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UK Banking Giant Barclays to Allow Charities to Accept Bitcoin

Barclays has announced it will take its first steps toward supporting the use of bitcoin as an alternative payment method by allowing charities to accept donations in the digital currency.

In a new article in The Sunday Times, the multinational financial services firm hinted that it had entered into a partnership with an unnamed "bitcoin exchange or spending platform", and that it would seek to begin a formal rollout of the service by 2016.

Barclays chief design and digital officer Derek White provided the news source few details about the partnership, other than to state that it was in development.

White told the Times:

"Barclays is enabling the bitcoin exchange to help charities accept bitcoin."

The announcement follows others that suggest the bank it steadily increasing its efforts to understand and implement bitcoin and blockchain technology.

Earlier this year, Barclays revealed it is pursuing a proof of concept with European exchange and services provider Safello, a move that followed March news that it had accepted three industry firms into its FinTech accelerator program.

BankingBarclaysCharity

Gyft Co-founder: Bitcoin Payments Have Decreased by 80%

When digital card platform Gyft first integrated bitcoin payments, they accounted for 90% of the company's sales, with PayPal and credit cards making up the remaining 10%, but this has all changed, according to the firm's co-founder and CEO Vinny Lingham.

The California-based company integrated bitcoin payments in 2013 and initially saw a trend for this payment method, but this has since reversed – PayPal and credit card purchases now account for 90% of sales. Regardless, Lingham continues to be fascinated by bitcoin.

In fact, it's fair to say his personal fascination with the digital currency led to Gyft offering it as a payment option in the first place.

Lingham told Bitcoin News:

"The reason we started [accepting bitcoin payments for gift cards] is because I am a bit of a bitcoin fanatic and being the CEO and co-founder is kind of one of those things where you build the company and its DNA around the things that you are passionate about."

Lingham – a serial Internet entrepreneur – also noted bitcoin integration had acted as a catalyst for the company's growth, after the its decision to do so received a significant amount of media attention.

"So we rode out the bitcoin bandwagon for at least a year throughout various hype cycles and so a lot of people adopted bitcoin and they used Gyft ... and we became the de-facto standard for bitcoin usage," he added.

Bitcoin as a commodity

Despite having a front seat to bitcoin being used in payments, Lingham doesn't see bitcoin as a currency – at least not yet.

"The reason for this is its just not stable and you can't price things in the currency ... right now it's being used as a medium of exchange, the same way you would use gold," he said.

According to him, bitcoin will become a currency when its supply and demand are balanced and an industrial use-case is found.

"There's an unknown amount of demand, but a lot of speculation, so the price fluctuations are pretty intense and because the demand side of the equation is not fully calculated yet, this is why there is so much uncertainty in the bitcoin world," he added.

Despite his initially pessimistic observations, Lingham seemed bullish when it came to discussing the digital currency's potential price mark, which he believes will reach $10,000.

Lingham said:

"It will get there, it may take five years to get there but it will get there and at that point it will be a very stable asset and the price fluctuation will be very minimal. I think we will get to the point eventually where you can use bitcoin as a currency, we are just nowhere close to that right now."

For Lingham, bitcoin is essentially a commodity – albeit the world's first digital commodity.

Blockchain: a public database

Similar to his contemporaries, Lingham's views on blockchain technology revolve around the notion of using the distributed ledger as a database.

"There are so many potential use-cases [for blockchain technology] that I wouldn't even know where to start. I personally think there are a lot of opportunities in identity, property ownership titles and obviously stock market trading and decentralised stock exchanges."

Other companies who supply gift card services to merchants, he said, are storing them in their own proprietary databases.

"Why does that have to be the case? Why can't you store this information publicly in a public ledger or in a public database and so whoever owns that gift card has access to that data and owns that data," he added.

This option, Lingham noted, would be cheaper, more secure and provide a better user experience.

The company sets out to do this with Gyft Block – a gift card trading platform which leverages blockchain technology – created in partnership with API developer Chain.

With Gyft Block, Lingham concluded, the company is showing how a neutral third party such as the blockchain can be used to track "sensitive and financial data".

Vinny Lingham is speaking at Consensus 2015 in New York. Join him at the TimesCenter on 10th September. A list of the event speakers can be found here.

Blockchain TechnologyConsensus 2015GyftVinny Lingham

Blockchain Tech Could Save Global Business $550 Billion Per Year

Jeremy Almond is cofounder and CEO of PayStand, a payments-as-a-service platform. He is a frequent speaker on next-generation payment technologies, including bitcoin and the blockchain. Here, he examines whether open Internet standards and blockchain technology can rescue the last bastion of analog payments.

In today’s globally connected, digitally driven, Internet golden age, it may surprise you that when businesses pay each other for goods and services, they still pay by check.

According to a recent Goldman Sachs report, paper checks account for at least 50% of B2B payments. While credit cards have made consumer purchases faster and easier, the merchant fees involved are a deal-breaker for high-value B2B transactions. It’s 2015, but without a viable digital alternative, we’re now sending $26tn per yr through an analog system invented 2,000 years ago.

But what about the hidden costs of continuing to use paper checks? When you factor in the overhead and time spent processing check payments, their actual cost is about $8 per check, not including losses due to human error and fraud.

All told, legacy payment systems are costing global businesses $550bn a year in direct expenses and inefficiencies.

Instead of losing funds to a leaky payment system, that’s money that could be used to create more jobs, build better products and invest back into the economy.

Money on the table

This potentially deadly combo of aging technology and mounting costs represents a once-in-a-century opportunity for businesses to modernize the way they pay each other, or risk joining the graveyard of corporate dinosaurs that couldn’t compete in the 21^st century.

There’s a lot of money on the table for companies that switch to digital – $57B in net cost savings globally each year, according to Goldman Sachs’ research.

Although many Fortune 500 companies operate their payments on legacy systems that are the embarrassment of their IT staff, the ones that hold out the longest actually stand to see the most benefit from switching to digital.

Just as some third-world countries skipped over landline telephones and went straight to cellular, companies that resisted pre-Internet EFT and other proprietary systems can leapfrog straight to digital systems that are optimized for today’s Internet and mobile infrastructure.

They can even take advantage of developments of open, natively digital blockchain technology to slash the cost of payments even further.

Teaching payments a new language

Wasted money is the elephant in the room with paper checks, but there’s another big problem with legacy payment networks that could do even greater damage in the long run—the inability to track information about payments throughout the supply chain.

While organizations typically invest heavily in their ERP and accounting systems, the actual payment itself is usually not connected to these commerce engines.

In this era of Big Data, payment systems that can’t provide automated, up-to-date and globally accessible tracking information spread inefficiencies not just to accounts departments, but to all areas of a business.

So how can businesses be sure that when they move to digital payments they realize the most cost savings and be able to mine the wealth of data that payments can reveal about their operations?

The answer may lie in an open Internet technology you’ve probably never heard of – FSML, or Financial Services Markup Language.

Like HTML, FSML is a structured language developed specifically for financial transactions, including eCheck, the digital successor to paper checks.

FSML makes it possible for eCheck transactions to carry an unlimited amount of data with them, structured in an open language that can be read and shared between databases and applications.

This addresses a key limitation of analog check and legacy automated clearing house (ACH) and electronic funds transfer (EFT) transactions, which limit appended data to a handful of cryptic codes.

When a company moves from paper checks to eChecks, they gain an opportunity to append their transactions with rich data that can be synced between ERP, CRM and vendor-facing websites. They can begin to connect the dots between procurement, accounts payable and payments, perhaps discovering inefficiencies, double-payments and even fraud along the way.

Get ready for machines that can pay each other

The eCheck standard with its underlying FSML language is an open technology that businesses can use today to digitize their payments. But this is just the beginning of how open technology can reinvent payments.

Looking out into the not-too-distant future, innovative businesses will begin to record their transactions on blockchain-like ledgers, opening up the possibility of completely automated payments between trusted parties and even between machines.

Imagine a world where commercial agreements are executed by digital smart contracts. Where the contract and payments are actually tied together by mathematical rules of the blockchain.

A commercial term like “Net-30” that obligates a business to pay its invoice in 30 days, could be automatically executed on the day it’s due. Or an agreement to pay on delivery could track that the product actually was received and signed off on as in good order, before payment is released.

Escrow systems, third-party agents, and intermediary networks could be rethought to be far more efficient.

Or perhaps even more exciting is the ability for business-to-business blockchains to enable digital native payment networks that can instantly settle funds directly between parties.

Today, electronic payments are delayed as they batch-process through third party processors and legacy networks, like ACH.

With a blockchain, rich data about the payment can be included, it can operate seamlessly across borders, between currencies and can be executed at the speed of light. Say goodbye to “the check is in the mail”.

The race is on for businesses to claim their share of the $57bn of cost savings for moving to digital payments. The ones that really think through how to integrate payments with all the moving parts of their business, and embrace open technology standards they can customize and build on, will win the lion’s share.

Check and dollar images via Shutterstock

Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, Bitcoin News.

Blockchain TechnologyChecks

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USAA: Bitcoin and Blockchain Are FinTech Game-Changers

Vic Pascucci is quick to use the phrase "game changer" when talking about bitcoin and blockchain technology.

The current USAA head of corporate development and board member at its portfolio startups including Saffron, ID.me and Automatic Labs says he hasn't seen many technologies that meet this description during his nearly 20 years in the VC sector.

