Dub 22

Florida Bill Aims To Add Virtual Currency To AML Statutes

· April 22, 2017 · 1:00 pm

An act designed to add virtual currencies to Florida’s anti-money laundering statutes has unanimously passed three state committees.


Bill Targets ‘Ill-Gotten Gains’ From ‘Internet-Based Currencies’

The bill, sponsored by republican Jose Felix Diaz, “makes sure that traffickers and fraudsters can no longer try to use internet-based currencies to hide and move their ill-gotten gains,” State Attorney Katherine Fernandez Rundle said in a statement quoted by local news resource Miami Herald.

Rundle added:

The high-tech criminals of the 21st Century use virtual currencies like bitcoin to accumulate and hide the profits of their illegal activities.

Bitcoin related crime

As the Herald notes, the legislation comes hot on the heels of the failed prosecution of Florida resident Michell Espinoza, who allegedly tried to sell $1,500 of bitcoins which were used to purchase stolen credit card information.

Despite his arrest after undercover law officers posed as traders on Localbitcoins, telling Espinoza they intended to use the funds for illicit purposes, a judge ultimately threw out his case as Bitcoin is not considered money under current Florida law.

“This court is unwilling to punish a man for selling his property to another when his actions fall under a statute that is so vaguely written that even legal professionals have difficulty finding a singular meaning,” the ruling determined in July last year.

No Official Identity For Bitcoin In Florida

Fellow Republican Dorothy Hukill meanwhile announced in September that she was seeking official recognition of Bitcoin as a currency in the state, but no progress has yet been made.

The latest motion has ruffled feathers among local cryptocurrency advocates. Barry University economist Charles Evans explained to the Herald how it could send the wrong message.

Barry University economist Charles Evans

Florida legislators will be sending a very clear signal that financial innovation is not welcome here… No doubt, officials in China, Europe, Russia, Texas, and other places where Bitcoin is welcome will be pleased.

Others were less concerned, local lawyer Andrew Hinkes claiming authorities would still need to prove intent to use Bitcoin for illegal activities to entail a prosecution.

I don’t think it would affect the day-to-day users of bitcoin, or investors who hold bitcoin… but it might affect the business of those who exchange bitcoin for dollars. Now, assuming the facts support the intent required by law, the path to prosecution of traders for money laundering is clearer in Florida.

The bill is now awaiting its audition before a further state committee.

Virtual currency has faced a continued patchwork legal status across US states, with jurisdictions taking markedly different approaches to regulating it.

What do you think about Florida’s latest bill and Bitcoin’s status in the state? Let us know in the comments below!


Images courtesy of Shutterstock, Barry University

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Bře 23

The China Syndrome: Are California’s Bitcoin Exchanges Doomed?

· March 23, 2017 · 4:30 am

Increasing regulatory pressures have eviscerated trading volumes across Bitcoin exchanges in China. Bitcoin’s shifting volumes and price are signaling that further disintermediation is inevitable, which could also spell trouble for Western exchanges like Coinbase and Kraken.


China Regulates Bitcoin Exchanges

Increasing regulation of the Bitcoin market in China by the People’s Bank (PBoC) has characterized the first Quarter of 2017.

First they banned margin-trading. Then they halted withdrawals of Bitcoin from Chinese exchanges in February. The latest news is that withdrawals are expected to resume soon provided a strict set of KYC/AML conditions are met.

The nature of the ban on withdrawals has been widely misunderstood.

Note that bitcoins were not trapped. Trading continued the whole time on Chinese exchanges – purchases and sales were allowed. The PBoC never disallowed the withdrawal of cash from Chinese exchanges. So Chinese who wanted to exit could simply sell their Bitcoins and withdraw their renminbi.

The China Syndrome

That said, there were several consequences of the Chinese regulation in the global Bitcoin market. I call this set of results or symptoms that occur in tandem ‘the China Syndrome’.

China Bitcoin Core attack

We can expect more and more financial regulators to intervene ever more intrusively into Bitcoin markets globally, and we can expect to see a similar syndrome of effects every time.

So, as the IRS demands that Coinbase reveal all its customer records, we can expect the same China Syndrome set of consequences.

What were the results of increased regulation of exchanges in China?

