Slashdot Mirror
Bitcoins Join Global Bank Network
another random user writes "Bitcoin-Central, a currency exchange that specialises in virtual cash, has won the right to operate as a bank. They got the go-ahead thanks to a deal with French financial firms Aqoba and Credit Mutuel. The exchange is one of many that swaps bitcoins, computer generated cash, for real world currencies. The change in status makes it easier to use bitcoins and bestows national protections on balances held at the exchange. Under European laws, the deal means Bitcoin-Central becomes a Payment Services Provider (PSP) that has an International Bank ID number. This puts it on an equal footing with other payment networks such as PayPal and WorldPay. As a PSP it will be able to issue debit cards, carry out real-time transfers to other banks and accept transfers into its own coffers."
The NSA are digging their tunnels underneath the bank's head office as we speak.
No sig today...
...It is a soul-less monster.
"However, he said, this protection only applied to balances held in euros rather than bitcoins."
So either you have an Euro account which is treated as a real bank account, or you get a Bitcoin account and are outside those regulations.
In other words, they now have an Euro bank and a Bitcoin exchange combined in the same company, but not a Bitcoin bank.
The Tao of math: The numbers you can count are not the real numbers.
I'm not an accountant or tax lawyer, so treat this with suspicion:
US tax law doesn't do much to distinguish between receiving cash and anything with a market value. If it's a gift, you pay the gift tax based on the cash value when you received the gift. If it was compensation for employment, you pay income tax. If it was for an investment, you pay capital gains rate. If it was reimbusement for a business expense, you don't pay tax. If it was for, well, you get the idea. It's not quite that simple, but for a Slashdot explanation, it'll do.
The good news is that you only pay one tax. You can estimate the value yourself. If you estimate too low, the IRS may come knocking. If you estimate too high, thank you for helping to fund our wonderful government with your kind donation.
The world is made by those who show up for the job.
There is no official exchange rate from EUR to USD either. The only currencies operating with official exchange rates are IRN (Iran), KPW (North Korean won), and a few others. For those there is a black market using completely different rates.
If you check the currency rates from different banks, you will see they differ. Usually by very small amounts, because every time a robot discovers it can buy USD with EUR in one bank and sell in another at a profit, the market rates at both banks will even out. The same mechanism is at work in Bitcoin. Sometimes however, the bots run out of funds and the exchange rate stays sparated by a few percent.
As for taxation, I have reported my bitcoins and Bitcoin earnings to the tax authorities every year, and they still have no clue what to do about the information. Bitcoin is an undefined entity. All their calculations return undef, NaN, null or similar.
I would expect that it will rise on the news - it usually does - but this story broke a few days ago, and, yes, now I remember it, it did rise.
Medium term, though, it may well push it back down. Part of the price at the moment is because they are difficult to buy, so there is a premium. If it becomes easier, then the price may fall.
So, I predict temporary instability, on top of the usual long term instability. And yet I still think it, or a tweaked successor, will succeed. Am I not loopy?
Prediction for end of Universe #42: Fencepost error in Quantum_bogosort.cpp
1. They do not claim to be a Bitcoin bank.
2. They do not claim to be a bank (just licensed to operate as one).
3. They are technically a PSP, which means they are not allowed to issue credit, i.e. increase the money supply.
4. Bitcoin banks are not impossible, just not necessary. You see the difference?
As others have said, there is no official exchange rate. I've traded currencies (not very well, but I have), and have done UK tax returns based on the same. Unless there's a more applicable rate (as in, if you're trading at one rate, obviously you can't claim another), any consistent process for calculating the exchange rate can be used (so you can use the average of high/low from a Barclays as long as you always use that, you couldn't suddenly start using the high from another data source halfway through your calculations). Exchange rates can (and do) differ depending on which market you're trading on (although obviously the use of automated trading means inconsistencies last typically seconds at worst).
I am not qualified to give tax advice to others, so anyone depending on this should consult an actual professional. Tax laws will obviously also differ by country.
PCI compliance is only for credit card payment processors. Bitcoin Central does not (as far as I know) accept deposits with credit cards because of the fraud risks from the completely insecure card-not-present payment system, so PCI compliance is irrelevant. Also, as far as I can tell it doesn't actually mean much beyond basic best practices like having firewalls, being up to date with the latest patches, encrypting card data at rest, having access controls etc. It's hardly a magic bullet.
You don't need a bank if you are using Bitcoin. However your existing money does and your existing trading partners do. Therefore you need a way to move between the Bitcoin and banking worlds. Hence, exchanges (which already exist, but a new one has launched).