Bitcoin and the blockchain, in his opinion, are very different than other areas of interest for the insurance, investing and banking firm, founded in 1922.

"I've been working in technology since the early 1990s, I never thought I'd see something as big as the Internet," Pascucci, who has been with USAA since he joined as a vice president of enterprise operations in 2006, said in interview.

However, he suggested his personal passion for the technology may be more overstated than the US military-focused financial firm, which generated $24bn in revenue in 2014 and manages $26.7bn in net worth for its members.

Pascucci told Bitcoin News:

"I've seen a lot of great things out there that could help our members and our enterprise, but I think the biggest potential game-changer long-term will be bitcoin and the blockchain."

This interest, according to Pascucci, is propelled by how well the financial technology hits on its three core areas of focus – finance, consumer Internet and digital capabilities. "We look for those convergences that have that synergy," he continued.

But while there is much speculation as to how USAA could ultimately deploy bitcoin-based services or blockchain technology, Pascucci remained tight lipped about what the team he said based full time on the blockchain is currently developing.

"We want to be sensitive to how much we expose," he said. "We experiment a lot, and if we come out too early, our members expect to see it. The last thing we want to do is mismanage our users' expectations, so we want to be sensitive to that."

Pascucci did hint that the group is working on applications on both the bitcoin blockchain and on private blockchains that would potentially enable the company to track assets and claims and conduct real-time record-keeping.

"There are so many efficiencies we can unlock," he added.

Chance meeting

To date, USAA's biggest move in the space was its participation in Coinbase's $75m Series C round, completed in early 2015 – a move he attributed to an early meeting with the company.

Pascucci said that, in order to keep pace with emerging technologies, his team makes frequent visits to the West Coast to meet with venture firms and FinTech startups.

"We sat down with [Coinbase co-founder] Fred [Ehrsam], Micky Malka from Ribbit Capital and just had a great conversation about bitcoin and the blockchain and the efficiency it would bring," he recalled.

But it was the makeup of the bitcoin services firm's user base that ultimately convinced USAA to make Coinbase one of its estimated 10 to 12 annual deals, where it invests anywhere from $1m to $10m in venture capital.

"We saw an amazing index of USAA members using Coinbase," he said. "We were one of the most active user groups, but we saw our members' accounts were twice the size and they tended to be twice as active."

From there, Pascucci said USAA realized it needed to "move fast" to better understand the technology, investing because of the combination of market analysis and member association.

As for whether it remains interested in subsequent investments in the space, Pascucci was optimistic if non-committal, adding:

"There's a strong feeling we'll do more, but we've got all types of lines of businesses to serve."

Possible applications

Right now, Pascucci said USAA is still working to develop a thesis on the technology, and it hasn't decided where it might be most applicable.

Still, Pascucci acknowledged bitcoin and the blockchain could impact how USAA interacts internally, with other financial organizations, with its members and how its members interact with each other.

"It's that kind of constant balancing act as to where we're going to see the best benefit for our members and the cost," Pascucci said. "It feels like bitcoin is most advanced but it feels like the enterprise capabilities are so vast, but it could all take time."

More specifically, Pascucci deflected comments on whether it was pursuing blockchain-based recordkeeping technologies for use in its insurance claims process.

Ultimately, Pascucci said USAA will continue to base its decisions on feedback from members, with whom he stressed the firm strives to maintain a dialogue regarding its decisions. Should users be uncomfortable with or unsure about the need for certain features provided by the technology, he suggested any interest could fall by the wayside.

"They could surprise us and say 'We like the set up the way it is,' he said. "We see the capabilities and the power, but the members are going to tell us what they like."

Pascucci suggested regulatory uncertainty surrounding the technology was another factor, citing discussion as to whether bitcoin is best considered a currency or security.

"My take on that is that the level of understanding has to be consistent with regulations," he continued. "The regulations weren't designed for these types of things."

Ongoing discovery

As for the ongoing work at its facilities, Pascucci was less specific with details, noting that 90% of his team is working on the firm's venture arm and tracking emerging trends.

"I have a team of nine that works for me," Pascucci explained. "Zach Gibson, our chief innovation officer, he has the tech resources to incubate ideas, they have a full team of people that's exploring disruptive technologies and we're working closely with that team."

Pascucci said USAA has an equally strong interest in technologies that enable communication with its members, given that it has no physical branches. Cybersecurity, storage, networking and analytics also remain top priorities in the innovation lab.

Cost, he suggested, would also be a factor in the company's decisions, and that ultimately any solution it pursues would need to balance expenditure with benefit.

Pascucci concluded:

"My team in corporate development is responsible for identifying emerging trends that will ensure it's as relevant the next 100 years as it was the last 100 years."

Vic Pascucci is speaking at Consensus 2015 in New York. Join him at the TimesCenter on 10th September. A list of the event speakers can be found here.

USAA image via Facebook

Blockchain TechnologyCoinbaseUSAA

ChangeTip Users Can Now Turn Bitcoin Tips into Gift Cards

ChangeTip users can now swap their digital currency tips for real-life goods, thanks to an integration with digital gift card provider Gyft.

The bitcoin tipping service, which has raised $4.25m in funding to date, brands itself as a 'love button' for various social media channels including Facebook, Twitter and Reddit.

Until now, ChangeTip users could top up their accounts via Coinbase, bitcoin or credit/debit card, however they could only cash out in bitcoin. Following the firm's announcement yesterday evening, they now have the option to redeem gift cards from Starbucks, iTunes, Xbox and Amazon. They range from $1 all the way up to $2,000.

ChangeTip's withdrawal page

Alongside denominations in dollars and 'bits' (0.000001 BTC), the platform has various 'monikers' – such as coffees ($1.50), doughnuts ($0.35) and high-fives ($5.00) – that users can tip each other.

"We are doing this because it's important for people to use their tips. If you receive a coffee, claim the coffee," Victoria van Eyk, ChangeTip's community manager, told Bitcoin News.

"If it goes well I'd love to link monikers to gift cards, so you can send someone an item and have them claim it at a store," she added.

Gyft, which has been accepting bitcoin since 2013, is one of the most popular merchants for bitcoin users. Earlier this year, a report from its processor, BitPay, indicated 39% of its transactions were related to gift cards.

Featured image: Bocman1973 / Shutterstock.com

Disclaimer: Bitcoin News founder Shakil Khan is an investor in BitPay.

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Sentencing Looms for Teen Who Promoted ISIL Bitcoin Donations

A Virginia teenager who offered online advice on how to use bitcoin to fund terrorist group ISIL is to be sentenced today.

Federal prosecutors asked US District Court Judge Claude Hilton to sentence 17-year-old Ali Shukri Amin to 15 years in prison after he pled guilty in June to a charge of providing material support to ISIL.

In a statement of facts from June, prosecutors said Amin used social media to promote ISIL and discussed “ways to establish a secure donation system” using bitcoin. Amin previously worked as a journalist for the cryptocurrency news site CoinBrief. He was arrested in March.

Amin also admitted to encouraging another Virginia teen to support ISIL and later helped him travel to Syria.

In asking for the 15-year sentence, prosecutors wrote:

“The defendant’s conduct has had an impact on worldwide security, the United States’ security, and the lives of Reza Nikejad and his family. Under a best case scenario, Niknejad will return to the United States to be prosecuted and incarcerated for his activities. It is far more likely, unfortunately, that he will accomplish the goal that this defendant set out for him; martyrdom in the name of ISIL.”

The defense asked the court for a sentence of 75 months, or just over six years, based on Amin’s lack of a criminal history, strong academic record as a high school student and his cooperation with the Federal Bureau of Investigation since his arrest.

In a letter to Judge Hilton, Amin wrote that he had renounced his support for ISIL, “its violence and the way it twists the core tenets of Islam into weapons killing and oppression”.

Gavel image via Shutterstock

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Blockstack on Wall Street's Budding Blockchain Interest

"What can the blockchain do for me today?"

It's a question that's increasingly being asked by major financial institutions, and one that San Francisco-based Blockstack (formerly CryptoCorp) has been focused on finding an answer for since its relaunch in past June.

One of a growing number of companies seeking to provide custom blockchain solutions, Blockstack boasts unique expertise in Standard Chartered Bank veteran Peter Shiau, who serves as the company's COO, and Phillip Harris, advisor and former head of FX at Nasdaq.

Shiau indicates that Blockstack is seeking to capitalize on the "thought shift" currently underway at major financial institutions, which by all accounts are becoming increasingly aware of the potential payoffs from utilizing blockchain-based systems as distributed databases.

Shiau told Bitcoin News:

"This is a software stack to enable financial services to have a private isolated blockchain...that became exciting to financial institutions, because now they can start working on applications and back-office systems."

Blockstack is one of a new wave of blockchain-first tech services firms seeking to partner with financial institutions on initiatives involving the technology, a group that prominently includes names such as Chain, Eris Ltd, Gem and Digital Asset Holdings, among others.

CEO and former Google engineer Miron Cuperman indicated that Blockstack is currently seeking to educate its potential clients so they can understand applications for the blockchain in commodities, equities, clearing and trading, emphasizing that the company is seeking to make the case the technology is actionable today.

Shiau said Blockstack's goal is to replicate the success of Red Hat, the open-source software company that helped commercialize the Linux operating system in the 1990s.