  1. The share of global trading volumes of Chinese exchanges collapsed.
  2. There was terrific disintermediation. Over The Counter (OTC) trading volumes in China exploded. This is trading that is done P2P, off-exchange. The two most popular OTC platforms in China are LocalBitcoins and Bitkan.
  3. Bitcoins started to trade on Chinese exchanges at a significant discount to global prices. Previously Bitcoin had nearly always traded at a small premium on China exchanges to the global price. (Zerohedge claimed ad nauseam this was evidence of demand for Bitcoin as a vehicle for capital flight, though that’s refuted by BTCC CEO Bobby Lee.)
  4. Bitcoin traded OTC in China has achieved a premium over both the price on Chinese exchanges and indeed over global prices. It is the most expensive Bitcoin in the world!
  5. Bitcoin has recently started to trade on LocalBitcoins at a premium to exchanges worldwide where previously there was a discount.
  6. The logical endgame of disintermediation is a black market. For example, what naturally happens in an economy such as Venezuela or Nigeria where banks (the middleman) fail to provide the market-clearing price for dollars as a result of capital controls? People will disintermediate their asses and sell on the black market of course!

[Data verifying these statements about prices is at my website, Blocklink.info. Select the ‘Black Market FX’ tab.]

Disintermediation is Inevitable

Definition from Investopedia:

Disintermediation, in finance, is the withdrawal of funds from intermediary financial institutions, such as banks and savings and loan associations, to invest them directly. Generally, disintermediation is the process of removing the middleman or intermediary from future transactions.

There remains a powerful need among Chinese to trade Bitcoin that the PBoC cannot stifle. PBoC tries to block one avenue and wily Chinese users disintermediate their way through. It is like the funfair game of whack-a-mole.

As the middleman  – the Chinese exchanges – was failing to meet the need to freely trade Bitcoin, Chinese users cut out the middleman. Here are two charts to illustrate the extent of the disintermediation. Chinese exchanges have become the sick men of global exchanges, and LocalBitcoins China is experiencing explosive growth..

12

coin-dance-localbitcoins-cny-volume

Note that this second chart greatly understates OTC trading in China for several reasons.

One, it’s possible that the Bitkan platform is even more popular than LocalBitcoins in China. Bitkan reported a twelvefold increase in trading volumes in Q1 2017 in this interview with Bitcoinist.

Two, once buyer and and seller establish a relationship through LocalBitcoins or Bitkan, those two parties might choose to transact thereafter privately, without using the platform, so saving on escrow and platform fees.

Three, you also tend to get P2P Bitcoin deals being negotiated on popular financial and exchange forums, like the Chinese equivalents of Craigslist.

Effects of Disintermediation on Prices

This effect has received less attention than the effect on volumes. In Q1 2017 Bitcoins have traded on Chinese exchanges at a significant discount to global prices. Previously Chinese Bitcoin had always traded at a small premium to the global price.

Premium before Q1 201713

Discount after the actions of the PBOC:

My research shows that a) Bitcoin traded OTC in China has achieved a premium over both the price on Chinese exchanges and over global prices and b) Bitcoin has started to trade on LocalBitcoins as a premium to exchange prices worldwide where previously there had been a discount.

china2

There is not the space here to go into the details, which can be viewed at my site Blocklink.info. In summary, at a snapshot on March 22, 2017 07:00 GMT, these prices prevailed when the Global Bitcoin price was $1,064 USD:

China

  • Chinese exchanges: $1,038 (discount to Global price)
  • Chinese LocalBitcoins: $1,114 ($76 premium to CN Exchanges’ price, or 7.3%)

America

  • US Exchanges: $1,064 (same as Global price)
  • US Local Bitcoins: $1103 ($38 premium to global price, or 3.6%)

Previously analysts argued that there was naturally a discount on OTC markets as a result of the greater convenience that the exchanges offered their clients, and of the greater counterparty risk intrinsic in an OTC trade. But it now seems to be the case that the force is with OTC trading, and that users are prepared to pay a premium OTC to achieve greater privacy and control over their Bitcoins.

Decentralized Exchange is the Future

Exchanges in the San Francisco, Japan and Europe have been doing terrific business in 2017 and the money is rolling into their coffers in the form of trading fees and the income they derive from their Bid-Offer spread.

