First U.S. Bitcoin Exchange Set to Open

http://www.wsj.com/articles/first-u-s-bitcoin-exchange-set-to-open-1422221641

by sjcsjc • 11 years ago

126 58 11 years ago

wsj.com

jhildings• 11 years ago

What about kraken.com, wasn't that the first one ?

zmanian• 11 years ago

Canadian

jarsin• 11 years ago

https://poloniex.com/ is a US based exchange

bdcravens• 11 years ago

TradeHill (shut down twice due to regulatory issues, now dead) was the first US exchange, but I think that Coinbase will be the first to be properly licensed in the states it operates in, as opposed to just FinCEN.

sarciszewski• 11 years ago

Does anyone have a non-paywalled version of the story handy?

jamestanderson• 11 years ago

An easy way to get around the paywall is to search for this headline on Google and click a link from the results.

istvanp• 11 years ago

or take the URL and prepend it with the search operator "site:"

site:http://www.wsj.com/articles/first-u-s-bitcoin-exchange-set-t...

dmix• 11 years ago

A redditor posted the text of the article in a comment:

http://www.reddit.com/r/Bitcoin/comments/2tnkf4/first_licens...

wmf• 11 years ago

Previous discussion: https://news.ycombinator.com/item?id=8933218

presty• 11 years ago

Your link is about the Wilkevi's exchange. This article is about Coinbase.

gojomo• 11 years ago

Buttercoin, based in Palo Alto and open to US residents only, has been operating for a while. See the 'Legal' section of their FAQ:

https://buttercoin.com/#/faq

sillysaurus34• 11 years ago

Does this exchange offer insurance against catastrophic insolvency?

Someone went from millionaire to poor overnight when Mt. Gox failed, so it's a real concern. No one should keep their coins in any wallet except their own, and they need to make sure they have the technical understanding of how to properly manage their wallet. If your personal wallet isn't encrypted and backed up, it's not managed properly.

If you want to store coins on someone's exchange or webwallet, never store more than 25% of what you're comfortable with losing. (It turns out that "what you're comfortable with losing" is way, way more than the reality of waking up one day and realizing you've lost it all.)

This is an interesting move, but I'm worried that these new exchanges will increase the attack surface of Bitcoin's reputation. If the new ones fail, it will shake the public's confidence in Bitcoin yet again. Not that that matters, since Bitcoin seems to go along fine whether or not people are confident in it.

I don't know whether it would even be possible to insure against losing all cold storage reserves, but nobody should trust large sums to any webwallet (including Coinbase's current website, BTC-e, Bitstamp, etc) until protection against that worst-case scenario is in place.

EDIT: From the paywalled article:

The exchange could bring needed legitimacy to the currency, which isn’t backed by a central government and is traded over virtual exchanges, primarily overseas. Coinbase said it has insurance, offering traders some assurance that their money won’t disappear.

Until details about this insurance are released, do not trust large sums to Coinbase or anyone else. And unless the insurance protects against every coin disappearing tomorrow, never trust them at all. Trusting them is equivalent to gambling your savings for no benefit.

bobbygoodlatte• 11 years ago

"No one should keep their coins in any wallet except their own"

That's just not going to fly if Bitcoin becomes mainstream. There's too much dogmatism around this in the Bitcoin community. Sometimes a hosted wallet is the right solution for a particular user.

sillysaurus34• 11 years ago

It's not about whether it's going to fly. It's certifiably insane to trust your coins to any third party unless you either have multisig control to prevent those coins from leaving, or they have insurance to replace your coins. Do not ever trust anyone, or you'll lose your money like I did. They won't replace it unless they're legally obligated to replace it (insurance) or they're technically incapable of losing it (multisig).

Anything else is magical thinking at its most dangerous, since it can ruin lives.

mirimir3• 11 years ago

Bitcoin arguably cannot become mainstream without secure hosted wallets. Most people won't use Bitcoins until wallets start looking like debit cards, with authenticated access, insurance, and so on. Even so, prudent investors will keep large balances in offline wallets, securely encrypted and backed up.