"They made [software] something that could be consumed and used by all enterprises," he said. "That's what we aim to do – take that tech that is proven and put it together in a way that is useable for that community."

Blockstack today

But, while much has been said about private blockchains, little has been perhaps made public about the exact design features that are sought after by financial institutions.

Adding to the lack of certainty is that many of the firms exploring the technology are tight-lipped about any trials being conducted. For example, while Barclays and UBS are known to be experimenting with Ethereum, neither disclosed exactly how they are seeking to use the decentralized application platform.

Blockstack, however, provided a deeper dive into its technology, describing its solution as a "private, isolated blockchain" with access to core "blockchain functionality" through APIs.

The platform provides four functions, according to the team: a private ledger based on Bitcoin Core and optimized for high transaction volume; asset issuance to represent real-world assets; transaction management that allows users to describe transaction flows between parties; and multi-signature wallet security.

"Using these functions, a financial institution can model existing work flows in the lifecycle of common transactions," the company explained.

While Shiau said it would consider adding support for other blockchains to its solution, he indicated that the bitcoin blockchain remains the best option for clients today.

"Bitcoin Core is proven software and we know that it works and we want to be able to take advantage of the improvements in the bitcoin ecosystem," he continued, calling it is the most "robust and reliable" blockchain to date.

The firm's existing experience with bitcoin, he said, would further enable Blockstack to update client blockchains with the best innovations from bitcoin:

"There are other approaches are definitely interesting and there's merit in exploring these alternatives, but if you're a financial institution, you're looking to enhance the architecture you have today."

Internet of blockchains

Shiau also went on to address a lingering question in the bitcoin ecosystem, whether it's best to consider private blockchains as intranets, or private versions of a public good like the Internet that will eventually be replaced as users become more comfortable with the technology.

For now, Shiau said he is unsure if private blockchains will want to connect with each other or with a public blockchain, like bitcoin. Ultimately, however, he suggested both "flavors" of the technology offer advantages. While bitcoin boasts security, he said private blockchains offer faster transaction times.

"The bitcoin network has its value, it allows you to exchange value in a trustless environment without counterparty risk. That was the original purpose in the paper, and to the extent that people want that, there is value in that," he continued.

He suggested the sidechains project, currently being spearheaded by Blockstream, could increase bitcoin's functionality, but just as easily be replicated on other distributed ledger systems.

Equally, Shiau said he sees value in permissioned distributed ledgers, cautioning that the systems are not mutually exclusive.

"You can imagine an exchange where commodities are traded, and an equity exchange, they might want to connect. You can imagine a world where these private isolated chains can talk to each other, because there have these different assets," he said, concluding:

"I can see a future where at least the isolated blockchains will want to talk to each other."

Downtown buildings image via Shutterstock

Blockchain TechnologyWall Street

Oxford Dictionaries Adds New Definitions for 'Blockchain' and 'Miner'

OxfordDictionaries.com, the online language resource owned by the Oxford University Press, has added new cryptocurrency-related definitions.

The site outlined its latest additions in a new blog post, a list that also included "hangry", "butt-dial", "Redditor", "rage-quit" and "bants", among others.

A "blockchain", according to the site, is a noun defined as:

"A digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly."

The resource added new definitions for terms related to bitcoin mining as well, according to Katherine Connor Martin, head of US dictionaries for the Oxford University Press.

The updated definition for the noun "miner" includes:

"A person who obtains units of a cryptocurrency by running computer processes to solve specific mathematical problems." 

The verb "mine" has a new section as well:

"[To] obtain units of (a cryptocurrency) by running a computer process to solve specific mathematical problems."

The inclusions come roughly two years after the site added "bitcoin" to its list of definitions.

OxfordDictionaries.com is distinct from the Oxford English Dictionary. According to its publisher, whereas the site "focuses on the current language and practical usage", the Oxford English Dictionary is aimed at portraying "how words and meanings have changed over time".

Dictionary image via Shutterstock

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Research Examines Blockchain Securities Under US Commercial Law

Cryptosecurities and blockchain recordkeeping systems may not be subject to commercial transactions law under the US Uniform Commercial Code (UCC), according to new research from Cardozo Law.

Penned by professor Jeanne Schroeder, the 60-page research paper, released this week, provides a wide-ranging overview of how bitcoin transactions, both financial and non-financial, would be governed by laws relating to the exchange of property across US states.

The paper is the latest to highlight potential legal issues that could arise in disputes over ownership of cryptographic assets, such as bitcoin, following research by law firm Perkins Coie in January. At issue is that bitcoin does not fit the UCC's definition of money and challenges conventional notions of custody.

The UCC, first published in 1952, was created by private legal institutions seeking to harmonize state laws regarding commercial transactions. States may adopt the UCC as written or approve or deny specific changes to its provisions.

While the paper echoes many of Perkin Coie's conclusions, it is perhaps one of the first to speculate on how the UCC would apply to alternative uses of blockchains. For example, Schroeder cites decentralized application platform Ethereum and Overstock's tØ as a platform designed to enable the use of tokens outside of currency and payments.

The paper remarks that such transactions could be filed on a blockchain without any amendments to the UCC, stating:

"There is no reason under the language of the UCC that a state’s filing office, usually the Secretary of State, could not establish a blockchain recording system [in which] recording on the blockchain would constitute filing with that office. Similarly, there is no reason why requirements for numbering, maintaining and indexing records and communicating information provided in records could not be met through an electronic ledger system."

Schroeder suggested such a system may prove "more efficient and accurate" than those in place, while still providing US states the ability to collect filing fees through smart contracts.

"We could continue the practice whereby a filing fee must be paid to the state of the debtor’s location," the paper reads. "A 'smart' blockchain ledger could be programmed to allow secured parties to automatically transfer filing fees to the Secretary of State of the jurisdiction of the debtor’s location by transferring funds on the blockchain itself."

Amendment needed

The finding stands in contrast to the paper's less favorable conclusion that the UCC would need to be amended for bitcoin to be used as a payment system.

"Cryptocurrency do not, nor can they be made to, fit within Article 9's definition of 'money'," the report reads, echoing previous findings.

Building on this remark, the author indicated bitcoin is currently defined as a "general intangible" asset under the UCC. As pointed out by Perkins Coie, this means that, unlike cash, legal claims on the asset can continue to be valid even after it is transferred.

The legal interest, the author said, can continue regardless of how many times a specific bitcoin changes owners.

"Unlike virtually every other category of personal property recognized by Article 9, once a general intangible becomes encumbered by a security interest, it can never become unencumbered even by transfer to a bonafide purchaser for value," the report reads, adding:

"This could greatly impinge on bitcoin’s liquidity and, therefore, its utility as a payment system."

The paper argues general intangible assets are ill-equipped to function as money, as in the exchange of paper currencies, claims on the assets are relinquished at the time of exchange.

Cryptosecurities covered

In contrast, the author argues the UCC as currently drafted can easily accommodate the development of cryptosecurities, or assets traded on a blockchain.

The technology is currently being pioneered in various forms by major US stock market Nasdaq, online retail giant Overstock and 'smart securities' startup Symbiont.

Schroeder indicated cryptosecurities would fall under the UCC's definition of "uncertificated securities", which were meant to cover securities represented not as physical stock certifications, but on the books of a specific corporation.

"Article 8's failed uncertificated security regime, which was reformed in 1994, may be given a new life because it permit the issuance and trading of blockchain cryptosecurities in the direct ownership regime," the paper continues. "It is ironic that the drafters who could not understand their own present, may have ended up predicting the future."

However, the paper suggests the custody of a cryptosecurity could also affect the specific UCC provisions under which it is covered, thereby altering definitions they could be afforded.

Hand-to-hand currency

The paper goes on to imply that, even though bitcoin aspires to be a digital form of cash, the UCC contains wording that currently excludes it from acting as such.

"The problem is that, although inartfully drafted, in context it is clear that the term is limited to physical, or 'hand-to-hand', currency," it reads. "Characterizing bitcoin as money would have a perverse effect because security interests in money can only be perfected by physical custody."

Bitcoin could be given what the author terms the "super-negotiation" status of physical currencies, but such a change would require alterations to the text, according to the report.

Specifically, Schroeder contends that the UCC would need to be updated to include a definition of cryptocurrency, a definition of custody of cryptocurrencies and priority rules with regards to securities interests with the digital assets, among other changes.

Still, the author suggests this problem could be circumvented if bitcoins were held by third-party brokers or banks, at which point they could qualify as "financial assets", which are covered by super-negotiation rules.

"Unfortunately, to do so would defeat one of the greatest attractions of bitcoin – the ability to transfer value directly between parties without the use, and expense, of third-party intermediaries," the paper concludes.

Money conceptualization via Shutterstock

EthereumLawOverstock

BTCChina Support Gives BIP 100 Bitcoin Hashrate Majority

BTCChina has backed Jeff Garzik's block size scaling solution, giving BIP 100 a majority of the network's hashing power.

With the addition of the Chinese bitcoin firm today, the proposal now has support from the top three 'blockmakers' – who account for over 50% of the network's hashrate.

Speaking to Bitcoin News, BTCChina CEO Bobby Lee said the company's structure gave it the ability that few others have:

"We are in the unique position of seeing this from several sides, a mining pool, a wallet service, and an exchange. So we must come forward with a sound perspective, and not just vote quickly for the sake of asking the industry to move on."

