Frank Schaeffler, a member of German parliament’s Finance Committee has issued a statement recognizing Bitcoin as “Rechnungseinheiten,” which translates to “units of account”. Many news sources are reporting that this makes Bitcoin ‘private money’ or ‘legal tender’ in Germany.
But what exactly does the designation of “Rechnungseinheiten” mean for German Bitcoin users and businesses?
The German parliament stopped short of granting bitcoin full currency status on August 19, but recognized bitcoins as “units of account” when it formally issued regulations for the popular virtual currency.
In October 2012 the European Central Bank published a remarkable study on “Virtual Currency Schemes”. At that time, the Bitcoin exchange rate was still stable (about 12 USD per Bitcoin). But only a little later, in the beginning of 2013, the Bitcoin rally started reaching its peak rate of 237 USD in April. This rally led to an intensive worldwide discussion about the nature, challenges and threats of virtual currencies. The ECB report includes two case studies of the virtual currencies Bitcoin and Linden Dollar (of the Second Life virtual community). Based on its findings, it proceeds to discuss the relevance of such private unregulated (at least at the time being) currency schemes for central banks, published as an official view of the ECB.
The ECB is not worried at the moment because the volume of virtual currencies is still low. Therefore it does not see them as a threat to financial stability. But the ECB notes that such virtual currencies could have a negative impact on the reputation of central banks.
Announced this week at the Inside Bitcoins conference the new DATA industry group aims to represent businesses not just in the Bitcoin space but any digital asset including, “emerging payments, virtual currency, and other financial technology innovations”.
DATA, or the Digital Asset Transfer Authority’s founding members include the CEO’s of leading Bitcoin businesses such as BitInstant, BitPay, & BitStamp as well as the CEO’s of other digital currency businesses including Ripple’s OpenCoin and Ven.
However, the groups stated goals seem sure to heat up the regulation debate.
To reach this potential, to inspire confidence in the services we offer, and to ensure fair and responsible treatment of consumers and merchants, we believe our industry must evolve in compliance with law and regulation. We must work proactively with regulators and policymakers to adapt their requirements to our technologies and business models. We must develop and implement common risk management and compliance standards that address the public policy concerns associated with our businesses. And our firms must build risk management and compliance programs that meet those standards.
Exchanges are the link between the old world of banking and the new world of crypto-currencies; they play a vital role in supporting the growing Bitcoin economy. If Bitcoin hopes to continue rapidly gaining new users it needs this bridge between the old and new systems to be up and functioning. While Bitcoin is in no way dependant on a link to the traditional banking system, its smooth transition into mainstream use certainly is.
Unfortunately these bridges which make up the exchange market are concentrated and often broken. This leads to concerns over reliability and security, which can cause market panic and extreme volatility. As Bitcoin enters the mainstream a wave of new businesses, services and software developers have recently dedicated their efforts to solving this problem. Their task will not be easy, and the while the exchange rate has seen some recent stability, there is a long way to go before obtaining bitcoins can be called user friendly and reliable.
Those following the internal rift in the Bitcoin community over regulation have often discussed the possibility of a fork. The Bitcoin world moves quickly.
Hitting the web only hours ago is a paper detailing the how and why of a proposed “Bitcoin 2”. The authors, and many in the Bitcoin community, are concerned that changes will be made to the Bitcoin protocol turning it into “a distributed PayPal instead of a censorship resistant currency”.
The paper discusses inherent weaknesses and changes to the protocol currently being discussed which could see users lose the option of anonymity or see miners concentrate into larger centres of control. The proposed “Bitcoin 2″ aims to increase Bitcoin’s resistance to centralization, censorship and political control and prevent it from being “absorbed by the established financial and regulatory environment.”
After shutdown of Liberty Reserve in May this year FinCEN proposed an “Imposition of Special Measure Against Liberty Reserve S.A. as a Financial Institution of Primary Money Laundering Concern”. The primary purpose of the ‘Special Measure’ being to cut Liberty Reserve off from the banking system.
FinCEN noted Liberty Reserve’s irrevocable transactions and lack of ID verification as evidence that “Liberty Reserve’s system is structured so as to facilitate money laundering and other criminal activity,” these comments worried the digital currency community and was likely what scarred off many of their banking partners.
On the 19th, the Bitcoin Foundation responded to FinCEN’s proposed special measure urging them to clarify that not all virtual currency transactions are inherently suspect.
Jan Skoyles and the Real Asset Company are continuing their look at the global gold market, this time with review of the Shanghai Gold Exchange.
Released last week the review covers contracts, deliveries, Inventory, pricing and SEG members.
In the next part of our on-going look at the global gold market we now turn our attention to the Shanghai Gold Exchange. An exchange which has received more interest of late, than any other in the world of gold and silver.
Given the significant rise of gold exports from Hong Kong to China, 68% yoy, this is a timely and informative research piece which shines a spotlight on the Eastern gold market in a time when many are declaring the end of the gold bull market. Given the huge demand for physical and reportedly high premiums on the gold price, we ask if this market may well be a better indicator of gold demand, and subsequently true gold prices, than either COMEX or London.
The M-Pesa mobile payment system is huge in one of Africa’s biggest economies, Kenya. An estimated 31% of Kenya’s GDP travels through the person to person payment provider. The country has a large rural population making traditional branch banking an unattractive option. This is certainly one of the reasons that M-Pesa’s SMS based mobile payment system has caught on. But what is clear from the M-Pesa story is that the worlds ‘under-banked’ need better solutions.
Could Bitcoin be a solution for Africa’s under-banked? It’s certainly a possibility and why not start in Kenya with a population who both has a need for and a familiarity with digital money.