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First U.S. Bitcoin Exchange Set to Open

wsj.com

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Re: First U.S. Bitcoin Exchange Set to Open

#51

Post by beaner »

sidko wrote: post #48
fehrsam wrote: post #46

Earlier quoted context omitted.

Co-founder of Coinbase here You're right in that it's not the "first US Bitcoin exchange". However, it is the first US bitcoin exchange with some amount of money transmitter licenses (none of the companies you listed have them to my knowledge). If you're not familiar with money transmitter licenses, it's what you need from most state regulators to move or hold money for customers in that state. That's why we can't su…

>However, it is the first US bitcoin exchange with some amount of money transmitter licenses Not true. There are definitely exchanges out there that have state MSB licenses. Perhaps you're unaware of their existence. I know companies can sometimes be secretive about this stuff, but exchanges like CoinX have MSB state licenses. Check out http://coinx.com/money-transmitter-licenses for instance.

CoinX doesn't have a real product though do they? Does it count if you have the licenses but no exchange to use them with?

Re: First U.S. Bitcoin Exchange Set to Open

#52

Post by Animats »

foobarqux wrote: post #39
Animats wrote: post #18

"As is typical of most bitcoin/fiat intermediaries when promoting their products, the new exchange is being touted as a first and a means to bring legitimacy to Bitcoin." - Qntra. We've heard that story many times before. Kraken makes similar claims. (Kraken uses the same address, 548 Market St, SF, as Coinbase. It's a mail-forwarding service. Few people know where either exchange really is.) So what is this "license…

SIPC doesn't insure all types of investments, I'm not sure if BTC would qualify. And if it doesn't qualify cash intended to purchase BTC probably wouldn't be insured either.

It was decided in the Shavers case that Bitcoin is a "security" or "investment contract" for regulatory purposes. The SIPC insures securities, including investment contracts, and cash you have with a US regulated broker, up to their limits of $500K securities/$250K cash. They don't do commodities. The SIPC successfully unwound Lehman Brothers, Madoff, and MF Global, and everybody got their money back up to the SIPC limits. Dealing with a failed Bitcoin exchange would be a small job.

The SIPC is good at finding and getting back assets that somehow wandered off. See "http://www.madofftrustee.com/". Some insiders who thought they'd gotten away with big gains from Madoff funds had them "clawed back" by the litigation trustee. Billions of dollars were clawed back.

Madoff himself is Federal Prisoner #61727-054, in a cell at Butner Federal Correctional Institution, scheduled for release in 2139. That's what should be happening to heads of Bitcoin exchanges where the assets just "disappeared".

Re: First U.S. Bitcoin Exchange Set to Open

#53

Post by faisalkhan »

beaner wrote: post #51
sidko wrote: post #48

Earlier quoted context omitted.

>However, it is the first US bitcoin exchange with some amount of money transmitter licenses Not true. There are definitely exchanges out there that have state MSB licenses. Perhaps you're unaware of their existence. I know companies can sometimes be secretive about this stuff, but exchanges like CoinX have MSB state licenses. Check out http://coinx.com/money-transmitter-licenses for instance.

CoinX doesn't have a real product though do they? Does it count if you have the licenses but no exchange to use them with?

VP CoinX here: We do have an exchange, www.coinxtrader.com (it is mentioned on our main website, coinx.com). We were the very first exchange to obtain MTLs, that is the route we took when we established our company.

With respect to the second point, "real-product" We have a working exchange in addition to money-transfer services in the shape of coinhub.com (which goes live in a few weeks time).

Re: First U.S. Bitcoin Exchange Set to Open

#54

Post by tlrobinson »

mirimir wrote: post #42
tlrobinson wrote: post #32

Earlier quoted context omitted.

Not sure I'd call that "simple". A hardware wallet like Trezor seems like a much better solution.

That's too proprietary for me. Too much could go wrong. If someone has enough Bitcoins to bother with offline wallets, knowing how to use VMs isn't too much to expect.

Trezor uses BIP-32 hierarchical deterministic wallets, BIP-39 mnemonic seeds, an open communication protocol, and entirely open source software and hardware (firmware and schematics, no PCB). If you have concerns about the RNG you can import BIP-32/39 wallets from elsewhere. It also now supports multisig.

I'm not really sure what storing entire VMs as "wallets" gets you. VMs don't protect the guest VM from a compromised host OS, so at best you're protecting the host (and therefore other guests) from a compromised wallet VM. But then why not spin up a fresh VM and type in the wallet's mnemonic seed? I suppose you could argue it protects against unsophisticated attacks like malware on the host OS looking for "wallet.dat", but that's about it.

With hardware wallets, assuming the firmware is bug-free (which is difficult, but easier on a simple embedded device than a PC running millions of lines of code), you could plug it into the most malware infested machine imaginable and still securely send your bitcoins to the intended address (excluding DOS attacks, and assuming you verify the address out of band)

There are a couple ways to use a hardware wallet to manage funds. You could use a single wallet with a single seed and multiple addresses, but if the host AND device are compromised you'd lose all the funds, so ideally you'd split offline funds across a bunch of seeds that are either stored in individual Trezors, or on paper to be entered into a Trezor when they need to be transferred.

Multisig adds another strong layer of protection, and would be wise especially in organizations where you don't want to trust funds to individuals.