Up until today, the firm – alongside China’s other pools – had been backing the 8MB proposal, however it is now taking issue with the consequences of a sudden step change. In an open letter, to be released on its blog today, the company said:

"BTCChina has experienced firsthand the problems of high orphan rates and the related risks of the blockchain forking. Our perspective is that the Internet today, in China and also globally, is not yet ready for unrestrained, automatic increases of the block size."

If BIP 100 is adopted by the industry, BTCChina will vote for a 2MB limit, with a view to increase to 8MB in the "mid-term". This, the firm says, will give stakeholders time to study any effects the increased block size has on the network and plan ahead accordingly.

BTC China is also one of the sponsors behind a Montreal workshop gathering many bitcoin stakeholders to discuss the pros and cons of various scaling solutions. Lee added:

"Even though this issue is not fully resolved yet, I have full confidence that we will come together as a community and one solution will emerge that everyone can be happy with."

Bitcoin image via Shutterstock.

Bitcoin ProtocolBTC ChinaChinaJeff Garzik

BitFury Backs BIP 100 Blocksize Proposal

The best-capitalised mining firm in bitcoin has waded into the block size debate – stating it must be resolved by consensus.

BitFury, previously silent on the hot-button issue, said it will join bitcoin's biggest mining pool in backing Jeff Garzik's "market-led" BIP 100 proposal, which lets miners 'vote' on the size of each block.

CEO Valery Vavilov told Bitcoin News:

"We think that the block size debate must be resolved by consensus and the voting mechanism introduced in BIP 100 is a good way to achieve such a consensus ... The power to make such future defining decisions must belong to the community."

BitFury noted its preference with a public 'tag' on the blockchain yesterday afternoon. BIP 100 now has support from over 35% of the bitcoin hashrate, more than any other proposal.

Sizing up the debate

If bitcoin transactions continue to grow at their current rate, the network will hit a 'capacity cliff' in the coming year. How to resolve this, or whether to take any action at all, has sparked a 'flame war' raging for nearly five months.

Following the release of Bitcoin XT, Gavin Andresen and Mike Hearn's highly controversial fork to 'opt out' of bitcoin's current 1MB block size limit, industry stakeholders are now picking sides.

In a statement on Monday, several of bitcoin's biggest service providers – including wallets Blockchain, Circle and Xapo – put their weight behind BIP 101, the proposal for an 8MB block size limit that increases over time.

"BIP101 and 8MB blocks are already supported by a majority of the miners and we feel it is time for the industry to unite behind this proposal. Our companies will be ready for larger blocks by December and we will run code that supports this," it read.

While over 39% of the network's hashing power is yet to back any scalability proposal, BitFury rival KnCMiner, alongside several China-based mining pools, is also behind an 8MB increase.

Vavilov is against these proposals, he said, because their growth forecasts don't provide enough "predictive power", so the potential cost of mistakes runs extremely high. He added:

"We believe a substantial part of full nodes right now would not be able to support blocks of this size simply because of hardware limitations. Similarly, we do not support propositions to fork client software as we believe this move may have potential negative consequences for the entire bitcoin ecosystem."

Black and white blocks image via Shutterstock

BIPSBitFuryJeff GarzikMining

Commonwealth Governments Urged to Regulate Bitcoin

Commonwealth governments should regulate bitcoin to address the risks associated with digital currencies without stifling innovation.

This was one of the recommendations put forward by the Commonwealth's Virtual Currencies Working Group during a three-day conference held in London this week.

After hearing from the banking sector, academia, virtual currency operators, users and law enforcement agencies, the group urged governments to re-consider their legislative response to virtual currencies such as bitcoin and strengthen law enforcement to counter criminal use.

The group, which noted that virtual currencies have potential benefits and could help drive development, concluded:

"Member states should consider the applicability of their existing legal frameworks to virtual currencies and where appropriate they should consider adapting them or enacting new legislation to regulate virtual currencies."

Additionally, the group asked governments to provide education on digital currencies and funding for training law enforcement agents, prosecutors, judges, regulatory authorities and the financial sector.

The group is expected to prepare a report on the prevalence and impact of virtual currencies and plans to reconvene in early 2016 to consider drafting technical guidance on the subject for member states.

View the full conclusions and outcomes from the event here:

Conclusions from the Commonwealth Virtual Currencies Working Group's Three-Day Event

Commonwealth flags image via Kiev.Victor / Shutterstock.com

Commonwealth SecretariatLondonRegulation

Overstock's tØ Acquires Broker Firm for Wall Street Disruption

Overstock's crypto subsidiary tØ has acquired Wall Street brokerage firm SpeedRoute, a move the latter's CEO termed a "quantum leap" for securities trading.

TØ (pronounced t-zero), unveiled last month at Nasdaq's New York headquarters, is a blockchain-based equities trading platform Overstock claims could revolutionise clearing and settlement. The SpeedRoute deal, it says, marks a momentous step toward connecting the crypto and capital markets.

SpeedRoute CEO Joseph Cammarata said in a release:

"This collaboration allows Overstock to enter this new financial technology arena with a speed and aggression that I believe will revolutionise Wall Street, while adding an already profitable and cash-flow positive business right to Overstock's bottom line. The winners are going to be investors and regulators alike."

While some details are yet to be finalised, an SEC filing, cited by New York Business Journal's Michael del Castillo, indicates SpeedRoute was bought for $30.3m: $11m in cash and $19.3m-worth of common stock in Overstock. The filing also indicates TØ owned 24.9% interest in the firm prior to the deal.

SpeedRoute connects broker-dealers with liquidity at 11 US equity exchanges alongside 'dark pools'. The 15-year-old company is reported to handle 2.5% of order flow in the US stock market.

MediciOverstockPatrick ByrneWall Street

Bitcoin Stock Scam Targets WhatsApp Users

A penny stock tied to a little-known bitcoin company and a slew of WhatsApp spam messages were at the heart of a pump-and-dump scheme last week.

As reported by The Awl, WhatsApp users received messages on 21st August stating that traders from major Wall Street investment banks including JPMorgan, Morgan Stanley and Goldman Sachs were about to buy stock in Avra, Inc (OTCQB: AVRN), a company that, according to its website, sells bitcoin ATMs and point-of-sale solutions.

Pump and dump spam on WhatsApp? http://pic.twitter.com/3BCVnIzHNC

— Noah McCormack (@noahmccormack) August 21, 2015

The messages indicated that the price would see major gains, and in one instance, claimed that a buyout would happen soon.

The stock price quickly shot to a high of $1.26 before falling significantly, though it’s unclear exactly how many WhatsApp users fell for the scam.

Whatsapp spam for pump and dump scheme. Ain't technology grand! http://pic.twitter.com/tW9PYqCGi2

— Patrick Delaney (@pxdelaney) August 21, 2015

The messages mostly drew complaints from users, who cried foul that they were receiving any spam at all. At least one user on Reddit indicated that they had reported the incident to the SEC.

Heavy trading volume for Avra’s stock continued days after the spike, according to data from Google Finance.

The event raised questions about the company’s financial prospects based on public data filed with the US Securities and Exchange Commission.

For example, HotStocked.com noted that, according to the company’s SEC 10-Q filing for the period ending 30th June, Avra has reported no revenue since it was founded in December 2010. The company reported roughly $25,000 in cash on hand versus about $245,000 in liabilities.

At press time, Avra’s stock is trading at approximately $0.23.

The company did not immediately respond to a request for comment.

Penny stock image via Shutterstock

ScamsSecurityWhatsApp

Litecoin Network Experiences First Mining Reward Decline

Litecoin's block reward has halved.

At block 840,000, the mining reward fell from 50 LTC per block to 25 per block, marking the first time the alternative cryptocurrency, launched in 2011, has seen such a reduction. The 840,000th block was mined by F2Pool, also known as Discus Fish.

Litecoin supporters took to social media to celebrate the halving, and creator Charlie Lee thanked Chinese supporters in a YouTube message.

For now, the network itself doesn't appear to have been significantly affected by the reward drop, though some have speculated that, long-term, the hashrate will fall as profitability for some miners declines.

The litecoin network hashrate saw some fluctuation but is within ranges seen over the past several days, according to CoinWarz.

Markets reacted more significantly around the time of the halving. According to BitcoinWisdom data for OKCoin, litecoin prices in Chinese markets fell sharply but have since seen recovery at press time.

Speculation as to what comes next varies.

Some have predicted a long-term price increase, whereas others see further declines to come after the LTC market ramped and subsequently plunged earlier this summer as concerns about Chinese investment fraud mounted.

External factors in China - the largest market for litecoin – could fuel further volatility in markets moving forward, as the country's stock markets slip further into turmoil.

Images via BitcoinWisdom, CoinWarz, Flickr

AltcoinsLitecoinMining

Dark Market Agora Shuts Down Citing Security Threat

Dark web marketplace Agora has announced it will shut down temporarily while it explores defense mechanisms against potential attacks.

The marketplace attributed its decision to recent research that highlighted vulnerabilities in the Tor protocol that could lead to the identification of its servers and operators.

Agora is believed to be the largest dark market website by daily transaction volume, and uses bitcoin to facilitate payment for both legal and illicit items listed by vendors.

