Bitcoinica Becomes Registered Financial Services Provider

Bitcoinica's boy-genius, Zhou Tong, today announced that Bitcoin has become a registered financial services provider under the laws of New Zealand.  Arguably one of the greatest Bitcoin success stories, Bitcoinica continues to thrive, and the site's new status will add legitimacy to the Bitcoin economy as a whole.

The press release can be found here: 

https://www.bitcoinica.com/posts/registered-financial-services-provider

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Maltese Customs Office Recognizes Bitcoin as Legitimate Currency

Spotted on the Bitcointalk forums:

So I went to the customs office (in Malta) to get the merchandise I bought online with Bitcoin. They ask for a Paypal receipt (?!) or an invoice. I don't have either of them, but they say they'd accept a printout from the web site's order page. In a hurry I get a print out and hand it [to them]. They ask me what BTC is. I blabber something unintelligible to get it over with, but they go and check anyway. They tell me it's Bitcoin and the exchange rate is ~2.99. I pay my customs tax and get my box.

I'm pretty excited about this, and interested in others' similar experiences. Also, I don't know from which source they checked the exchange rate, so what do you think should be the authoritative source for government entities? Which generic sources publish BTC exchange rates?

Source.

When I started reading, I expected there would be more handcuffs and pepper spray involved, and maybe even a deportation, especially after what happened to Nefario. Perhaps some governments are willing to accept that Bitcoin is going to be a part of our future? Stay tuned!

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Bitcoin is Approaching the Mainstream

On December 12th, the Internet Archive announced they would be accepting Bitcoin donations. For starters, the Internet Archive is ranked 224th among all websites in the US and 213th worldwide. Let that sink in for a second.

In the two days that the site has been accepting donations, they've received over $1,000 in Bitcoins. Bitcoin users came through in a way that guarantees that other sites, possibly even bigger sites, will take notice that accepting Bitcoins is an extremely easy and effective method of collecting donations.

A comment from "apeterson", on Reddit, summed it up best:

"If you already have Bitcoins, the necessary steps are:

1) Copy the address;
2) Paste it to your wallet;
3) Enter amount; and
4) Press send.

(editor's note: two of these steps will go away when the URI scheme is implemented)

If you already have a credit card the necessary steps are:

1) Choose from one amount in the options (25, 50, 100, 250, 1000 or other);
2) Select additional options and optionally sign the donation with your name;
3) Add to basket;
4) Review your basket, and untick the hidden option to donate an extra $2.00 to justgive;
5) Proceed to checkout;
6) Login as donor, either by your existing account or by creating a new account;
7) Create an account;
8) Enter email, first name, last name, birth year (chose between 4 options: 1979 or later, 1965-1978, 1946-1964, 1945 and earlier), gender, and how you heard about the site;
9) Untick "I would like to get spam";
10) Enter billing info (full address);
11) Enter credit card info; and...
12) [this is where apeterson surrendered]

The pain alone to complete [these steps hurts more than just giving them] the 5 BTC I sent them."

One other turn of events that will push Bitcoin closer to the mainstream is that you can now sell your Bitcoins on either Mt.Gox or Tradehill and withdraw your cash to PayPal. The significance of this should not be understated.

You now have some serious ammunition to help you convince someone that Bitcoins are actually worth something. Many an argument about the legitimacy of Bitcoin can be put to bed simply by telling someone they can sell their Bitcoins, right now, and withdraw the cash to their PayPal account, right now. You could even offer someone Bitcoins in lieu of cash and not feel like an eccentric Internet geek; the divide between Bitcoin and fiat currency has grown smaller.

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Proposed Financial Protocol Standards Could Legitimize Virtual Currencies

Payward Inc. Submits Draft Proposals to IETF for Internet-Based Financial Protocols


Payward Inc, which you might remember as the group behind Ogrr.com, has submitted two draft proposals to the IETF which, if implemented, would form the framework for the legitimization of virtual currencies like Bitcoin, and mark the first steps toward the elimination of the archaic financial framework upon which we currently depend.

