Bitcoin soon to enter early adopter phase

[raja]

Re: Bitcoin soon to enter early adopter phase

Not sure if you're serious?

Did you read what he wrote?

[Adeptus]

Re: Bitcoin soon to enter early adopter phase

More details on the Department of homeland security (DHS) Dwolla account seizure of MtGox:

Article Summary: Earlier this year FinCEN stated that anyone exchanging virtual currencies needed a license in the USA. An investigation was done against MtGox recently that revealed they did not have such a license in the USA and in fact supposedly lied about the purpose of their US bank account used to work with Dwolla. The DHS thus sent court order to Dwolla to seize MtGox account in USA.

Source: http://arstechnica.com/tech-policy/2...t-gox-account/

The Department of Homeland Security is investigating Mt. Gox, the largest Bitcoin exchange, for violating laws on US money exchange and money transfers—and it's grabbing the exchange's money in the process.DHS officials refused to comment on the ongoing investigation, but they did provide a copy of the warrant that was used yesterday to seize funds that Mt. Gox had in Dwolla, a money transfer service. Dwolla is a Des Moines, Iowa company that provides one of the most popular ways to move US dollars to Mt. Gox, where they can be used to buy bitcoins.
In the warrant, a special agent with Homeland Security Investigations (HSI), states that there's probable cause to believe Mt. Gox is engaging in "money transmitting" without a license, a crime punishable by a fine or up to five years in prison. The warrant goes on to demand that Dwolla hand over the keys to account number 812-649-1010, which is owned by Mt. Gox subsidiary Mutum Sigillum LLC, and held in the custody of Veridian Credit Union.
The funds in that account "are those of Mt. Gox customers that withdraw said funds from Mt. Gox and direct their transfer to Dwolla."
Homeland Security used a confidential informant, based in Maryland, to conduct the investigation. The informant simply created accounts with Dwolla and Mt. Gox, bought bitcoins, and then changed them back into dollars. Tracing that money, HSI was able to see that the money passed through a Wells Fargo account, number 7657841313, which was created by a single authorized signer: Mark Karpeles, the president and CEO of Mt. Gox. The Dwolla account shows transfers to Dwolla going back to at least December 2011, according to the warrant.
The special agent then explains what appears to be the smoking gun: Karpeles specifically denied he was going to get into the currency exchange business. The warrant reads:

As part of the account opening process, Wells Fargo required Karpeles and Mutum Sigillum LLC to complete a "Money Services Business (MSB) Accounts, Identification of an MSB Customer" form. That document was completed on May 20, 2011 and identified Mutum Sigillum LLC as a business not engaged in money services. The application asks several questions; to include, "Do you deal in or exchange currency for your customer?" and "Does your business accept funds from customers and send the funds based on customers' instructions (Money Transmitter)?" Karpeles answered these questions "no," indicating that Mutum Sigillum LLC does not deal in or exchange money, and that it does not send funds based on customer instructions.
Money transmitting businesses are required by 31 USC section 5330 to register as such with FinCEN. According to FinCEN records on May 6, 2013, neither Mt. Gox nor the subsidiary, Mutum Sigillum LLC, is registered as a Money Service Business.

The agent then gives a brief description of how Mt. Gox deals in the "crypto-currency" of Bitcoin:

Mt. Gox acts as a digital currency exchange where customers open accounts and fund the respective accounts with fiat currency, which is then exchanged into crypto-currency by Mt. Gox; the crypto-currency is known as bitcoin. Fiat currency simply refers to any money that a government has declared to be legal tender. The exchange is bidirectional and allows customers to also exchange bitcoins back into fiat currency, and then withdraw those funds. The exchange of fiat currency and bitcoins incurs a floating rate fee charged by Mt. Gox and is determined by the customer's aggregate amount of funds exchanged on a monthly basis.

We've reached out to Mark Karpeles and will update the story if we hear back

[Adeptus]

Re: Bitcoin soon to enter early adopter phase

BTW, I am going to attend the http://bitcoin2013.com conference in San Jose starting in a couple of days. If any other iTuliper's are going, I'd be happy to meet up. I promise I am far more normal and average human being than I might come across in this forum :-D If you are interested in meeting up for a coffee, chat or whatever, drop me a PM.