In its online announcement, Agora's anonymous administrators reported they had moved servers following the detection of "suspicious activity" that could potentially reveal their IP addresses and enable law enforcement agents to gain insight into its operations.

The announcement read:

"At this point, while we don't have a solution ready it would be unsafe to keep our users using the service, since they would be in jeopardy."

It continued: "Thus, and to our great sadness we have to take the market offline for a while, until we can develop a better solution. This is the best course of action for everyone involved."

The administrators urged customers to withdraw funds from their accounts as soon as possible. Consumers were also asked to refrain from sending bitcoin to Agora's deposit addresses while it was offline.

Agora's predecessor Silk Road was taken down by the Federal Bureau of Investigation in 2013 and Ross Ulbricht – it's operator – was sentenced to life in prison earlier this year.

Closed image via Shutterstock.

AgoraCrimeDark WebTor Network

Mt Gox CEO Claims to be 'Victim' in Bitcoin Exchange Demise

Mark Karpeles, the CEO of bankrupt bitcoin exchange Mt Gox, has denied claims he manipulated account balances while he was running the Tokyo-based company.

According to a local media report, Karpeles told Japanese police he had no knowledge about the disappearance of any bitcoins and that he "was just a victim".

Karpeles was re-arrested in Tokyo last week following allegations he had embezzled ¥321m ($2.6m) of customer deposits to fund his personal projects.

The report, which bizarrely noted that Karpeles has an intelligence quotient of 190 – which would make him a genius – also cited the CEO as saying that Mt Gox had been "a normal business operation".

According to a loosely translated version of the article, an anonymous friend of Karpeles mentioned a "Mr X" (the alleged founder of Mt Gox) whom he claimed lied to the former CEO.

"The balance of bitcoin was already incorrect when he bought the exchange, but Mr X advised to Karpeles that if Karpeles follow the operational rules decided by Mr X, Karpeles could recover the bitcoin balance, which turned out not to be true," adds the anonymous source in the report.

The police investigation is ongoing.

To learn more about Mt Gox, view our interactive timeline.

CrimeMark KarpelesMt GoxTokyo

Support Grows for BIP 100 Bitcoin Block Size Proposal

Support for BIP 100, the market-led scalability fix from core developer Jeff Garzik, is growing as more miners pick sides in bitcoin's block size debate.

Data from BlockTrail indicates the percentage of blocks mined in support of BIP 100 has quadrupled to 22% following the backing of bitcoin's biggest mining pool DiscusFish / F2Pool on Monday night.

Miners have the ability to voice their preference for which proposal they support, be it BIP 100 or an 8MB increase, when they 'tag' each block they mine. Unlike votes for controversial bitcoin client XT, these tags will not trigger a hard fork of the software.

Garzik's proposal, first published in June, calls for a "free-market-based approach" to bitcoin's scalability. Unlike solutions that impose a set cap on the size of bitcoin blocks that increases over time, each block will be dynamic – its capacity agreed by consensus in the mining community.

This, Garzik says, is a less risky way to test bigger blocks incrementally – and one that will allow miners to adjust to any potential issues in real-time.

The 'tags' come following the announcement of a two-day bitcoin scalability workshop for the currency's key engineers and academics in Montreal next month. It is rumoured to be the first time bitcoin's top developers will meet all together in person. Another, to be held in Hong Kong, is pencilled in for later this year to cater for the vast mining community located in China.

Current statistics

Currently, DiscusFish / F2Pool, Kano CKPool and Bit Club network, which accounts for around 1.4% of the current hashrate, are supporting BIP 100. Yet, as the statistic above show, miners presenting over half of bitcoin's hashpower have not yet wavered from the current 1MB default. Some may yet specify their preference, others may not.

Of all the proposed changes, an 8MB increase has the biggest share of bitcoin's hashrate (25.5%), with support from KnCMiner, Antpool, 21 Inc and BW Pool. Meanwhile, Gavin Andresen's XT fork – which has been branded "dangerous" by some core developers – lags behind with 1%, despite 14.6% of nodes showing support.

Additionally, Slush.io, the only mining pools having voted for XT so far, appears to have 'switched off' its vote in its most recent blocks.

Tally image via Shutterstock, pool distribution charts via BlockTrail

Bitcoin XTJeff GarzikKnCMinerMining

Coinbase Lets UK Users Buy Bitcoin With Credit or Debit Cards

Coinbase now allows customers in the UK and Spain to instantly purchase bitcoin using 3D Secure-enabled credit and debit cards.

The 3D Secure protocol – developed by Visa – requests users enter a password to confirm their identity with the card issuer. Once verified, customers are able to complete their online purchase.

The San Francisco-based company, which recently confirmed it had applied for a BitLicense, said in a post:

"Since credit and debit cards will not require a customer to pre-fund their Coinbase account with a bank transfer, customers in the UK and Spain can now receive bitcoin instantly."

Coinbase currently only accepts Visa, Mastercard and Maestro cards with 3D Secure authentication and purchases with either GBP or EUR are subject to a 3% "convenience fee".

The company noted the 3D Secure protocol is supported by most banks across Europe and the UK but advised users to check with their bank or try adding their card to their Coinbase account to see whether it is eligible.

"You will get an error message if your card does not support it [3D Secure]," the post concluded.

Coinbase

Bitcoin Micropayment Service Targets Global Freelancers

A new bitcoin micropayments tool has launched to take aim at the global freelance and on-demand services market.

Called Faradam (after inventor Michael Faraday), the service uses a simple timer to facilitate payment between two parties, with freelancers seeking to leverage the service only needing to provide their name, hourly work rate and bitcoin address. In turn, those looking to employ short-term services simply receive a link and connect a wallet.

Created by former former Quasar Ventures senior business analyst Demian Brener and Manuel Araoz, the developer behind early decentralized verification project Proof of Existence, the project boasts three full-time employees and is based in Argentina.

Unsurprisingly given its high bitcoin adoption rates, it's in this region where Brener believes Faradam could have the biggest impact, telling Bitcoin News:

"What we're now doing is focusing mainly on use cases where people have bitcoin like international freelancers, and they charge their clients in bitcoin. In Argentina, we don't have a PayPal, it's really hard to charge for freelance services from the US."

While a novel use case for micropayments, the technology underlying the service is not new, having been created by Brener for Streamium, his decentralized video streaming startup launched in May.

Brener explained that Faradam was inspired by Streamium users, who saw that the ability to charge for services rather than content would be broadly useful. He indicated he now sees that project as a proof of concept for what could be a variety of more commercial use cases.

"The value of what we did lies not in the livestream video, but the metered payment infrastructure," he continued. "This lets you charge in real time for on-demand services."

Brener went on to suggest Faradam will focus on bitcoin users in "niche markets", before adding other payment methods depending on the product's use.

Faradam charges 1% for all payment sessions facilitated on the service, a contrast to Streamium's free, open-source model. The company does not currently plan to enter an incubator.

Design influence

Brener indicated that Faradam was also inspired by Streamium's design, specifically the need for it to streamline the interface for novice bitcoin users.

"We know it's a complicated concept, payment channels and bitcoin, so we worked really, really hard on doing the site very simple so people could grasp it and understand it as soon as possible," Brener said.

To break down the design to simple elements, Brener talked with Streamium users, including online teachers and professional psychologists, who had sought to leverage its metered video payments as a way to earn income.

"We finished the Faradam project a week ago, and we shared it with our champions, our early adopters, freelancers, teachers and consultants who use it with their clients," he continued. "Today it's a simple product to use and you can grasp it right away."

Built as a web application, Brener said Faradam can be used in conjunction with popular communication apps such as Skype or Slack.

"It's independent of how you provide the service, you don't depend on a webcam or live streaming application," he said. "You turn the switch on and money starts flowing right away."

Freelancer image via Shutterstock

ArgentinaMicropaymentsStartups

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Bitcoin Up For Discussion at Commonwealth Virtual Currency Meeting

The Commonwealth Virtual Currencies Working Group will meet first time next week to discuss the management of cryptocurrencies, such as bitcoin.

The specialist group, formed by the Commonwealth – a voluntary association of 53 independent countries, almost all of which were formerly under British rule – is made up of members from the Commonwealth Secretariat, Australia, Barbados, Kenya, Nigeria, Singapore, Tonga and the UK.

Along with the International Monetary Fund (IMF), the World Bank, intergovernmental organisation Interpol and the United Nations Office on Drugs and Crime (UNODC), members at the event held in London will explore the risks associated with virtual currencies, the existing legal frameworks, regulatory responses and potential benefits of use in developing countries.

A spokesperson for the Commonwealth Secretariat commented on the purpose of the meeting, telling Bitcoin News:

"Recognising both the associated benefits and risks, the group will meet to design technical guidance for member states on potential regulatory and legislative measures to effectively respond to virtual currencies."

She continued: "The meeting will also be an opportunity to hear from a range of experts about the latest developments in the sector. Participants will also share findings from a recent Commonwealth survey which shows innovative use for legitimate business opportunities but also warns an absence of regulations is exacerbating criminal exploitation."

The event, will feature Alden Pelker of the FBI's Money Laundering Intelligence Unit and Joe Mignano of the US Department of Justice, among others. It is taking place on 24th and 25th August.

Alden Pelker is also speaking at Bitcoin News's inaugural event, Consensus 2015, in New York on 10th September.