In my experience, it's simplest to use multiple offline wallets, each in its own VM. To start using a wallet, one merely copies its VM to an online host, and appropriately configures network access for the VM.

lappa• 11 years ago

The way Coinbase words it, they may be only insuring 3% of your funds. The online wallet is insured[1], but there may only be 3% online[2] meaning a malicious employee or just a mistake leading to their cold wallet being lost probably isn't protected.

[1] http://blog.coinbase.com/post/95927658922/coinbase-is-insure...

[2] https://www.coinbase.com/security

abjr• 11 years ago

campbx.com is also US based and has been around for a while

Animats2• 11 years ago

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

So what is this "licensed" thing? "Licensed" by whom? The US SEC? The State of New York? Some other state? FinCen.

There have been many exchanges registered with FinCen, the anti-money-laundering regulator, including Mt. Gox. That provides no investor protection. A few have been licensed as state money transmitters. That may provide some investor protection. Nobody as yet has been licensed as a broker, dealer, or exchange with the Securities and Exchange Commission, something every stockbroker and dealer in the US has to do.

Being licensed as a broker/dealer means SIPC insurance for investors up to $500K per customer, FINRA supervision (they fine a few brokers every month), outside audits, exams for personnel (even the people in a call center have to pass an exam, so they know what they can and can't do) and exams top management (yes, even top management at a brokerage has to pass an exam).

There are significant advantages for being a real broker/dealer. You can plug into the financial system at a higher level, and moving money around becomes much easier.

An existing broker/dealer could set up a market in Bitcoin if they wanted to. So far, no one has bothered.

When a Bitcoin exchange gets licensed by the SEC, let us know. Until then, it's just hype.

Edit: the article says they claim to be licensed in California. Here's the list of money transmitters licensed in California: http://www.dbo.ca.gov/Licensees/money_transmitters/money_tra... Not seeing Coinbase on the list. Silicon Valley names on the list include Google, Square, AirBnb, Xoom, Paypal, Intuit, etc. No Coinbase, or anything in SF that looks like it might be them.

skue• 11 years ago

Is there any significant difference between this exchange and the upcoming Winklevoss exchange?[1]

Both claim to be "regulated," but it doesn't look like the Winklevoss version will offer SIPC protections either.[2]

[1] http://dealbook.nytimes.com/2015/01/22/winklevoss-twins-aim-...

[2] http://www.sec.gov/Archives/edgar/data/1579346/0001193125132...

bdonlan2• 11 years ago

The Winklevoss Bitcoin Trust is not an exchange, it's an Exchange Traded Fund. Basically you can think of it as a shell company that exists solely to possess (approximately) 0.2 BTC per share; buying into it is _approximately_ equivalent to buying BTC (less the trust's expenses). It's no different in theory from precious-metal ETFs like GLD or PPLT, although I'd expect expenses to be lower since no precious metals need to actually be stored.

The operation of a trust like this is simplified by the fact that the Trust itself never buys bitcoins, and sells bitcoins only as necessary to pay the Trust's expenses. The day-to-day arbitrage that causes the price to track that of actual bitcoins is something that third parties do; they can exchange a certain number of bitcoins for a certain number of shares (and vice versa).

Anyway, it's a lot easier to run a trust like this than an actual exchange; you don't need to track lots of tiny transactions, allow every random person on the internet to open accounts, generate 1099-B forms, hold significant US dollar deposits, etc.

Heck, it doesn't even need a hot wallet; in that prospectus, exchanges of BTC for shares take three business days for settlement, which is more than enough time for a quorum of people to get their keys out of their respective bank safe deposit boxes around the country and sign a multi-signature settlement transaction offline.

The big advantage of this trust, though, is that once it is listed on a big stock exchange, you'll be able to go to any stock broker and buy an interest in bitcoin. Your accountant will be able to deal with the tax implications easily, since it's just a stock, and you'll even be able to do margin transactions through properly licensed and insured brokers. It'll take a lot of the infrastructure risk out of a bitcoin investment (although volatility risk will of course remain in full force).

jvoorhis• 11 years ago

Note that the S-1 for Winklevoss Bitcoin Trust linked by the parent describes the forthcoming ETF and not the Gemini exchange.

vasilipupkin2• 11 years ago

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

SuddsMcDuff• 11 years ago

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

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

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

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

foobarqux• 11 years ago

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

Animats2• 11 years ago

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

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

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

tlrobinson3• 11 years ago

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

thinkcomp• 11 years ago

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

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

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

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

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

Just can't make this stuff up.

blfr• 11 years ago

And Google now tracks Bitcoin as any other currency.

https://www.google.com/finance?q=CURRENCY:BTC

https://www.google.com/search?q=50btc+in+usd

hellbanner• 11 years ago

How new is this?

oska• 11 years ago

Implemented in June 2014 [1], [2].

