widely regarded as a success—until he was told that he would be thrown in federal prison by a state bureaucrat.

As you will soon see, to say that Aaron does not mince his words is the understatement of the century, so I am aware of the risks I am taking by presenting his strong point of view here. However, even Continue reading

Bitcoin Vegas Coming Out Party

[Reading Time: 3 minutes]

This week history was made in Las Vegas when, for the first time ever, digital currency entrepreneurs prominently showcased themselves at Money2020, the largest payments and financial services technology conference in the world.  CoinX, Bitpay, Kraken, Blockchain.info and Coinbase had booths on the expo floor and a lot of digital currency investors and entrepreneurs were in attendance, notably Nejc Kodric and Damijan Merlak of Bitstamp, Stan Stalnaker of Ven/Hub Culture, Gabriel Sukenik of Coinapult, and Meyer “Micky” Malka of Ribbit Capital.  See photos below.

As expected, the event was largely dominated by traditional players, and only three of over one hundred panels were directly related to Bitcoin and virtual currencies, which qualifies as a drop in the ocean.   However, the words “bitcoin”, “ripple”, “digital” and “currency” were heard everywhere both in and out of the formal sessions, especially in connection with two other key words: regulation and disruption.

Here are a few things that stuck in my mind:

  • In the panel “Bitcoin & Beyond: Math-Based & Virtual Currencies”, masterfully moderated by Continue reading

No Banking, No Bitcoin

[Reading Time: 4 minutes]

Last Friday’s news that the Internet Archive Federal Credit Union (IAFCU) had shut down Tradehill’s account must have sent chills down the spine of every virtual currency entrepreneur.  If it didn’t, it should. The IAFCU was supposed to be one of the few, if not the only, Bitcoin-friendly financial institution in the U.S. rescuing virtual currency exchangers from ‘banking oblivion’.  At this point, we can only speculate about the true causes of this unfortunate situation, and we certainly hope it gets resolved favorably, promptly and permanently.

Let’s hope it’s another case of entrepreneurial immaturity, as that would be the lesser evil compared to other potentially more devastating ones.  However, with all due respect to the parties involved in this particular case, there is, in general, a fine line between immaturity and stupidity; one that cannot be ignored in a nascent industry that is riddled with risks, and in which a few bad apples could set the entire industry basket back by years.  My point is: Are convertible virtual currency exchangers doing their homework?

News flash #1 to virtual currency exchangers: you are financial institutions!

Being a financial institution requires a heightened degree of governance –organization, discipline and Continue reading

Is Bitcoin Selling its Soul to the State?

[Reading Time: 5 minutes]

This question or some variation of it has actually been posed to me by many virtual currency enthusiasts over the past few months.  It so happens that the financial services regulations applicable to many new virtual currency businesses have been seen as impinging upon the core features that make Bitcoin so innovative and potentially disruptive.

First, the hope for complete anonymity was shattered by the statutory obligation to implement know-your-customer procedures at the currency translation points.  Second, the irrevocability of transactions was dampened by the federal consumer obligation to provide for delayed executions, cancellations and refunds.  Is financial privacy next? 

One of Bitcoin’s most salient and innovative attributes is that its block chain, the public ledger where the entire history of every transaction ever conducted is stored, is publicly viewable by anyone with the right tools.  Given this unique window into their virtual currency wallets, are Bitcoin users not at risk of giving up the right to the private use of a currency that cash affords them today?  I say at risk because it may still be possible to Continue reading

“Compliance-Enabled Legitimacy is Key to Bitcoin’s Survival”

[Reading Time: 9 minutes]

Interview with Megan Burton, founder and CEO of CoinX

Early last month, at a Bitcoin pitch contest organized by Ultra Light Startups, the winner, Atlanta-based CoinX, beat the competition by a landslide.  To be precise, the show-stealer was actually Megan Burton, its founder and CEO.  John Frankel, partner of venture-capital firm ff Venture Capital, one of the three expert judges in the panel, said to me: “It was a strong presentation.  She came across as someone who has done her homework and her strategy seems sound.”

Megan, whom I was delighted to meet in person last week at the Inside Bitcoins conference in New York City, has graciously agreed to an interview.  Enjoy!

Juan: Please tell us about your background and how you got involved with Bitcoin.

Megan: My background is in internet and payments security.  I first came across Bitcoin in the spring of 2012, when reading an article on the BBC website about a foreign currency exchange that had been shut down as a result of a security breach.  Nothing out of the ordinary, except that this breach had been due to an encryption Continue reading

The Hidden Rule that Could Kill Bitcoin’s Irrevocability

[Reading Time: 5 minutes]

If federal anti-money laundering rules ‘killed’ Bitcoin’s anonymity, could consumer protection rules ‘kill’ its irrevocability?

Last March, the crypto-currency world was struck dumb when the Financial Crimes Enforcement Network (FinCEN), the United States federal agency responsible for enforcing anti-money laundering and anti-terrorist financing regulations, issued the now famous interpretive guidance equating exchangers and administrators of ‘convertible virtual currencies’ to money transmitters.

Although some of us saw it coming, crypto-preneurs are just now slowly waking up to the reality of what it really means to be this particular species of non-bank financial institution.  See the final section for a compendium of risks and obligations.

One set of regulations that I included in the laundry list of obligations last April but has yet to come to the fore are the federal consumer protection rules emanating from the Dodd-Frank Act and being enforced by the Continue reading

Winklevii Warn Investors in Their ETF That Bitcoin May Become Illegal

[Reading Time: 6 minutes]

Apart from the cookie-cutter risks everyone is required by law to disclose, the Winklevoss Bitcoin Trust prospectus contains a series of unique risk factors that would make even Bernie Madoff cringe.  One of those risks, indicated as my favorite below, almost made this post qualify for my ‘Seriously?’ category, reserved for cases of utmost nonsense and near insanity.

All joking aside, the unique virtual currency-related risks listed in the Winklevoss twins’ new Bitcoin fund SEC filing hint at the number and complexity of roadblocks that the crypto-community will need to surmount if it aspires to take digital currencies to the mainstream.  On the positive side, this first (technically, second) Bitcoin fund marks Bitcoin’s official entry into the capital markets and could go a long way towards legitimizing it as a commodity.

Here are some of the more salient risks for your edification and enjoyment:

  • The loss or destruction of a private key required to access a Bitcoin may be irreversible.  The Continue reading

“Bitcoiners Must Understand that Compliance is Just the Beginning”

[Reading Time: 15 minutes] 

Interview with David Landsman, Executive Director of the National Money Transmitters Association (NMTA) – PART TWO

Longer post than usual, I’m aware, but well worth it –the closing of bank accounts, the Bitcoin Foundation Cease & Desist Order from California…  David comments on it all and gives links to valuable resources!

In PART ONE, David talked about the image problems that all money transmitters have in the United States, the fragmented regulatory regime and the likelihood of a federal license, now that the Bitcoin community has joined the fray.

Read on for David’s strong viewpoint on US banks –very timely, given the increasing closing of Bitcoin operator accounts in the US–, and the reasons why many legal and PR efforts in fighting the closing of accounts have so far been fruitless.

PART TWO Continue reading

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