Commonwealth flag image via Shutterstock

Commonwealth SecretariatFBI

Bitcoin Price Falls 14% Following Bitfinex 'Flash Crash'

Bitcoin's price fell 14% in a period of just 30 minutes following a 'flash crash' on exchange Bitfinex yesterday night.

The Bitcoin News Bitcoin Price Index had been holding steady between $250 and $255, but dropped to a low of $214.36 just before midnight (UTC). In the same period, the Bitfinex price sunk 29% to $179.35.

Bitfinex, which claims to be the most liquid exchange in the world, experienced the 'flash crash' following a large sell order said to be worth 10,000 BTC ($2.3m).

A tweet by the company at 03:22 this morning read: "The selling that occurred during the dump were legitimate sell orders and positions being margin called. Lenders were not affected."

Alongside a regular buy/sell orderbook, Bitfinex offers margin trading, meaning users can borrow funds from the platform's lenders – known as 'peer liquidity providers' – at a rate of interest to trade bitcoin. These users place 'long' or 'short' bets on whether bitcoin's price will rise or fall.

When the price shifts suddenly, as it did yesterday, 'long' users who have borrowed funds may see their account equity drop to zero – at which point Bitfinex will automatically liquidate their positions. This can exacerbate price movement, as these positions add to sell-side pressure on an already crashing market.

Circuit breakers

There are ways to mitigate against such drastic movements – some traditional exchanges put a 10% limit on price movements from the previous day's close for example – however it is unclear if Bitfinex had such 'circuit breakers' in place.

In an interview with members of the 'Whale Club', Bitfinex's Phil Potter indicated the platform had experienced a number of technical difficulties, including a lag in its live engine that updates positions.

Timo Schlaefer, CEO of derivatives trading platform Crypto Facilities, told Bitcoin News margin trading on spot exchanges destabilises the price and has lead to "numerous" flash crashes over the years. Flash crashes on Bitfinex and BTC-e were blamed for a 10% price decline last August.

"You need to make a decision if you want to be a robust spot exchange (ie no margin trading) or something else, but you cannot be both," he said, adding:

"This is bad for bitcoin as it shows that the market is still immature and unreliable and there seems to have been little progress in that regard over the last year or so."

While a familiar part of most markets, margin trading is a relatively recent phenomenon in bitcoin, with two exchanges adding it in the last two months alone.

However, a bitcoin market maker who wished to remain anonymous said flash crashes are not unique to markets with margin trading.

"You can do margin trading without it actually being offered by the platform itself, nothing prevents you going and borrowing money to fuel a gambling habit."

He claimed the "gambling mentality" in the bitcoin space, with traders happy to put a lot of money on the line with lot of leverage, exacerbated price moves.

Meanwhile, the current uncertainty and "public bickering" over the Bitcoin XT fork is bound to affect the price negatively, he added.

BitfinexPrices

Spanish Authorities Clarify How Tax Applies to Bitcoin Losses

The Spanish tax authorities have clarified how the country's existing tax laws should be applied to losses incurred by the collapse of a bitcoin exchange, the result of a scam or a situation of insolvency.

Spain's Dirección General de Tributos (DGT) received a question from a bitcoin enthusiast who claimed to have lost a large part of their savings after investing in bitcoin.

According to the question, the person deposited their bitcoin in a third party loan service in 2013. At the end of the year, the website's administrator – identified only by nickname and a public key – announced the bitcoin had been stolen and, as such, customer deposits could not be returned.

The bitcoin enthusiast was then offered a refund amounting to 5% of their deposited bitcoin, in exchange for dropping claims for a full refund and not proceeding with legal action.

Suspicious that the website had been running a pyramid scheme, the bitcoin aficionado refused the offer and presented his case to the Spanish police and the relevant authorities of the country where the website is thought to have been registered. These, however, were unable to help because the claimant was Spanish and fell under Spanish jurisdiction.

Clarification

In response to the question, the DGT noted these kind of situations were covered by the existing Personal Income Tax Law and that, in order for the losses to be considered a capital loss for tax purposes, one of the following conditions must apply:

• The reduction of the debt has been approved by a judge.
• The debtor is in bankruptcy and there is a reduction of the debt during the procedure; or the credit is not recovered after the bankruptcy procedure.
• The non-recovered credit is still outstanding a year after formal proceedings have began.

Alejandro Gomez de la Cruz, lawyer and founder of Law and Bitcoin, told Bitcoin News:

"I think the current law has been interpreted correctly. Whether it is positive or not, I think that these kind of interpretations will be welcomed by the community."

When asked about the wider implications of the DGT's clarifications, the lawyer said it could help bitcoin companies see the Spanish state was bitcoin friendly, by clarifying doubts and guaranteeing a certain amount of judicial security.

More from Spain

This is not the first time the Spanish authorities have spoken out about bitcoin.

Earlier this year, the country's bitcoin community celebrated confirmation by Spain's Ministerio de Hacienda that the digital currency was exempt from Value Added Tax.

Hat tip: Law and Bitcoin.

Flag image via Shutterstock

SpainTax

The 8 Steps to Becoming a Bitcoin-Savvy Bank

William Mougayar is a Toronto-based angel investor and four-time entrepreneur who advises startups on strategy and marketing. In the first of this three-part series, he discussed how banks dealt with the emergence of the Internet and how blockchain technology is causing these institutions a whole new headache. In part two, Mougayar looked at why banks should start embracing blockchain technology. Here, in part three, he explores the steps banks should take to make sure they lead the blockchain-banking revolution.

What should banks do?

Don’t just do pilots that automate old processes. Rather, launch major reengineering efforts across all processes and ask the important question: What could Crypto-Tech enable now if we reinvented it?

Here is a list of potential actions:

1. Hire or promote a leader

Hire or promote a real leader from within, and give them the title of “Blockchain Czar”. That person should have experience in banking operations and know about reengineering business processes via technology implementations. Tough to find that person? Find them. Let them be your spokesperson in the marketplace, not an analyst in your research department or someone in charge of innovation.

That person will be responsible for removing obstacles within your organization, education, best practices, and project managing the various implementations. This job is a tough one, but it involves finding and obliterating old processes, instead of blindly automating what you are currently doing.

2. Mine cryptocurrency

How about getting your feet wet with some mining action? Buy a few extra computers and mine bitcoin or other currencies so you can learn what it’s like be in the cryptocurrency waters. Here’s why Banks and Brokerages Should be Mining the Blockchain.

3. Train staff

Send the top 10% of your IT staff to courses on cryptocurrency platforms, tools and technology. Let them learn the bitcoin blockchain and its various overlay technologies, Ethereum’s contract languages, and many other ready-to-use crypto technologies.

4. Dont invest

Don’t invest in blockchain startups. Become one (if you can). Investing is not a spectator’s sport. You need to get involved, and not just watch. If an investment allows you to participate in the actual outcome of the technology solution, that’s one thing. But if your investment is so-called for learning purposes, you’re wasting that money.

Invest in direct learning and by doing stuff, and not by watching others. Operating like a technology startup is very different from operating inside a bank. Yes it is about culture, and a bank doesn’t have a startup culture, nor does the word innovation mean the same thing to a nimble startup that is hungry and ambitious, as compared to what it means to an overhead-laden bank.

5. Buy a bitcoin exchange

Immediately. The good thing about the proliferation of bitcoin exchanges around the world, (and there are at least 50 viable ones) is that there is one for each large bank out there. The merging of bitcoin trading inside banks is inevitable. Most of these exchanges have already developed the basic technology, but the biggest pain has been how new users fund and connect their wallets with their banking accounts.

If you merge online banking with bitcoin trading, you automatically eliminate the friction that currently exists for onboarding new users. OK, you’re afraid, I can tell. So, why not limit bitcoin conversions to $1,000 or something like that. Bitcoin to fiat conversions should be real-time.

You know how to handle customer relationships. The bitcoin exchanges have technical capabilities, but their CRM and customer support are not great. One of the big banks will blink first and buy one of the fledgling bitcoin exchanges and delight their existing customers. Why not you?

6. Re-invent trading and capital markets

Remove the delays and intermediaries. Delays means more costs. Real-time levels off inefficiencies. Remove the steps that are not need during the settlement and clearing stages.

7. Offer remittance services

Offer free (or really cheap) cross-border remittances services. Abolish wire transfer fees. That’s a tough one, and I’m sure you’re not going to do it. But if you used the bitcoin network instead of SWIFT, I can guarantee your transfer costs will decrease by orders of magnitude.

8. Create a cryptocurrency task force

You like task forces and committees. Create an internal cryptocurrency task force with members from each functional group, and let them have weekly meetings to share initiatives, projects, and learnings. Even better, get them all on a Slack group and invite anyone in the bank to participate in it.

A strategic roadmap

Most banking executives probably don’t even have a bitcoin account, nor have used a bitcoin wallet; yet they are in charge of their organization’s future when the future is staring them in the face with the word “blockchain” in it. This isn’t unlike the early Internet and email days, when corporate executives were laggard users and had their secretary print their email for them.

It is so important to get a first hand feel with a bitcoin account in order to experience the flexibility, speed and innovations that are built-in. For example, you can send money to anyone in the world by just knowing their email address or bitcoin address, without a banking relationship, and without going anywhere physical. That’s pretty awesome in itself. You can convert from fiat to bitcoin and vice-versa, including wiring money to a fiat account for free.