[Adeptus]

Re: Bitcoin soon to enter early adopter phase

Greetings,
I am back from Silicon Valley, from the Bitcoin conference. The conference totally exceeded my expectations. Specifically, the maturity and balanced views of the key individuals at the forefront of bitcoin impressed me the most. This is not being run by a bunch of geeky hacker teenagers with extreme libertarian views, like one might get the impression if reading online forums and reddit, or hanging out on IRC. There are serious businesses globally with lots of brain power, resources and significant money going into bitcoin now. I met business representatives from USA, Canada, UK, Singapore, Hong Kong, Argentina, Russia, Israel, France, Slovania, Mainland China, Sweeden, Switzerland, Panama, Brazil to name a few. I was also impressed by some of the lecturers at the conference which I recorded and am uploading the bitcoin lectures onto Youtube now (over 40 videos by the time I am done). Quite a few Phds lecturing including an MIT professor. Of particular interest to Itulipers are some regulatory related videos, but first... the trailer to the Bitcoin Documentary that is to be released soon. I met about 5 of the people from this video. Very cool how everyone was so accessible, I'm sure that may not be the case in the near future as this thing takes off even further.

Bitcoin Documentary Trailer: The Rise & Rise of Bitcoin

Excuse the amateur/shakiness of the videos below, but it's what I could do with the pocket camera I had with me. Most of it is steady, but at times I had to adjust my little tripod:

BITCOIN: Issues of Regulatory Compliance - Part 1 of 7

[Adeptus]

Re: Bitcoin soon to enter early adopter phase

BITCOIN: Issues of Regulatory Compliance - Part 2 of 7

BITCOIN: Issues of Regulatory Compliance - Part 3 of 7

[Adeptus]

Re: Bitcoin soon to enter early adopter phase

BITCOIN: Issues of Regulatory Compliance - Part 4 of 7

BITCOIN: Issues of Regulatory Compliance - Part 5 of 7

[c1ue]

Re: Bitcoin soon to enter early adopter phase

Adeptus,

Can you summarize how the attendees think bitcoin can overcome the regulatory conflicts that are increasingly an issue?

I've never doubted smart people were working on this - but smart people don't themselves resolve an inherent conflict with existing regulatory apparatus, not to mention a lot of existing revenues potentially under attack.

Just like the various taxi-cab hailing/car sharing companies are experiencing now that the entrenched interests in those fields are fighting back.

[Adeptus]

Re: Bitcoin soon to enter early adopter phase

BITCOIN: Issues of Regulatory Compliance - Part 6 of 7

BITCOIN: Issues of Regulatory Compliance - Part 7 of 7

[Adeptus]

Re: Bitcoin soon to enter early adopter phase

EDIT: I just realized I had 1 last video in the series 1min 46 secs. So there's actually 8 in total.

BITCOIN: Issues of Regulatory Compliance - Part 8 of 8

Adeptus,
Can you summarize how the attendees think bitcoin can overcome the regulatory conflicts that are increasingly an issue?

I think there are all ranges of views on this, from one extreme to the other - with the extreme right/underground not really showing face at this conference, so what you see in the panels are primarily the guys trying to exist within the current legal framework. The Bitcoin Foundation whom does not itself control bitcoin, but rather is lead by a group whose directors are CEOs of various major bitcoin business' as well as the #1 core developer (Gavin), and who put the conference together (1200 attendees btw); are of the view that the foundation should be hiring lobbyists to approach capital hill and request to be regulated in a fair manner. This has ticked off a few libertarian minority of the bitcoin foundation members, but not all. A few of the major bitcoin related businesses currently already have small armies accountants, lawyers and compliance consultants and such experts so as to ensure they are aligned with the law within their jurisdictions. On this panel (videos I posted), the second from the left is a Sr. representative of Tradehill.com the first US exchange, they are trying very hard to comply to all regulations. Conversely I also met Roman the ex-CEO of Bitfloor.com who had the #1 most popular US bitcoin exchange until about mid April when the banks shut down his bank account. He is a super friendly laid back nice guy (spoke to him and heard him speak in a non-formal setting for about an hour), he is also some kind of software developer genius because he designed and ran the entire thing by himself (surely a startup-mistake). Unfortunately, he didn't have all his ducks in a row from a regulatory perspective, so now he is holding over 2.3 Million dollars in USD funds that belong to his customers, but can't return the money because until whatever issues he had are resolved, he is basically banned from using a US bank account in all major banks. He is actively looking for a way to return the customer's money. He used to be a software developer for wallstreet bank trading software, but comes across in person as a surfer dude from California.