Oh, they are living the life of Riley in San Francisco’s Financial District! Knocking back the $20 libations at Rickhouse Bar on Kearny Street and at Comstock Saloon. They think nothing of buying $75 steaks. The toilets are dusty with cocaine powder. But threats similar to those that have hit the solvency of OKCoin, BTCC etc. await Coinbase, Kraken, Bitfinex and the other big hitters. There will be blood.

coin-dance-bitsquare-all-volume

The future looks rosier for the more decentralized avenues like Bitsquare, whose global volumes have been rising steadily, and for wallets with greater privacy like Samourai.

Further disintermediation in Bitcoin trading is inevitable. That is what the shifting volumes and the price mechanism in the Bitcoin market are signaling.

And note this: the ultimate disintermediation is black market/criminal activity. For example, drug users disintermediate the failure of pharmacies to provide Grade A meth and crack by buying from the street corner or on Dark Markets. That is where we might buy our Bitcoin 3-5 years from now, possibly from wild-eyed, shaggy-haired ex-employees of Kraken.

Do you agree that centralized exchanges will become obsolete and unable to compete with decentralized avenues? Share your thoughts below!


Images courtesy Coin.dance, Twitter, Shutterstock, Blocklink.info

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Úno 20

LocalBitcoins Trading Up 1,200% in China Since PBoC Clampdown

· February 20, 2017 · 7:30 am

LocalBitcoins has recorded an exponential 1,200% surge in China trading since the country’s exchanges started reacting to pressure from the People’s Bank of China (PBoC).


36 Million Yuan Per Week and Counting

The week ending February 18th was the best on record for the peer-to-peer marketplace, which registered a global high of over $24 million USD in transactions.

The Chinese market, until just a few weeks ago practically dormant, saw a giant 36 million yuan in transactions compared with the previous week’s 6.6 million, which itself was a previous high.

coin-dance-localbitcoins-all-volume-1

LocalBitcoins has seen a rapid increase in usage for the past few months from countries around the world. Venezuela, Canada, Turkey, and New Zealand have all recently peaked on the platform, due variously to financial clampdowns or – in New Zealand’s case – the closure of one of its longest-running exchanges due to “banking hostility.”

Spreads in highly active markets are unsurprisingly wide, with Chinese users especially paying a premium for convenient fast access to fiat or cryptocurrency.

Lee: PBoC ‘Taking Scrutiny More Seriously Than 2013-14’

February 18th also saw Bobby Lee, CEO of major Chinese exchange BTCC, take to Reddit for an AMA session with the community.

bobby_lee_bitcoinist

While much of the discussion focussed on issues related to Chinese miners’ support of scaling solutions for the Bitcoin network, Lee was predictably coy on matters involving regulators.

“I think that compared with 2013/2014, this time, the PBoC is spending more effort on this and taking it more seriously,” he wrote, adding:

The PBOC will have a strong say in how the bitcoin exchange industry evolves in coming years.

He added he could not comment on topics discussed behind closed doors “beyond what was already announced publicly.”

Over-The-Counter Real King of CNY/BTC?

But despite the LocalBitcoins figures being impressive, their overall effect could be little more than a drop in the ocean. A recent report by WSJ China on Bitcoin’s entry and exit from China highlights three main ways investors are using the currency – and LocalBitcoins is not one of them.

“There are several options: premium-taker, foreign futures exchange and OTC (over-the-counter),” a translation of the original article from news resource 8btc reads.

Bitcoinist_NodeCounter Variety

Given the extremely tight margins involved, even for high-frequency traders, it is likely that the last of these methods is seeing the most action.

“OTC traders are looking for each other through mobile apps, social media tools, forum, website or offline meetups,” 8btc reports.

Some major OTC dealers are hiring people to spam online. Wechat chatbot are being developed for OTC purpose. With the absence of exchange-like monitoring, OTC trading will be even harder to track.

Where do you think is the bulk of Chinese Bitcoin trading happening currently? Let us know in the comments below!