The first proposal concerns the creation of an Internet-based Market Identification Code (MIC), "with which the internet community can develop viable, interoperable alternatives to legacy financial systems."

From Wikipedia:

The Market Identification Code (MIC)(ISO 10383) is a unique identification code used to identify securities trading exchanges, regulated and non-regulated trading markets. For examples trades that are executed in US NASDAQ market are identified using MIC code XNAS. The MIC is defined in ISO 10383 [1] by International Organization for Standardization (ISO)[2].

The MIC is used to identify the trading market in various communications like trade processing, settlement and other automated processes.

From Payward's first draft proposal:

An Internet MIC (IMIC) identifies an internet-based financial market.

No assumptions are made about settlement paths or the currencies or commodities exchanged on the market. IMIC provides a building block with which the internet community can develop viable, interoperable alternatives to legacy financial systems.

Technically, IMIC is an unofficial superset of the ISO's existing Market Identification Code standard [ISO10383] that is widely used for global identification of conventional financial exchanges. Against the ISO's MIC registry [MIC-REG], IANA assumes name space management rights for codes beginning with the digits 0-9 in order to obtain an adequate name space with which to provide a financial market registrar service for the internet community.

In recent years the internet has seen the emergence of online markets trading in both conventional and novel [BITCOIN] financial instruments.

Given this trend, it makes sense to propose a standard mechanism for the consistent, global identification of internet-based markets. IMIC provides such a mechanism.

Just as the Internet Protocol provides a mechanism for Address Allocation for Private Internets [RFC1918], so too IMIC provides a mechanism for address allocation for private financial networks. Private financial networks MAY include those operated associated with Massive Multiplayer Online Roleplaying Games (MMORPGs) or financial simulations.

Payward's second proposal is even more ground-breaking. What they describe is an evolved standard for identifying end-users of financial systems, i.e., the implementation of Internet-based bank accounts. Such a proposal would provide a structure upon which a virtual currency such as Bitcoin could satisfy the existing legal framework surrounding international financial transactions.

From Payward's second draft proposal:

An Internet IBAN (IIBAN) identifies an internet-based financial endpoint in a manner that is superset-compatible with the existing European Committee for Banking Standards (ECBS) International Bank Acccount Number (IBAN) standard [ISO13616].

An Internet IBAN (IIBAN) identifies an internet-based financial endpoint. No assumptions are made about settlement paths, currencies or commodities being exchanged, or trust relationships between parties. IBAN provides a building block with which the internet community can develop viable, interoperable alternatives to legacy financial systems.

Technically, IIBAN is an unofficial superset of the European Committee for Banking Standards (ECBS) International Bank Acccount Number (IBAN) standard [ISO13616] that is increasingly used in conventional global financial networks, including outside of its original home of Europe. Against the IBAN registry [IBAN-REG], IIBAN subsumes the position of National Numbering Authority (NNA) for the nominal [ISO3166] 'nation' of AA (the Internet) in order to provide a financial endpoint registrar service for the internet community.

In recent years the internet has seen the emergence of an increasing variety of online financial settlement scenarios. Such scenarios include web based commerce, high frequency trading (HFT) on stock markets, mobile phone 'in app' payments, mobile near field communication (NFC) physical proximity-based payments, online banking based bill payment, and interpersonal payments within Massive Multiplayer Online Roleplaying Games (MMORPGs) amongst others. These scenarios vary in at least the following aspects:

* Typical payment size

* Acceptable settlement latency

* Currencies or commodities supported

* Nature of trust relationships between parties (if any)

* Requirement for offline operations

Despite these differences, in each case the need remains to precisely identify each of the parties within a transaction.

Given this trend, it makes sense to propose a standard mechanism for the consistent, global identification of internet-based financial endpoints. IIBAN provides such a mechanism.

Conventional financial settlement systems typically assign endpoint creation, maintenance, and identification responsibility to large incumbent players (for example banks, major telecommunications carriers, online payment processors, credit card companies, stock exchanges or brokerage firms). In addition, financial settlement processes themselves typically occur via a relatively small number of relatively centralized networks.