Of course, with no banks, this leads to the question of how you can get credit from the Bitcoin economy. I explored these topics in a talk I gave at the London conference, the latter part covers distributed markets, ways to use modern cryptography in P2P networks to implement things like low overhead bond and stock markets. Consumer credit financed by individual bond issues isn't really practical today, but technology could make it so.
Better than that, Bitcoins generated on graphics cards have PCI Express compliance
On a more serious note, when are you guys going to wake up and see that this is just an old fashioned ponzi scam ...
Do you have a drop dead simple explanation that would prove that fact to all comers? Does anyone?
That's why this is still going on. Lots of people (not me) are out there playing with this stuff trying to determine if there's any "there" there. I enjoy the show, and think it would be a good thing if it pans out, but the jury's still out. Ponzi Scheme is a fairly definitively defined concept. What's your proof that Bitcoin == Ponzi Scheme, and what exactly is it that proves to you that all those dabbling in it are fools?
Absent of that, you're just laughter from the peanut gallery.
"Tongue tied and twisted, just an Earth bound misfit
Sure there are. MtGox was not breached since the "big one" (which was itself only a few thousand coins and the owner covered the loss from their profits, so it had no user impact). Quite a few other services just tick over making money without any drama. You don't hear about that, of course.
As usual the summary is incorrect. But then so is the BBC article and it also vastly simplifies the regulatory framework defining what it means "to operate as a bank" (or even a PSP) -- anybody with more than a month within the finance industry could have told them that. There are various types of bank licenses for different kinds of businesses that very clearly define what you are allowed to do and under what kind of regulations. The term "bank" is too imprecise in that regard. But anyway, Bitcoin-Central is neither a PSP nor a bank and they have put up the corresponding clarification on their website: https://www.bitcoin-central.net/s/aqoba-partnership "In short, Paymium is neither a bank, nor a PSP. And it doesn't need to be."
There seems to be some confusion about our recent announcement of a partnership with Aqoba allowing us to hold Euro balances legally. There has been an overwhelming response to this development, unfortunately some of the information quoted by journalists is factually incorrect.
This shall serve as a clarification.
In short, Paymium is neither a bank, nor a PSP. And it doesn't need to be.
Paymium, the company behind Bitcoin-Central has partnered with Aqoba, which is a registered PSP. The Crédit Mutuel Arkéa bank (not to be confused with the Crédit Mutuel bank) is the bank that Aqoba is associated with to provide the financial infrastructure a PSP needs.
This allows Aqoba to keep funds on behalf of third-parties in payment accounts ("comptes de paiement") which are different from bank accounts ("comptes de dépôt"). The difference between these is that funds deposited on a payment account may not be used for investments or loaned out. Additionnaly, these accounts have no overdraft capabilities.
These accounts will soon get their own IBAN number, be able to be associated with a debit card, but remain distinct from what is legally referred to as a "bank account".
In short :
Crédit Mutuel Arkéa is the bank that is used by Aqoba for its financial infrastructure needs,
Aqoba is a registered PSP,
Paymium works with Aqoba in order to operate as an intermediary when individuals and corporations wish to engage in the exchange of Bitcoins,
The "Garantie des dépôts" mechanism (which resembles the FDIC) covers our clients against a collapse of the Crédit Mutuel Arkéa bank.
Funds deposited with us will still remain clearly separated from Paymium's funds.
It is still a big development for a Bitcoin exchange to be able to operate legally within the European regulatory framework. Bitcoin-Central is leading the way in this respect. But we're neither a bank, nor a PSP. And we intend to keep it that way.
Don't just help spread rumors from other sources.
There seems to be some confusion about our recent announcement of a partnership with Aqoba allowing us to hold Euro balances legally. There has been an overwhelming response to this development, unfortunately some of the information quoted by journalists is factually incorrect.
This shall serve as a clarification.
In short, Paymium is neither a bank, nor a PSP. And it doesn't need to be.
Paymium, the company behind Bitcoin-Central has partnered with Aqoba, which is a registered PSP. The Crédit Mutuel Arkéa bank (not to be confused with the Crédit Mutuel bank) is the bank that Aqoba is associated with to provide the financial infrastructure a PSP needs.
This allows Aqoba to keep funds on behalf of third-parties in payment accounts ("comptes de paiement") which are different from bank accounts ("comptes de dépôt"). The difference between these is that funds deposited on a payment account may not be used for investments or loaned out. Additionnaly, these accounts have no overdraft capabilities.
These accounts will soon get their own IBAN number, be able to be associated with a debit card, but remain distinct from what is legally referred to as a "bank account".