It is absolute freedom in terms of money movements, and it happens almost instantly and at the peer-to-peer level. Granted you can’t pay bills, and can’t easily use bitcoin at the cash register, but these aren’t show stoppers for now.

When every asset has a blockchain linkage, it puts it at par with bits that travel at Internet speeds. And that comes with a built-in trust layer that transports the transaction’s history and validation with itself. That’s a powerful capability (also called smart property), and it will free financial assets and instruments from the latency and inertia of legacy clearing and settlement processes and usher in efficiencies, speeds and innovations.

At the end of the day, it’s about financial services, not the blockchain. The blockchain is just an enabler.

If you can disrupt your business successfully, then you can also disrupt your competitors, but if you just focus on protecting your business, you’re really living in the status quo. Internal disruption is always more benign than an external one, especially if it is done pro-actively and on your own terms. It’s better to shoot yourself in the foot, rather than having someone else shoot you in the head.

But the road to disruption is paved with some casualties. Because the blockchain is a value disruptor, it will change the role of existing intermediaries. Some will get replaced, others will see their powers, influence and usage diminished. In the trading space, some of the current intermediaries at risk include SWIFT, CCP, FIX and the DTCC.

The first blinker

So, who will blink first? That first blink means buying a bitcoin exchange and totally incorporating its wallet into online banking. I know some libertarians will say that’s not what bitcoin was about. Bitcoin is about freedom to be your own bank. They are right, and with the passage of time and further sophistication, that might be possible. But in the meantime, you are the Bank, and you have a chance to keep that customer relationship going.

This revolution isn’t happening at Money 20/20, Finovate or Sibos. It’s happening elsewhere. It’s happening at the grass root levels in meetups, in stealth startups, accelerators and Github repositories.

“The blockchain is not perfect, but it is that perfect catalyst for business process changes, and this type of opportunity doesn’t present itself that often.”

And user-initiated blockchain apps are coming. They will look like SaaS apps that users can launch without anyone’s permission. Wow, that’s a lot of change. If you’re a banking executive, maybe I’ve got more of your attention, now.

The banks have an opportunity to re-engineer themselves. They missed doing that when the Internet came along. It’s not about bitcoin. It’s about exposing openness, decentralization, and speed. Consumers and business users want that.

The meaning of trust and transactions changes with the blockchain. Every centralized and manual process is up for grabs due to what the blockchain enables: self-enforcement of trust and smarter transactions with longer end-points.

The blockchain has a diverse stack, and I hope that a bank can touch it at many levels.

Bitcoin isn’t easy to use, blockchains are difficult to program, most merchants aren’t accepting cryptocurrency, and it does sound risky to rely on computers and mathematics to govern a currency, but so what?

If you don’t take bitcoin, blockchains and cryptocurrency seriously, I can predict that bitcoin will be to banks what the iPhone was to BlackBerry. Yes, it was not perfect when it came out, and didn’t have a keyboard, didn’t have apps, and wasn’t “secure” for corporates, but so what?

The blockchain is not perfect, but it is that perfect catalyst for business process changes, and this type of opportunity doesn’t present itself that often. The last time it came was with the Internet. Let’s hope the banks see this as a big opportunity for change, not just a small one.

The possibilities that are enabled by the blockchain have a transformational impact, once you put them together.

You can go slow and be left behind, or you can go deep and leapfrog. It is a case of experimentation, but also of determination.

This article originally appeared on Startup Management, an edited version has been reposted here with permission.

Roadmap and bitcoin images via Shutterstock

Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, Bitcoin News.

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Destinia: Bitcoin-Paying Customers Spend More on Travel

Bitcoin-paying customers spend €16 ($18) more on average per transaction than those paying with credit cards, according to Spanish online travel agency Destinia.

This year, customers paying with bitcoin have spent an average of €377 ($477), in comparison to an average of €361 ($400) being spent by credit card paying consumers, according to a spokesperson for the company.

Despite receiving bitcoin payments on an almost daily basis, the spokesperson said there had been a slight decline in the number of transactions since integration in early 2014.

The Destinia spokesperson said it was difficult to determine the reasons behind this decrease, but cited greater industry competition – Expedia began accepting bitcoin for hotel bookings last summer – and the digital currency's price decline as possible factors.

"Despite all of this, we are delighted with the way in which this payment method [bitcoin] is performing and we foresee a lot of potential," the spokesperson said, adding:

"Last year bitcoin was mostly used for paying for hotel reservations, this year we have noted a significant increase in bitcoin payments for flight bookings ... currently, sales for both are pretty levelled."

Destinia's most active bitcoin customers, the spokesperson concluded, are in Spain, Germany, Argentina and Sweden.

Just yesterday, the online travel agency announced it now also accepts bitcoin for low-cost flights.

Beach image via Shutterstock.

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Italian Banking Group: Bitcoin's Advantage is its Network Effect

The European Securities and Markets Authority has published a number of responses stemming from a request for information on the topic of virtual currency.

The ESMA, which regulates securities activity in the European Union, first sought submissions from the finance and digital currency industries in April. The agency published 14 responses from participants such as German megabank Deutsche Bank, Italian banking group Intesa Sanpaolo, regional trade group European Central Securities Depositories Association (ECSDA) and interbank messaging network SWIFT, among others.

The submissions offer varied perspectives on how European regulators should approach overseeing activity on the continent. At the same time, the documents show how some of these organizations are adapting to the technology as it evolves.

Intesa Sanpaolo, like a growing number of banks worldwide, has gone as far as to establish an internal working group called an “Innovation Area” focused on cryptocurrencies as part of a broader effort to innovate on the technology side.

The letter noted:

“This Area is performing in depth research on virtual currencies and blockchain technologies. Through its dedicated task force, Intesa Sanpaolo is also implementing cryptofinance projects [and] integrating them with its strategic vision about the evolution of the financial services industry.”

The bank did not immediately respond to a request for further comment.

Bitcoin as potential ‘global standard’

Intesa Sanpaolo noted that among its possible use cases, bitcoin could function as a network for rights management, writing that "[the bitcoin protocol’s] potential is far from being fully explored especially as a means to transfer rights and value in a very secure way".

The bank went on to suggest that ESMA avoid using the phrase "virtual currencies", offering alternatives such as "distributed ledger technology", "limited supply digital entitlement", "digital scarce asset" and "mathematical commodity".

At the same time, Intesa Sanpaolo wrote that among both implemented and envisioned distributed ledgers, bitcoin itself remains “the first and the most important of Internet of Value protocol", citing the adoption of TCIP-IP over alternatives as possible precedent.

The bank wrote:

"There are high chances that it can establish itself as a global standard, as it leverages at least four powerful network effects: [the] bitcoin network has by far the largest hashing power (and so the greatest security), the higher capitalization, the largest user (and merchant) adoption, the best and largest developing and maintenance effort around it."

The bank further argued that alternative algorithms, including proof-of-stake, are "still not validated from both a theoretical and an empirical point of view", stating that NXT and other networks depend "on some kind of centralization in validation checkpoints".

Call for dual oversight

The ECSDA, which represents 41 central securities depositories in Europe, said that it supports a regulatory regime for digital currencies, adding that such a framework "needs to be developed to avoid ... disturbances to financial stability".

Perhaps echoing a divergence to come as banks look at implementing bitcoin’s underlying blockchain for use as permissioned database instead of currency networks, it added:

“Looking at technological developments in conjunction with, but also separately from, virtual currencies and virtual currency investments, could enable securities regulators to find the right balance between promoting innovation and mitigating the related risks."

On the other hand, the group said that its members from within the securities depositories industry are actively exploring the technology for use as a settlement mechanism but are not ready to disclose specific findings.

“Most of the work at CSD level however remains exploratory at this stage, and ECSDA is not yet able to share any conclusions,” it wrote.

Image via Shutterstock

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Overstock Unveils Blockchain Trading Platform at Nasdaq Event

Patrick Byrne, CEO of US online retailer Overstock, unveiled tØ.com today at the headquarters of the major US stock market Nasdaq in New York today.

The announcement marked the formal debut of tØ (pronounced tee-zero), Overstock's long awaited blockchain-based private and public equities trading platform first announced in 2014.

Byrne also unveiled a "big surprise" in the form of the platform's Preborrow Assured Token, which Byrne suggested would democratize securities lending. The product, he said, is already being used in an enterprise pilot program, and is the subject of interest by major banks.

Speaking to the crowd, Byrne explained the larger goals of the new platform and why he believes it to be a milestone in the history of trading:

"We built a platform and we're launching tØ.com, where the trade is the settlement. That's the big disruptive idea, the entry is both the trade and the settlement, it doesn't have to be a separate process."

Elsewhere, the event kicked off with talks by tØ co-founder Johnny Tabacco, Jones Day partner Lee Armstrong and Overstock president Stormy Simon, all of which sought to emphasize the innovative nature of the project and the genius of Byrne, who was described as a maverick, visionary and philosopher.

"We had build a system that allowed couches to be hand delivered in a box, and back then, that was a hard conversation, helping retailers see how their business would be changed in the future," Simon said in her remarks. "Today shipping couches doesn't feel like a big deal."

Despite his staunch support for the bitcoin network, Byrne was also keen to stress that tØ intends to be ledger agnostic, meaning it can work with any decentralized ledger, he said, with a few weeks of integration.