Whilst this centralized approach is understandable from an historic perspective, today its age and drawbacks are becoming more visible:

* Systems integration and maintenance overheads due to disparate endpoint identification schemes, centralized endpoint identifier validation and differing prerequisite communications security configurations (for example, TLS client certificates [RFC5246])

* Poor fault tolerance. Incumbent players and their physical, legal and communications infrastructure represent undesirable Single Points of Failure (SPOFs) that act to reduce system availability. Classic examples of this are banking services that suspend over the weekend, and unpredictable international
settlement delays due to differing holidays affecting financial services in foreign jurisdictions.

* Potential for abuse. Attackers (or indeed individual nation-states or organizations wihin conventional centralized financial systems) may consider temptation for abuse too great to resist. Abuses observed include constant, passive, warrantless surveillance of entire populations [SWIFT2], illegal financial blockade [WL] [WL2] and abusive asset seizure [WSJ].

It is hoped that IIBAN will assist the internet community to develop systems that move beyond the above limitations.

Using distributed hash tables (DHT) or a similar mechanism it may be possible to provide dynamic identifier name space management within a financial network itself, such that individual users can self-issue IIBANs and have them corroborated by other network participants.

The primary benefit of this approach is that it is completely decentralized, thus avoiding the issues associated with centralization (described above).

You've probably heard the suggestion that Bitcoin is to finance what the Internet was to publishing. We're now starting to see why that just may be.

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PayPal Competitor Okpay.com Now Accepts Bitcoin

Online payment processor Okpay.com has today announced that it is accepting Bitcoin deposits.

The site came online in March 2010 and has been increasing in popularity ever since. Alexa shows a very high ranking in Russia of 1,268, 19,411 in the United States (better than Diaspora's 19,825), and 15,516 globally.

The site reported 300,000 open accounts in March of this year.

This is the first serious commercial acknowledgement of Bitcoin's legitimacy as an electronic currency, and will provide Bitcoin users with dozens of additional ways to convert their Bitcoins into cash.

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A Bitcoin Bond?

Could it be?

"You will soon be able to purchase Bitcoin through a financial instrument. I will announce it when its ready and the product is readily available to purchase online and through banks on the stock market."

"Each bond has to be denominated in some sort of a price. And if I peg a bond to the price of btc then I have to find at least some similarities between the two. I am not sure yet about how exactly the whole structure is going to look like but ill let you know once I know for sure what I want to do."

Since the "bond" (more like an ETF) would be pegged to the price of Bitcoin, the organization behind the bond would have to buy and sell Bitcoins in accordance with the interest in the bond. Got to love free markets...

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Robert Prechter Calls Bitcoin "Brilliant"

Over on the Bitcointalk Forums, cypherdoc brings us this interesting development:

Robert Prechter, one of the world's most renowned stock market analysts and proponent of Elliot Wave Theory, in his latest report, calls Bitcoin "brilliant:"

"In June, Senator Charles Schumer (D, NY) called the brilliant on-line transactional unit, Bitcoin, “a form of money laundering.”

Robert Prechter postulates that Bitcoin, while brilliant, will likely fall victim to government action. As with Liberty Dollars in the United States and GoldMoney in the Netherlands, he believes Bitcoin will be declared illegal, thus dissuading legitimate business from accepting it in exchange for goods and services.

Unlike other alternative currencies, however, Bitcoin can never be shut down.

Robert Prechter's praise for Bitcoin truly is a step towards its legitimization, and as long as Gavin Andresen and the core development team continue to work with government to build a framework for Bitcoin's regulation, it is unlikely that it would be declared illegal.

It should also be noted that GoldMoney's currency, called "GoldGrams" has been around since 2001, and remains legal in the United States.

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The Legitimization and Inevitability of Bitcoin

Beginning on the 13th of September, a French court will start working toward an important legal decision on Bitcoin, with the goal of answering the question, “is Bitcoin a virtual currency?”