Images courtesy of Shutterstock, Twitter, Coin.dance

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Lis 04

OTC: The Silent and Growing Sector in the Bitcoin Trading Markets

Source: bitcoin

Bitcoin Over the Counter Trading OTC

The bitcoin price has exploded in recent weeks, breaking $700 USD for the second time in 2016. Many analysts attribute this bullish activity to the economic slowdown occurring in China, along with the devaluation of the renminbi (RMB), which reportedly leads Chinese investors to buy bitcoin as a safe-haven asset.  

Disclaimer: This article is sponsored by BitKan

The Chinese economy has been in a slow decline since the beginning of 2016, with a depreciating currency and a stock market crash worrying investors holding Chinese assets.

Meanwhile, the economic struggles in China have sent bitcoin markets into a bullish frenzy, propelling the currency’s price skyward.

As such, a large portion of bitcoin’s purchasing volume comes from China, with both cryptocurrency enthusiasts and profit-driven investors buying in.

In fact, one bitcoin analyst credits China’s massive capital outflows for the cryptocurrency’s recent rise to $700 USD. Citing the country’s estimated $573.2 billion in capital flow during 2016, the analyst predicted that enough Chinese money would flow into bitcoin to push its price to $800.

The Rise of OTC Markets

 

Bitcoin exchanges are an area of focus when considering Chinese bitcoin trading. However, over the counter (OTC) markets off an equally large — if not bigger — source of trading from all over the world, China included.

For the most part, OTC trading has been reserved for people purchasing abnormally large amounts of bitcoin. The bitcoin community refers to these traders as “whales.”

However, one Chinese bitcoin company wants to bring OTC trading to the masses through its new mobile service.

BitKan, a popular Android and iOS application that provides news and market data for bitcoin, has recently added an OTC market as part of a large update to its product.   

Similar to popular peer-to-peer exchange LocalBitcoins, the BitKan OTC market displays traders in the user’s area and their buy and sell quotes. Users can choose the person they want to trade with, contact them through the app, and arrange a trade.

In order to utilize the OTC utility, BitKan users have to create an in-app web wallet, as well as bind their phone numbers to their app accounts in order to execute purchases via SMS.

The company has recently brought this service to web-based users as well, launching a browser version of the OTC function on its official website.

While the team at BitKan does not condone illegal asset liquidation, or other actions that violate Chinese capital controls, it still claims to respect user privacy. As such, any OTC trades on the app under 5 BTC do not require Know Your Customer Verification.

Getting off to an enthusiastic start, the company has visited bitcoin and blockchain conferences across the world, recently attending the Blockchain & Bitcoin Conference in Kiev in September. The team also said it plans to go the next conference in Moscow.

Additionally, today, the team will be at the laBITconf in Argentina, the largest bitcoin conference in Latin America. BitKan is a major sponsor of this event, and the company’s chief operations officer will deliver a speech there on the Chinese Bitcoin and blockchain market.

With services like BitKan and LocalBitcoins gaining in popularity among average traders, and a continuing threat of global recession, it is plausible that OTC bitcoin trading will continue to grow, simultaneously driving the bitcoin price higher.   

Do you use OTC markets to trade bitcoin? Let us know in the comments below.


Images courtesy of Shutterstock, BitKan.

The post OTC: The Silent and Growing Sector in the Bitcoin Trading Markets appeared first on Bitcoinist.net.

OTC: The Silent and Growing Sector in the Bitcoin Trading Markets

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Dub 24

LocalBitcoins Database Allegedly Hacked, User Info For Sale

Source: bitcoin

LocalBitcoins Database Allegedly Hacked, User Info For Sale

The bitcoin marketplace, LocalBitcoins, has reportedly been hacked by a malicious agent who claims to have the full database of usernames and passwords.

Also read: Bitcoin Price Stirs Up Bullish Sentiment

LocalBitcoins Possibly Hacked

So far, the hacker has only posted an alleged partial list for sale on Satoshibox and it remains unknown if there is a larger list being sold. There is a belief among some that this is simply a hoax as the very same person who is claiming to be the hacker has apparently tried to sell a fake “bitcointalk.org database” in the past.

Below is a partial quote of the original post on Bitcointalk forum:

For sale in here is the Localbitcoins.com database, including up to 700k+ users, most are active.
I’ve managed to get into a few accounts, but the passwords are encrypted but pretty easy to crack if you have to programs… Inside is a partial upload of the Localbitcoin.com Database… using multiple methods of Cross Service and Injections I’ve managed to gain access to their server. Included with the majority of checked logins are Bitcoins. Please be aware, if you plan to transfer to your account it may be risky business.