In the video panel, the lady in the middle is some kind of compliance expert that works for ZIPZAPinc.com, which is a global money transfer company with over 700,000 locations that existed prior to bitcoin, and has recently added bitcoin as a way to transfer 'money' globally. So, from this one can deduct that if they (zipzapinc) didn't think they could legally do this, they would not have done so, because why put at risk their entire international online money transfer empire? Specifically, she talks about how in the USA, in order to legally function as a "money transmitter" (one of several licenses required to function as an Exchange) it costs aprox $5 Million dollars, takes 9 to ~12 months of effort which entails going to each individual state and filing (mostly the same) paperwork over and over again until approvals are attained... one at a time. In some cases, they would not approve any paperwork until she actually showed up in person and they interviewed her. This is an excruciating process and a huge barrier to entry into the money transmitter/exchange business for bitcoin startups. CoinLab.com is another US exchange that is about to go live. It has 12 employees and is also taking the legal route, whereas recently, Mt.Gox the world's largest bitcoin exchange running operations out of Japan just had one of its gateways (dwolla.com) to US bank accounts shut down.

I think in one of these seminars I attended, one guy in the panel basically said, many bitcoin business' are going to attempt to legally co-exist with banks and governments, but if the governments come down too hard, it will drive the entire system underground overnight, and then, good luck regulating bitcoin! I share this view as well. The technology exists to operate completely under the radar (just look at Silkroad, who runs a drug selling business with bitcoins for the past 2-3 years and has not yet been caught), but this may also prove a huge barrier to mass-adoption...although it hasn't stopped non-tech saavy people from using complex protocols like bittorent.

Two of the seminars I attended titled "Distributed Mixers" and "ZeroCoin" (I will upload videos shortly to youtube) are advanced technologies & protocol thesis by Phd students whose implementations aim at making bitcoin completely anonymous to use. Right now, whilst your name and IP address aren't explicitly written in bitcoin's global ledger, your bitcoin wallet addresses (ID) can still be traced to you if you don't know what you are doing. Once these advanced anonymity protocols get developed into a simple piece of software you can download for free and use to transact bitcoins, it will be very interesting to see just how many people will still bother to create legit accounts with major exchanges abiding to regulatory compliance rules.... because if one is guaranteed anonymity and able to avoid taxes, being a target for theft/hacking, etc, then why not use it? And this is not an extreme libertarian view as one might imagine. All we have to do is look at Napster and how millions of very middle class people downloaded music for free, when they could easily pay for it, all because they thought they were anonymous and couldn't be caught.

On my way back home at the San Jose airport, I met a conference attendee who said his software developer friend is moving to Panama to work for an offshore Exchange because they don't want to deal with the "BS regulatory rules of the USA". So in summary, I see this heading in all directions at once; and mostly only the guys with LOTS of $$ trying to do it via the legal route.

[c1ue]

Re: Bitcoin soon to enter early adopter phase

Thanks for the overview.

From my view: if bitcoin exchanges have to undergo the same regulatory compliance as existing money transfer institutions such as the $10K transaction record or $2K/daily transaction record, this is going to put a huge crimp on bitcoin acceptance. It will not only drive up the cost of doing business, but also is going to severely limit the anonymity and other (non-static supply related) benefits of bitcoin.

As for the non-US money transfer organizations - ultimately the reason these exchanges and similar businesses are interesting are because they are effectively a tax on a value transfer. Just as there are myriad banksters embedded in the large US to Mexico/Central America/South America remittance flow, so too do these exchanges seek to insert themselves into the bitcoin value flow. So long as the regulatory cost is below the profit potential, why not?

As for the 'anonymizing' of bitcoin wallets - once again while technically possible, ultimately the weak link is still the conversion of bitcoin to dollars (or other currency). If the US regulatory apparatus gets its claws into bitcoin, I guarantee that the ROW will soon follow. As an example - I point to Uruguay.

Uruguay has a reputation for being a South American tax haven - essentially the Switzerland for wealthy Brazilians and Argentinians. There is, as far as I can tell both externally and while I was there, little interaction with the US. Yet Uruguay was compelled to change a number of its existing residency, citizenship, bank and financial regulations to comply - and did so due to the US threatening to slap tariffs on Uruguayan agriculture exports to the US. Clearly the US government has strong feelings on financial anonymity.

[c1ue]

Re: Bitcoin soon to enter early adopter phase

More money laundering fun:

This operation is notable not for bitcoin involvement, but that the sting operated over multiple countries simultaneously. Just an illustration of the long arm of the law...

http://www.theregister.co.uk/2013/05...eserve_titsup/

Shadowy online money exchange Liberty Reserve has been shut down by the US feds, its dotcom website seized - and its founder arrested. He and six others are accused of running a $6bn global money-laundering operation, the biggest of its kind, according to prosecutors.