At present, there is nothing inherently illegal about accepting Bitcoins. When questions arise in the community about such issues as income-tax implications, it is oft-quoted that trading in Bitcoins falls under the laws that govern bartering. So what’s the difference between trading in Bitcoins and trading in bananas? Really, it comes down to the potential for money-laundering (bananas are an inefficient medium for laundering money), which is why it’s essential that a legal framework be put in place to govern businesses that facilitate Bitcoin transactions, like the exchanges.

As far as merchant risk is concerned, the legal status of Bitcoin is a non-issue, as it really is nothing more than a new type of payment processor, like Visa or PayPal, only cheaper and more efficient to use. Worst case for most merchants, if there was a legal problem with Bitcoin, they could instantly remove the functionality and carry on with business as usual.

The likely outcome of the court ruling will be that Bitcoin exchanges and banks, at first those doing business in France and then eventually elsewhere, will be required to have their customers and transactions documented to satisfy the laws to which fiat currencies are bound. While this might come as a blow to those who bank (excuse the pun) on the pseudo-anonymity of Bitcoin, it actually represents the next step toward its legitimization and mainstream acceptance. It is likely that many businesses are currently reluctant to dabble in Bitcoin due to its disproportionately reported association with the drug trade and money-laundering, however, if the currency is given billing as a legitimate currency, albeit virtual, it will surely mark the kick-off of the inevitable next phase of significant growth in the Bitcoin economy.

Ahh, but you ask, "why is it inevitable that the Bitcoin economy should grow?" The answer is simple: efficiency.

We now live in a globalized economy with ever-expanding free-trade agreements and reduced trade tariffs, yet moving money internationally is still slow and wrought with fees, and that's for your average business, let alone an individual.

The adoption of almost every major technological development, from the telephone to computers to email, has been driven by one common goal: increased economic efficiency. Any business that uses new technologies will have an advantage over its competitors. This advantage gives early adopters of these technologies the choice to increase profits or to pass savings to their customers, both being good for business. Those who don’t adopt new technologies will not be competitive.

At present, the efficiency gains are there, but have not been completely realized; merchants still need to convert Bitcoins to local currency to pay their bills and re-stock their shelves, with typical currency conversion fees on Bitcoin exchanges in the range of 0.6%. Volatility risk and currency exchange fees can be absorbed by payment processors like bit-pay at a cost of two percent, which still beats services like square, who charge 2.75% for processing credit-cards. That fee, however, does not take into account charge-backs. For merchants, Bitcoin has a major advantage over its competitors in that transactions are non-reversible. For consumers, the finality of a Bitcoin payment is not a show-stopper, as long as they're dealing with reputable merchants. When dealing with merchants of questionable integrity, services such as ripple will eventually fill the gap.

Imagine Bitcoin tomorrow: merchants will be able to keep their money in Bitcoin as they become able to pay their suppliers, anywhere in the world, without converting currencies. Volatility risk will subside as the economy grows and the Bitcoin production rate drops; efficiency gains will be fully realized.

We can share any piece of information with anyone in the world, instantly, yet financial transactions lag behind. This post is actually being written by two people at the same time. We live in different countries, and I can see his typing and he can see mine, yet before Bitcoin, I would not have been able to share money with him (not that I'm making any money with this post!) without losing a significant portion of it to a middle-man (likely PayPal) in both transaction fees, currency exchange fees, or both.

Using PayPal, assuming no transaction fees and only exchange fees, if I sent 10 USD (worth 9.97 CAD at current exchange rates) to a person who wanted CAD, they would receive 9.70 CAD on their end, after fees were deducted, resulting in a 2.8% charge.

Bitcoin is, quite simply, a more efficient way of moving money than has ever existed before, and with the growth of the Bitcoin economy and the adoption of some of the enhancing applications that are soon to come, like Open-Transactions, its efficiency will only improve.

It will be interesting to see how the French court words its ruling, but the fact that they're even speaking the word "Bitcoin" is significant. This important step toward realizing mainstream legitimacy, combined with already existing and ever-improving efficiency gains, will accelerate growth of the Bitcoin economy, propelling it toward inevitable wide-spread adoption.

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