Most Americans have no idea what Bitcoin is. A survey from Bitcoin organization Coin Center using Google Consumer Surveys showed 65% of respondents call themselves "not familiar at all" with Bitcoin. Are you among these 65%? May be it is time to get on board of this promising trend? Or, may be, you still consider Bitcoin as subject of discussion for geeks and criminals?
Well, getting more regulation into the “wild” Bitcoin business is one of the most respected trends, which will allow bringing the cryptocurrency industry from underground level to the mainstream financial operations.
Coinbase as the First Regulated Bitcoin Exchange…
Coinbase Inc., a San Francisco startup, backed by $106 million from the New York Stock Exchange, banks and venture-capital firms, established the first regulated bitcoin exchange, offering greater security for individuals and institutions to trade bitcoin and monitor real-time pricing of the cryptocurrency.
It is bringing long awaited legitimacy to the currency, which is not backed by a central government and is traded over virtual exchanges, primarily overseas. Coinbase has business insurance, offering traders certain assurance that their money will not disappear, a big concern after several criminal cases in last several years.
Coinbase’s founders say they have been working for five months to win licenses from state financial regulators. They have regulatory approval in half of U.S. states. For now, Coinbase can do business only with account holders in states where it has approval.
Coinbase will take a small percentage, 0.25%, of most transactions and will take no fees for the first two months, said Fred Ehrsam, 26 years old, a co-founder. The exchange will initially be limited to users in the U.S., but Chief Executive Brian Armstrong, 32, said he plans to expand overseas.
Mr. Armstrong said he expected to attract both individuals and businesses looking to trade bitcoin. “Our goal is to become the world’s largest exchange,” he said.
Others are looking to open U.S.-based bitcoin exchanges, including Tyler and Cameron Winklevoss, the twin brothers known for their early feuds with Facebook Inc. founder Mark Zuckerberg. Last week, Cameron and Tyler Winklevoss announced plans for Gemini, which they called “a fully regulated, fully compliant ... bitcoin exchange for both individuals and institutions” that would be based in New York.
Coindesk, which tracks the price of bitcoins, says 82,000 businesses accept the currency, double that of a year earlier, including e-commerce site Overstock.com Inc. and Expedia Inc., as well as many small retailers. The value of all bitcoin is $3.2 billion, according to Coindesk’s price index.
The NYSE invested in Coinbase during a $75 million round of fundraising that closed this month.
Other investors include USAA Bank, the venture arm of Spain’s Banco Bilbao Vizcaya Argentaria SA and former Citigroup Inc. CEO Vikram Pandit and former Thomson Reuters Corp. CEO Tom Glocer. Venture backers include Draper Fisher Jurvetson, Andreessen Horowitz and Union Square Ventures.
… but not in California
Coinbase promised investors a modicum of security in the nascent bitcoin market this week when the San Francisco startup opened what it calls the first regulated U.S. trading post for the digital currency.
But for consumers in California, the service isn’t regulated at all.
Coinbase Exchange, which allows users to trade bitcoins, says it is insured against accidental loss, hacking and internal theft. The company advertises this “regulated exchange” in 24 states and territories, including California. “The exchange is regulated because of its ability to obtain money transmitter licenses in 24 of the 50 states. So it’s regulated at the state level,” Coinbase said Monday, January 27, 2015.
However, the California Department of Business Oversight says it has not issued any licenses for digital currency exchanges, meaning the state has not investigated the company to determine whether it is safe for consumers.
“It’s not that if they operate in California, they’re breaking the law, but it’s important that consumers be aware that the Coinbase exchange is not regulated or licensed in California,” said Tom Dresslar, a spokesperson for the Department of Business Oversight. The agency released a statement correcting media reports that said Coinbase’s exchange was licensed to operate in California.
On Tuesday, January 28, 2015, Coinbase backtracked, saying it had licenses in 14 states, did not need licenses in eight states, and that two — California and New York — are in a “grey zone” while they hammer out bitcoin regulations.
Well, it is just matter of time before the Bitcoin will make the way to the conventional economy, and California will have to be among the first states to accept the new ways of operation, there is no other ways for the economically advanced states.
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