[1] http://cointelegraph.com/news/111786/both_yahoo_and_google_f...

[2] http://blog.coinbase.com/post/88679063982/coinbases-api-brin...

BallinBige• 11 years ago

"!st ever"... cmon

aarondu• 11 years ago

Coinbase and Winklevoss ETF are acting more like new commodity exchanges than currency exchanges. A commodity (like Gold) has value attached but it is not a currency, and its value invariably fluctuates (like Bitcoin).

To date, crypto currency remains a technology topic. If you want to change finance, first understand it. Take your corporate finance, capital market, macro economics classes, and understand government's role in currency and economy. Learn about the history of how commercial banking, investment banking, currency and payment worlds have evolved over the last 100 years.

In short, figure out how bank and capital flows work before prescribing any solutions like Bitcoin, otherwise it will just prove the rightful criticism - that crypto may point to the right problem, but it in itself is just a technology looking for a problem to solve, and that even if it eventually finds its purpose, the chance that the problem will be small or a better, simpler solution comes by remains high.

Financial system as it's built today is an equally sophisticated system vis-a-vis the digital world. Most of those system designers (from say Banking Act of 1933) have left this world. Tech-hackers are many, finance-hackers are fewer. Even fewer understands both. This is why if you ask the view on crypto, you will have very conflicting views between the tech and the finance worlds. And rest to be sured, we are dealing with a problem that's more finance (including financial regulatory) than tech.

Almost anyone on hacker news understands how a full stack software system works. But do you understand how a financial "full stack" works? If you're interested in tackling the problem in a new way, we are hiring and welcome your input.

HN sn = Gmail sn

utunga• 11 years ago

FWIW aarondu appears to have posted an identical comment on three different bitcoin related hn threads.. and is associated with http://boomerangwallet.com. Not sure why this info not on his/her profile page.

uehehehehe• 11 years ago

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

You should take your own advice.

"just a technology looking for a problem to solve"

haha thanks for the Monday morning laugh.

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

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

pmorici• 11 years ago

Why is this being billed as the "first U.S. Bitcoin exchange"? No doubt Coinbase will do a good job but it isn't the first or even the first regulated exchange based in the US. CampBX, Kraken, and Coinsetter are all based in the US and follow regulations.

If there actually is some distinction between what Coinbase is doing here and what the existing exchanges have been doing for some time I'd be interested to know what that is.

fehrsam• 11 years ago

Co-founder of Coinbase here

You're right in that it's not the "first US Bitcoin exchange". However, it is the first US bitcoin exchange with some amount of money transmitter licenses (none of the companies you listed have them to my knowledge). If you're not familiar with money transmitter licenses, it's what you need from most state regulators to move or hold money for customers in that state. That's why we can't support all states at launch. You can see a list of the states we support here: https://support.coinbase.com/customer/portal/articles/178054...

There hasn't been a US based exchange which has had meaningful volume in comparison to the larger international exchanges, so our hope is this gives people a US option that is both stable (both on regulation and security) and has reasonable liquidity.

sankaetp• 11 years ago

What about http://coinx.com/ ?

sidko• 11 years ago

However, it is the first US bitcoin exchange with some amount of money transmitter licenses

Not true. There are definitely exchanges out there that have state MSB licenses. Perhaps you're unaware of their existence. I know companies can sometimes be secretive about this stuff, but exchanges like CoinX have MSB state licenses. Check out http://coinx.com/money-transmitter-licenses for instance.

SomeoneWeird• 11 years ago

That still doesn't mean you're the first.

sjcsjc• 11 years ago

I assume it's related to this: https://www.coinbase.com/lunar

Wonder if wsj breached an embargo releasing this early?

First U.S. Bitcoin Exchange Set to Open

Related Stories