Mentions of bitcoin were noticeably absent from most of the talk, even in references to the enterprise testing of blockchain-based trading systems such as Nasdaq's, which explores how the bitcoin blockchain could be used to trade shares in private companies.

All attendees at the event, however, did receive $25 in bitcoin, an announcement that followed the main presentation.

History of trading

Following the opening speakers, Byrne used his talk as a forum to discuss changes in the nature of Wall Street trading systems, using simplistic analogies as a way to showcase the larger innovations that could be unlocked by distributed ledger technologies.

For instance, Byrne used an example where a grandmother sought to purchase a baseball glove from a neighbor, noting how in this instance trade is conducted directly and without any intermediaries.

Byrne then evolved the example to showcase how the same trades have been conducted by Wall Street, from the time of bike messengers, until later when these physical messages were replaced by computer systems, and ultimately, different representations of these trades.

"True settlement would be, Grandma wants to buy a catcher's mitt, she gives money for the sale, imagine that could be put on a public ledger," Byrne said.

He continued:

"Imagine this ledger is cryptographically protected public and transparent, grandma's money can be turned into US dollar coins and when she buys the catcher's mitt, we're wiping out one coin and replacing it on another ledger."

Rather than pose this innovation as threatening to Wall Street business models, Byrne sought to stress that tØ intends to license the product to enterprise trading firms.

"We want to work with you," he continued. "We think this is a much better system."

Buyer beware

Byrne also sought to distance tØ from other competitors who are looking to sell blockchain-based products to the New York financial market, suggesting some may fall short of delivering on what he considers the true innovative nature of the technology.

"This is all about true settlement, there's no need for net settlement," he said. "If people come along and say they're introducing these crypto-based platforms, ask if it stays net. Other people working on such systems, some of the ones I know about will keep settlement net, I'm suspicious of why you would even do that."

Building on this narrative, Byrne suggested that real gross settlement would "make impossible" certain wrongdoings that have become common in financial markets.

He also strived to frame real-time settlement as an original goal of Wall Street, one that is finally being made possible by distributed ledger technology, concluding:

"That is what we've built at tØ.com and that's the original version of Nasdaq, a peer-to-peer (P2P) settlement system, this just happens to be based on new technology."

Images via Overstock

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Japan Weighing Bitcoin Exchange Rules Amid Mt Gox Investigation

Japanese government officials are weighing whether to regulate bitcoin exchanges in the wake of new developments in the ongoing investigation of Mt Gox.

Media reports from The Japan Times and The Japan News suggest that the government, including those from the country's Financial Services Agency, may seek to implement a registration system for exchange operators. Such a framework may include a licensing scheme and user identification requirements.

The Times quoted Finance Minister Taro Aso who said that government officials would need to "carry out studies" on how to properly regulate digital currency exchanges.

The news follows the arrest of Mt Gox CEO Mark Karpeles on Friday. The former Bitcoin Foundation board member faces market manipulation and embezzlement charges related to the now-defunct business, and comes nearly a year after the government decided against implementing regulation.

According to The Times, investigators believe Mt Gox may have been insolvent as early as November 2013, months before the exchange fully halted withdrawals and subsequently declared bankruptcy. Other reports suggest that the seizure of $5m in bitcoin by US officials may have exacerbated the situation.

The Financial Services Agency did not immediately respond to a request for comment.

Bitcoin News will continue monitoring this developing story.

Japan image via Shutterstock

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LOT Polish Airlines Now Accepts Bitcoin

LOT Polish Airlines is now accepting bitcoin payments, meaning the digital currency can be used to pay for flights to more than 60 global destinations.

Tickets can be purchased on LOT's desktop and mobile websites. LOT does not accept directly, but exchanges the digital currency for fiat using an unnamed payment service provider, the media outlet said.

LOT now accepts bitcoin alongside payment methods including American Express, PayPal, MasterCard and Visa.

Jiri Marek, executive director of sales and distribution for the company, said the decision demonstrates how LOT is open to "every client need" as well as innovations in the travel industry.

Marek said:

"Many of our customers are shopping online, including flights. It is only a matter of time before virtual currency payments will become as popular as credit card use nowadays. We saw this potential."

With the decision, LOT becomes the latest eastern European air carrier to accept bitcoin, following airBaltic in July 2014 and Air Lituanica in August of last year. Mexico's TAR later became the first air carrier in Latin America to accept bitcoin in June.

In more developed markets, Bitnet recently inked a partnership with UATP aimed at encouraging airlines to accept bitcoin, though no integrations have been announced as a result of that deal.

Image credit: Senohrabek / Shutterstock.com

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Klarna Exec: Bitcoin Could Help Small Merchants Go Global

To Klarna North America CEO Brian Billingsley, bitcoin and the blockchain hold the promise to solve many of the "great problems" affecting the payments space.

However, he says his Sweden-based company, which boasts more than 1,200 employees in 18 markets, isn't ready to join the list of online checkout startups like Shopify and Stripe that have embraced bitcoin as a payment method. According to Billingsley, the value proposition for the technology in payments and online commerce still remains unclear.

Addressing Klarna's bitcoin strategy at this week's Keynote 2015 conference, Billingsley indicated that his company's overarching goal is to remove friction for online consumers, something that today bitcoin as a digital currency doesn't quite achieve.

Billingsley told Bitcoin News:

"We've done internal pilots with bitcoin. We love the concept of a consumer paying with bitcoin, [but] we haven't seen a consumer experience to date that really makes it super frictionless."

Billingsley did indicate that Klarna is "actively tracking" the technology's development, even speaking to Swedish regulators to determine when they may allow consumers to spend bitcoin with their more than 50,000 merchant partners.

Despite moving forward on this front, though, Billingsley stressed that he feels that bitcoin as a digital currency, while appealing to a tech-friendly audience, won't be effective at increasing sales for Klarna's merchants.

"If shoppers have bitcoin, there are great use cases, but it will take us a while to figure out how to integrate this into our experience in a way that makes the average consumer happy," he said.

In interview, the FIS and Alliance Data veteran elaborated on the potential he sees for the technology in payments, noting specific challenges that he believes could be solved by bitcoin or the blockchain even as more attention is directed toward their non-monetary use cases.

Technology disconnect

In his conference speech and in conversation, Billingsley spoke at length about friction in the online payments process, questioning how bitcoin as a digital currency could remove e-commerce hurdles given that any new user would need to first purchase bitcoin.

Billingsley suggested this roadblock weakens the use cases for the technology, even in areas where it could gain traction, such as allowing merchants to accept payment from high-risk shoppers without assuming this added liability.

"That runs into the chicken-and-egg problem. If you're coming through the experience, our system says you're a high-risk transaction and you need to pay with bitcoin, what if the consumer isn't using bitcoin, does the conversion fall off?" he asked.

Even established companies like Coinbase, he said, face this issue, as no matter how easy it is to buy bitcoin with a credit card, most consumers won't see the value in the transition.

"Unless there's a very specific merchant that only accepts bitcoin, there isn't that reason for the average consumer to set up and buy bitcoin," he said.

Still, he suggested that a model similar to the Merchant Customer Exchange (MCX) where merchants band together to create a bitcoin payments system in an effort to lower fees would be one of the most compelling models.

"I think over time more and more people will be turned on [to the technology], but there needs to be some event," he continued. "What if an MCX was successful and said 'If you pay with bitcoin you get 3% off everything?' Otherwise it might be this long slog."

The comments echo strategies currently being executed in early stages by companies like Fold and Purse.

International payments

One trend that Billingsley does believe could be an indicator there are big problems for bitcoin and the blockchain to solve is the increasingly global reach of small merchants.

"It's shocking how global merchants are becoming, even when they're really small," Billingsley said. "We're seeing $5m–$10m merchants where 20% of their volume is from all over the world."

These merchants, Billingsley explained, face significants tax burdens from e-commerce sales, a situation that sometimes forces businesses to establish multiple corporate entities around the world.

"If you're a $10m merchant, it's tough to figure out how to scale," he said, calling this one of the biggest roadblocks to merchant growth.

Billingsley added:

"If blockchain can alleviate payments and taxes around local entities I think it would be really powerful."

Such business use cases, he argued, are more compelling than those aimed at consumers, as feels even those who favor cash aren't likely to adopt bitcoin.

"I think those consumers are probably some of the least tech savvy," he said. "How do you convince them that bitcoin is as safe as keeping greenbacks in your wallet?"

B2B opportunities

Like other panelists at Keynote 2015, Billingsley was bullish on the ability for bitcoin and the blockchain to penetrate business-to-business (B2B) payments verticals.

"The cross-border payments companies should be trying to figure out how to use blockchain technology or they should be really scared about what could happen," Billingsley said. "The Western Unions of the world should be really worried."

Billingsley indicated that Klarna is curious about how it could leverage the bitcoin network to send payments between its global offices.

However, Billingsley noted that, as Klarna is a bank in Sweden, it is still weighing the risks of partaking in this use case, noting how the company remains cautious about garnering any added regulatory oversight on top of the credit and fraud risk it assumes in online shopping.

He concluded:

"There's times when we're needing to settle out to a variety of different merchants and here is a way we can potentially settle in a better, faster and cheaper way."

Online commerce image via Shutterstock

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