Re: First U.S. Bitcoin Exchange Set to Open

#55

Post by tlrobinson »

Animats wrote: post #18

"As is typical of most bitcoin/fiat intermediaries when promoting their products, the new exchange is being touted as a first and a means to bring legitimacy to Bitcoin." - Qntra. We've heard that story many times before. Kraken makes similar claims. (Kraken uses the same address, 548 Market St, SF, as Coinbase. It's a mail-forwarding service. Few people know where either exchange really is.) So what is this "license…

IIRC it's possible to get a money transmitter "sublicense" (not sure if that's the right term) from another licensed money transmitter, which is perhaps what Coinbase is doing.

Re: First U.S. Bitcoin Exchange Set to Open

#57

Post by thinkcomp »

tlrobinson wrote: post #55
Animats wrote: post #18

"As is typical of most bitcoin/fiat intermediaries when promoting their products, the new exchange is being touted as a first and a means to bring legitimacy to Bitcoin." - Qntra. We've heard that story many times before. Kraken makes similar claims. (Kraken uses the same address, 548 Market St, SF, as Coinbase. It's a mail-forwarding service. Few people know where either exchange really is.) So what is this "license…

IIRC it's possible to get a money transmitter "sublicense" (not sure if that's the right term) from another licensed money transmitter, which is perhaps what Coinbase is doing.

To the best of my knowledge, it's not. Instead they've hired Thomas P. Brown at Paul Hastings LLP/UC Berkeley as well as the former DFI Commissioner, Bill Haraf, to lobby on their behalf for forgiveness while they perpetually violate the California Money Transmission Act. Both have done quite well. Brown met with Robert Venchiarutti at DBO on October 25, 2013 at the very least, and also filed documents with the CA Office of Administrative Law, which he revoked when the DBO promised to be nice to him over the phone.

https://archive.org/stream/california-dbo-emails-ii/Producti...

For his part, Venchiarutti got his current job with the then-DFI 12 days after settling a legal malpractice claim in Los Angeles, which he lied about under oath in 2010. In the same deposition where he lied about having been sued, he also admitted to having no qualifications at all for his work.

https://archive.org/details/robert-venchiarutti-letter

This is the guy responsible for letting money disappear at Mt. Gox (via Dwolla, with a San Francisco office) and most recently Xoom, where $31 million vanished overnight. But don't worry, his assistant Julio Prada literally has a blood pressure cuff in his office for when he gets too stressed and angry. (We know this because a former DFI employee sued them both.)

Just can't make this stuff up.

Re: First U.S. Bitcoin Exchange Set to Open

#58

Post by uehehehehe »

aarondu wrote: post #43

Coinbase and Winklevoss ETF are acting more like new commodity exchanges than currency exchanges. A commodity (like Gold) has value attached but it is not a currency, and its value invariably fluctuates (like Bitcoin). To date, crypto currency remains a technology topic. If you want to change finance, first understand it. Take your corporate finance, capital market, macro economics classes, and understand government'…

"If you want to change finance, first understand it."

You should take your own advice.

"just a technology looking for a problem to solve"

haha thanks for the Monday morning laugh.

I'd give you a clue but you took, "corporate finance, capital market, macro economics classes, and understand government's role in currency and economy." at a US school.

You should ask yourself why, knowing it all, you don't have it all...

Re: First U.S. Bitcoin Exchange Set to Open

#59

Post by SuddsMcDuff »

vasilipupkin wrote: post #24
Animats wrote: post #18

"As is typical of most bitcoin/fiat intermediaries when promoting their products, the new exchange is being touted as a first and a means to bring legitimacy to Bitcoin." - Qntra. We've heard that story many times before. Kraken makes similar claims. (Kraken uses the same address, 548 Market St, SF, as Coinbase. It's a mail-forwarding service. Few people know where either exchange really is.) So what is this "license…

I don't know the specifics, but this being a U.S. exchange, it needs to comply with a whole lot of regulations in order to deal with customer money. So, while I am not sure what exact level of protection it offers, whatever it is, it is higher than non US based exchanges, which should be a positive step for development of bitcoin

"whatever it is, it is higher than non US based exchanges".

Riiight, because nowhere except the US imposes financial regulations. Hey remember that time Europe existed?

What sets Coinbase apart right now is not what country they happen to be in, it's that they've sought extra levels of conformity with their local authorities. If Bitstamp were to register with the British Financial Conduct Authority for example, people would have a lot more confidence.

Lets not be so arrogant to imply that bitcoins future rests on the US market.

Re: First U.S. Bitcoin Exchange Set to Open

#60

Post by vasilipupkin »

SuddsMcDuff wrote: post #59
vasilipupkin wrote: post #24

Earlier quoted context omitted.

I don't know the specifics, but this being a U.S. exchange, it needs to comply with a whole lot of regulations in order to deal with customer money. So, while I am not sure what exact level of protection it offers, whatever it is, it is higher than non US based exchanges, which should be a positive step for development of bitcoin

"whatever it is, it is higher than non US based exchanges". Riiight, because nowhere except the US imposes financial regulations. Hey remember that time Europe existed? What sets Coinbase apart right now is not what country they happen to be in, it's that they've sought extra levels of conformity with their local authorities. If Bitstamp were to register with the British Financial Conduct Authority for example, peopl…

"Lets not be so arrogant to imply that bitcoins future rests on the US market" - first of all I never said this. Have you actually read what I said? I said this development is a net positive for bitcoin. Why? Because if you run afoul of US regulations, it's hard to deal with any banks that do business in the US.
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