Bitcoin Weekly 2013 July 3: Winklevoss Twins Plan Bitcoin Trust, Bitcoin Foundation Tells California to Talk to the Hand, China Gets into the Bitcoin Game

bitcoin-weekly-july-2013

Instead of a lot of financial drama or even regulation, this week Bitcoin has seen its share of good news. A Bitcoin Trust being planned by none other than the Winklevoss twins might inject some new value into the market—or cause turmoil, it’s hard to say. The Bitcoin Foundation has responded to California about the state’s outright wrong and silly cease-and-desist requesting the foundation stop doing something it doesn’t do (the response is worth a read.) And, China seems to be getting into the bitcoin game with mining pools and even exchanges of its own.

Winklevoss Twins Submit Plans for $20m Bitcoin Trust to SEC

Best known for their lawsuit against Facebook and its founder, Mark Zuckerberg, the Winklevoss twins have thrown their lot into building a firm that will allow investing in the derivative value of Bitcoin with a venture called the Bitcoin Trust.  According to the SEC filing, the trust will buy and sell bitcoins (and hold them for trustees) as well as enable allow them to cash in or cash out.

The $20m in seed money may see a profound effect on the Bitcoin economy when the Winklevoss twins go to set this up by buying up that much value of BTC from the exchange markets to load their trust with BTC for investors.

It’s hard to tell if the trust will work out from the SEC filing—a long winded, difficult-to-read document outlining everything possible bout the trust mechanics and dynamics—but one author from the Huffington Post weighed in that while it will be enticing to Wall Street professionals the trust will not be a great idea for them. Mark Gongloff’s criticism outlines many of the risks that investors might face given the nature of the trust and the current status of Bitcoin.

Bitcoin Foundation Responds to California Cease-and-Desist

Last month California got silly and sent a cease-and-desist letter to the Bitcoin Foundation alleging that the foundation engaged in “the business of money transmission without a license or proper authorization,” which for anyone doing even five minutes of research of their website, business registration, etc. would have discovered is completely untrue. The letter included the stiff penalties for breaking the law and demanded that the Bitcoin Foundation stop doing something it doesn’t do in the first place.

This little tidbit also made it into last week’s Bitcoin Weekly as news spread around the community.

This week, the Bitcoin Foundation replied in a seven page document outlining in great detail what the Bitcoin Foundation does—starting with what it doesn’t do, “the Bitcoin Foundation does not engage in money transmission California.” The best part of this reply isn’t just that the Bitcoin Foundation doesn’t engage in money transmission, but also “is incorporated in Washington D.C., and operates out of offices in Seattle, Washington,” meaning the Foundation doesn’t even have assets in California for business operations in the first place.

The entire response letter is available for your perusal on Scribd, but here’s the conclusion for the news weary:

For the foregoing reasons, the Bitcoin Foundation has concluded that it does not engage in activities for which a California money transmitter license is required. Furthermore, the Bitcoin Foundation respectfully submits that the sale of bitcoin is not a regulated activity generally speaking. The Bitcoin Foundation therefore respectfully requests that your office issue an official opinion or administrative letter ruling confirming that the Bitcoin Foundation is not required to obtain a license for the reasons explained above and affirming that the May 30, 2013 warning letter has been withdrawn. Further, the Bitcoin Foundation requests that your office issue an opinion that, for the reasons explained above, the sale of a bitcoin is not regulated under the California Money Transmitter Act.

For anyone setting up a bitcoin exchange in California this might be good to know; however, there might be other legislation or regulations in the state that could cover bitcoins, just not the laws cited by California in that letter.

The Chinese Discover Bitcoin

As the fastest growing industrial nation on Earth, and with such a huge population, China has always been a large part of the world economy—and although the country controls its people’s Internet with draconian filtering rules, it’s also very wired. As a result, when Alexa rankings began to show a notable spike in interest from Chinese in bitcoin mining and exchange it generated some curiosity.

According to Mike Wheatly, the discovery shows that bitcoin interest bloomed in China this year leading to the high popularity of numerous exchanges sites to compete with MtGox, “platforms like FXBTC.comBter.com and BTCChina.com.”

Upcoming Bitcoin Conferences: Inside Bitcoins “The Future of Virtual Currency”

A small conference planned for July 30th, 2013 will be held in New York called Inside Bitcoin: The Future of Virtual Currency. Featured speakers include James White, Director of Tax Issues at the U.S. Government Accountability Office, who will speak on financial regulation; Chris Larson is the CEO & Co-Founder of OpenCoin to talk about the regulatory issues facing virtual currency businesses; and Jaron Lukasiewicz, CEO of Coinsetter, a high-performance levered trading platform for Bitcoin, who will speak on FinTech business trends that will make people money.

Attendees who register before a July 11th deadline save a great deal of money, only $349 now but it become $599 if tickets are bought on site. Registration is open now.