In short :
Crédit Mutuel Arkéa is the bank that is used by Aqoba for its financial infrastructure needs,
Aqoba is a registered PSP,
Paymium works with Aqoba in order to operate as an intermediary when individuals and corporations wish to engage in the exchange of Bitcoins,
The "Garantie des dépôts" mechanism (which resembles the FDIC) covers our clients against a collapse of the Crédit Mutuel Arkéa bank.
Funds deposited with us will still remain clearly separated from Paymium's funds.
It is still a big development for a Bitcoin exchange to be able to operate legally within the European regulatory framework. Bitcoin-Central is leading the way in this respect. But we're neither a bank, nor a PSP. And we intend to keep it that way.
... ponzi scheme!
For Ponzi schemes, "nb4" is indeed the correct strategy.
Sheesh, evil *and* a jerk. -- Jade
On a more serious note, when are you guys going to wake up and see that this is just an old fashioned ponzi scam...
Using "ponzi" to describe something that's not a ponzi scheme, even if it is a financial scam of some sort, just makes you look like an idiot who can't tell the difference between ponzi schemes and other kinds of scams.
"Convictions are more dangerous enemies of truth than lies."
Not in US. If that's the way it works in EU... that's f'ed up :P
The answer is "never" because it does not meet the definition of such a scheme.
Bitcoin does not take money from later investors to pay early investors, nor does it promise a high rate of return. It also does not have a promoter who takes a cut from investor funds. It also does not need to "pass any sort of compliance" because it is not a security. It is an accounting system, similar to what you can do with a spreadsheet, just distributed and cryptographically secured.
There is one global Bitcoin account book that records every transaction ever made, and which account numbers got how many arbitrary units credited (bitcoins or BTC). It takes work to verify transactions and secure the transaction history from tampering. That work is rewarded with fresh bitcoins for whoever finishes a chunk of work (block) first. That is similar to an accountant getting credited for work keeping a company's books by an entry to pay himself added to the books themselves.
Adding fresh bitcoins to the system this way is different than how the Federal Reserve creates dollars, but is no less valid. The Fed buys Treasury bonds and bad mortgages, and pays for them by crediting the seller with new dollars it magically creates, then backing those dollars with the bonds and mortgages it bought. If the Fed wanted to reduce the money supply, it would sell the assets it holds for dollars, and the dollars vanish back into thin air. Since these days all of that happens by computer between the Fed and private banks, the new dollars are merely data entries, just like bitcoins.
Maybe, but I see it as more of an online payments system that scales down to micropayments and up to large, multi-million dollar transactions.
To the pedant if the object with no material value used in the scam is not actually called a ponzi then it can be argued the it is not a ponzi scam. To everyone else, there is no requirement to more correctly call it a "ponzi-like scam" because they assume that everyone can work out the "like" bit themselves and that it doesn't really matter if it's not there.
So yes, I suppose to a pedant a lot of people are going to look like idiots.
Have you noticed that a "bitcoin" has no physical value in itself? That (and several other things, such as the deflationary progression for late adopters) puts it firmly within the realm of ponzi-like scams.
Yeah, that's probably my point. But, also, yes, I may have it wrong. Maybe if I explain it, it will get clear in my mind.
At the moment, it is hard to get funds into the bitcoin economy, but relatively easy to sell out. So available cash to buy coin is scarce. Therefore cash is currently expensive, so flipping it around, according to this reasoning, coins are currently undervalued.
So, yes, I'm wrong, and it should rise, all things being equal and predictable. Mea Culpa.
Prediction for end of Universe #42: Fencepost error in Quantum_bogosort.cpp
That exchange is so small, I haven't even heard of it and I eat, breathe, and sleep bitcoins. EVERYONE uses MTGox to the order of about 95% of all trade volume last I heard. Once Tradehill was shut down by the state of California and the Feds based on BSA regulations, MTGox took over as the ultimate super power exchange. They're based in Japan and don't give a damn if they're part of some...whatever the hell this is. So in reality, I absolutely guarantee you with complete certainty that this exchange did it as a publicity stunt to try and convince people it has a better reputation and to use it instead.
It's not the case in European countries, the gift recipient obviously pays the gift tax. I think the anonymous comment is entirely wrong.
The EU doesn't write tax laws as Europe doesn't have a "federal" tax. We're still individual nations and taxes are national and local.
There is a reference rate which is "based on a regular daily concertation procedure between central banks across Europe and worldwide". That's what I used when I was earning GBP and paying income tax in EUR.
Maybe this will help.
Write failed: Broken pipe
True. But for the single transaction of gift giving, only one tax.
The world is made by those who show up for the job.