The Netherlands American Chamber of Commerce of the Southeastern United States (NACCSE http://www.naccse.org) recently hosted Megan Burton, founder and CEO of CoinX (http://coinx.com) to discuss the recent digital currency disruption and “Explore the Evolution of Bitcoin and What’s in it for You and Your Business?” The session’s description stated, “Bitcoin is an innovative payment network and a new kind of money that could change the future of the Internet, and have significant impact on politics and economics.” I discuss crypto-currencies (of which Bitcoin is just one of many, abet the most popular and well-known one) in Chapter 8 of the Managing Online Risk Book so I though Ms. Burton’s session could give us some helpful updates. She did not disappoint.
She began CoinX in 2012 prior to any regulation in the area at all. You may recall that Bitcoin was created with the idea that it would not be regulated – it is a currency without a country, and therefore without a government. Creators of Bitcoin wanted to keep it that way. This is one of the reasons Bitcoin creators because associated with a stereotype of anti-government technology-savvy rebels. But times have changed. Ms. Burton found her company, which she set up as a Bitcoin exchange, categorized as a Money-Service Business (MSB) under the US government. This has caused a number of changes for CoinX to continue to operate. She has enlisted an army of lawyers and compliance people – she joked that her compliance expense is higher than her total payroll – and is still in the process of sorting everything out. She has transferred the exchange service to the Netherlands and is now in the US listed as a software company. She also indicated that CoinX is looking at possibly becoming a bank to offset some of the confusion and vagueness of what the company actually does in regards to a crypto-currency.
After an overview of Bitcoin basics – what is is, who uses it, what does the Bitcoin market ecosystem look like, what are some of the concerns and risks related to using Bitcoins – she highlighted that “Bitcoins” actually has two definitions – one as a currency, but a second as a protocol – and it is the protocol that seems to be taking off with a number of new applications being developed to transfer assets using the protocol without a middle man for validation. One example she gave comes from a group of developers who came up with “ShoCard” for digital identity management. You can view the video introduction on YouTube at: https://www.youtube.com/watch?v=94wR0gu6w_E. More information about this identity solution can be found at their website: http://www.shocard.com.
Other highlights from the session:
- Canada has its own crypto-currency. (http://www.mobilepaymentstoday.com/articles/royal-canadian-mint-conducts-crypto-currency-trial/)
- Iceland had one but it failed. (http://kernelmag.dailydot.com/issue-sections/features-issue-sections/11331/auroracoin-history-failure/)
- Currently in the US you must self-report losses/gains for the purchase and sale of Bitcoins (or other crypto-currencies). This is not easy to do though. The IRS has claimed that crypto-currencies are to be taxed as property not as currency. There is still a lot of debate and vagueness of regulation of crypto-currencies in the US. (http://www.irs.gov/uac/Newsroom/IRS-Virtual-Currency-Guidance).
- A big threat to those who use Bitcoin is the possibility (a long-shot) of ne of the Bitcoin miners (or a group of them) gaining control of 51% or more of the total Bitcoins available. (http://www.coindesk.com/51-attacks-real-threat-bitcoin/).
- Paul Krugman, New york Times Contributor and Economist, as well as others are not convinced Bitcoin is viable. In his words “Bitcoin…is a self-fulfilling prophecy.” (http://www.nytimes.com/2013/04/15/opinion/krugman-the-antisocial-network.html?_r=0).
Some other resources regarding Bitcoins and Crypto-Currencies are listed below. Do you own any? Have you transacted with any? What has been your experience or what are your concerns regarding this? Share in the comments below.
The Rise and Fall of a Bitcoin Kingpin
David Kushner, 08/27/2015
What is a Bitcoin?
Wall Street Journal, 04/12/2013
Oxford Dictionaries add “Blockchain” and “Miner”
Stan Higgins, 08/27/2015
A brief attempt at explaining the madness of cryptocurrency
Mariella Moon, 01/21/2015
Dodgecoin: The Most Stable Cryptocurrency?
P.H. Madore, 07/13/2015