With the recent hacking of Shapeshift, this very well could just be the result of paranoia on the part of bitcoin users who are simply over-reacting. However, substantiated or not you can be assured that any hacking claims are going to draw some attention, maybe even more than it should or normally would have.

One thing is for certain, if this alleged hack is for real, then it will be a huge blow to not only LocalBitcoins, but to the entire Bitcoin community. Back-to-back large scale hacking events increases skepticism about Bitcoin and decreases trust in the cryptocurrency. For now, we can’t know for sure what has actually happened, we can only speculate until further events unfold that illuminate the situation a little better.

What Do you think of the possible hacking of LocalBitcoins’ database? Let us know in the comments below!


Sources: 1, 2

Images courtesy of  Harborly, LocalBitcoins.

The post LocalBitcoins Database Allegedly Hacked, User Info For Sale appeared first on Bitcoinist.net.

LocalBitcoins Database Allegedly Hacked, User Info For Sale

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Úno 29

LocalBitcoins Volume In South Africa Shows 50-fold Growth In One Year

Source: bitcoin

Bitcoinist_South Africa

The concept of Bitcoin has been attracting attention from all over the world in recent years. Digital currency provides a way to achieve financial freedom regardless of one’s location or access to existing services and platforms. South Africa seems to be taking a serious liking to Bitcoin in recent weeks, as the LocalBitcoins trading volume keeps spiking week over week.

Also read: London Bitcoin Forum – The Conference for Bitcoin & Blockchain Innovations – Kicks Off March 23rd

South Africa Goes Through Financial Turmoil

Historically speaking, the increase in trading volume on LocalBitcoins in South Africa has been taking place since April of 2015. Even though a small increase is nothing to make note of these days, the volume has been steadily increasing ever since that time. Or to be more precise, the LocalBitcoins volume has grown by almost 5,000 percent in the past eleven months.

Financial trouble has been brewing in South Africa for quite some time now, as the country has gone through no less than three different finance ministers in less than a week in December of 2015. Even though Pravin Gordhan had served as a finance minister from 2009 to 2014, his appointment at the end of 2015 was a drastic move to put investors’ minds at ease.

The previous finance ministers between the end of 2014 and December 2015 have been able to reign in state spending, which was a cause for great joy among South African citizens. However, the South African Rand fell to record lows during this same period, part of which could be blamed on the increasing USD value.

A weak Rand is creating financial instability in the country, forcing residents and investors to look for other options. Bitcoin seems to prevent the answer to the problem, as this popular digital currency is available to anyone in the world, without oversight from banks or governments.

However, obtaining Bitcoin can be a bit of a problem for novice users. Luckily, there are platforms like LocalBitcoins, which connects buyers and sellers of digital currency with each other. Unlike traditional Bitcoin exchanges, LocalBitcoins will not touch customer funds at any step along the way, as they just act as a platform to connect interested parties and create a reputation system for individual users.

LocalBitcoins Usage On The Rise

It should come as no surprise to find out the Bitcoin volume against the South African Rand is seeing a healthy boost on LocalBitcoins. The transaction volume has been increasing month over month since April of 2015, and business has seriously picked up as of November of last year. This surge in Bitcoin volume appeared around the same time the country when through three ministers of finance, so there might be a correlation there.

At the time of publication, LocalBitcoins reached a weekly volume of 12 million South African Rand in the past week. This is quite an increase compared to the last week of February in 2015, as the volume then was sitting at 251,254 Rand. To put this into numbers people can relate to, the LocalBitcoins volume in ZAR increased from US$16,624.66 per week to US$746,240.43 in less than one year.

What are your thoughts on this major LocalBitcoins trading volume in South Africa? Will this trend continue? Let us know in the comments below!

Source: Coin Dance

Images courtesy of LocalBitcoins, Shutterstock

The post LocalBitcoins Volume In South Africa Shows 50-fold Growth In One Year appeared first on Bitcoinist.net.

LocalBitcoins Volume In South Africa Shows 50-fold Growth In One Year

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