In a string of dramatic events,

• On Friday, cops in Costa Rica raided offices linked to the underground payment service, which is alleged to be favoured by cyber-crooks. The police pulled the plug on the Latin America-based website when they grabbed servers during the swoop, effectively freezing all the service's customer accounts.
• Meanwhile, the website's founder Arthur Budovsky, 39, was cuffed in Spain. Further arrests were made in Costa Rica and New York.
• Then this afternoon, Budovsky and six others were indicted in the US on charges of money laundering, conspiracy to operate an unlicensed money transmitting business and operating an unlicensed money-transmitting business.
• And the website's domain name, libertyreserve.com, was seized by the US Global Illicit Financial Team, which has cleared the site and replaced it with a takedown notice and government logos. Before that, the site's DNS records were briefly updated to resolve to Shadowserver.org, a community effort geared to fighting cybercrime.

Liberty Reserve asked for just an email address, a name and a date of birth from its users when they wished to transfer cash electronically: the money was converted into "Liberty Reserve Dollar" or "Liberty Reserve Euro" digital currencies and quickly moved with minimal bureaucracy and transfer fees no higher than $3 a transaction. These features apparently made the service popular with criminals - at least 55 million transactions were carried out - according to US prosecutors who led the investigation into Liberty Reserve.

During a press conference on Saturday, soon after the web money service went dark, Costa Rican state prosecutor Jose Pablo Gonzalez said a number of suspects as well as Budovsky were under investigation over alleged money laundering.

Today's US indictment, issued by the New York's southern district attorney's office, also links Exchangezone.com, Swiftexchanger.com, MoneyCentralMarket.com, AsianaGold.com and EuroGoldCash.com to the Liberty Reserve operation.

The official paperwork claims "the defendants [operated] an international online digital currency service and money transfer system called Liberty Reserve … which was incorporated in Costa Rica in 2006 [and] is extensively used by cybercriminals around the world for distributing, storing and laundering the proceeds of their criminal activity".

The Feds further alleged that Budovsky and his co-conspirators knowingly operated "a criminal business venture" that moved tens of millions of dollars around the world through a network of shell companies - a move to keep the cash beyond the reach of American and European investigators, it is claimed.

Budovsky was indicted in 2006 on similar charges of operating an illegal money business, called GoldAge Inc, from a New York apartment. The Feds alleged that the service transferred $30m during a four-year operation prior to its closure. Budovsky and co-defendant Vladimir Kats were found guilty and sentenced to five years' probation in 2007. However Budovsky failed to see out his punishment and fled to Costa Rica, where he set up Liberty Reserve. He also renounced his US citizenship and became a Costa Rican national.

Today's indictment charges Budovsky, Vladimir Kats, Ahmed Yassine Abdelghani, Allan Esteban Hidalgo Jimenez, Azzeddine El Amine, Mark Marmilev and Maxim Chukharev. The defendants are presumed innocent unless and until proven guilty

3 countries on 2 continents. A web site takedown. A non-US national.

[Jam]

Re: Bitcoin soon to enter early adopter phase

http://dealbook.nytimes.com/2013/07/...voss/?hpw&_r=0

Winklevoss Twins Plan First Fund for Bitcoins

Cameron and Tyler Winklevoss, the twins best known for their part in the history of Facebook, filed a proposal with securities regulators on Monday that would allow any investor to trade bitcoins, just as if they were stocks. The plan involves an exchange-traded fund, which usually tracks a basket of stocks or a commodity, but in this case would hold only bitcoins.

[Slimprofits]

Re: Bitcoin soon to enter early adopter phase

I have to admit that I enjoyed the movie, The Social Network and especially the portrayal of the Winklevoss Twins by one actor. The bottom line here is that they are trying to create an ETF that makes money by charging investors for the right to have fractional ownership of an imaginary currency controlled by one or more people no one has ever met.

[Blindweb]

Re: Bitcoin soon to enter early adopter phase

controlled by one or more people no one has ever met.

I think bitcoin, and any cryptocurrencies that replace it, will fail eventually for reasons connected to peak oil. You on the other hand clearly don't haveany understanding of how bitcoin works.

[Adeptus]

Re: Bitcoin soon to enter early adopter phase

I think bitcoin, and any cryptocurrencies that replace it, will fail eventually for reasons connected to peak oil.

Hi Blindweb,
Care to elaborate on this? After spending hundreds of hours reading about bitcoin, this is the first time I have read such a statement. In my mind, if anything, peak oil (or cheap peak oil as EJ prefers) would result in ever increasing inflationary pressures as goods end up costing more to produce and transport. Under such a scenario, one would think that a deflationary currency such as bitcoin would be even more, not less, desirable.