On February 2, Venezuela's leading bitcoin exchange, SurBitcoin, was forced to suspend operations when its bank account was revoked. According to Rodrigo Souza, who runs SurBitcoin's trading platform, the bank closed the account in anticipation of a nationwide crackdown on bitcoin use in Venezuela after the police raided a warehouse with 11,000 mining computers. SurBitcoin is in talks with other banks, and hopefully it will be operating again soon.

At its core, Bitcoin is a peer-to-peer system that allows users to exchange digital currency without permission from the government or any third party. That's why it's the ultimate libertarian technology. Bitcoin exchanges, like SurBitcoin, however, are subject to government control because they buy and sell bitcoins on behalf of their users and rely on a company bank account to collect and pay out money.

As Souza stressed in an interview last year, exchanges like SurBitcoin aren't actually necessary. They make buying and selling bitcoins more convenient, but users can always revert to peer-to-peer trading. As Souza put it, "how can [the government] stop software running on the internet?"

As he predicted, SurBitcoin's closure has led to a surge in peer-to-peer trading. LocalBitcoins, a site where users connect to buy and sell bitcoins, makes its trade volume public through an API. (See the chart below.) Last week, 464 bitcoins were exchanged in Venezuela on LocalBitcoins, the equivalent of nearly $470,000 dollars based on today's price. That's close to a 50 percent increase in volume since SurBitcoin stopped operating. (LocalBitcoins' previous trading volume peak was 377 bitcoins the week of October 15, 2016, but, at the time, bitcoin was worth almost 40 percent less than it is today.)

SurBitcoin's average weekly trade volume was about 330 bitcoins when it shutdown. So about two-thirds of SurBitcoin's activity has move to LocalBitcoins. (A similar phenomenon is happening in China.)

Why is bitcoin in Venezuela seemingly inexorable? For more, read "The Secret, Dangerous World of Venezuelan Bitcoin Mining." Or listen to this week's episode of EconTalk with Russ Roberts, where I discussed bitcoin in Venezuela and the impact cryptocurrency is having throughout Latin America.

As I told Roberts, I first learned about bitcoin when listening to 2011 EconTalk interview he did with Gavin Andresen, a pioneer in the field. I remember thinking, "this can't possible work." Six years later, in part through my reporting on Venezuela, I'm convinced bitcoin will change the world.

Listen to the interview below. (Bonus link: Nick Gillespie interviewed Russ Roberts in 2014 about his book on Adam Smith.)

Go here to see the original:
Peer-to-Peer Bitcoin Trading Surges in Venezuela - Reason (blog)

Banks in the United Kingdom are turning a deaf ear to bitcoin exchanges, despite the governments pro-blockchain position, according to financial writer Roger Aitken, writing in Forbes. Unless the situation changes, the banks will undermine bitcoins progress and drive cryptocurrency entrepreneurs out of the banking system.

Cryptopay, a bitcoin brokerage, recently informed customers that it will no longer support British Pound deposits and withdrawals on account of new bank policies. Such incidents have increased as bitcoin has gained popularity.

Cancellation of GBP deposit and withdrawal facilities limits people to Single Euro Payments Area (SEPA) transfers, making Cryptopays buying and selling useless to most British customers.

A dozen or more U.K. brokerages and bitcoin exchanges have suffered over the past three to four years as banking facilities have become unavailable. Some have closed or resorted to awkward arrangements.

Britcoin, which became rebranded as Intersango, started in 2011. It faced problems with U.K. bank transfers before eventually closing. An August 2012 update noted that bridging the gap between bitcoin and the conventional banking system was costly on account of technical issues, missing transfers, and accounts frozen and closed without warning.

In 2014, Bit121 had a promising start, but banks withdrew their support and the exchange closed.

In Bitcoin We Trust suffered the same fate. It resorted to using postal orders before giving up.

Coinfloor, one of the only U.K. exchanges still operating, uses SWIFT transfers, which incur hefty costs and delays. The minimum transfer is 1,000 (c.$1,250).

CoinJournal, a bitcoin publication, saw its banking services come to an abrupt endafter its U.K. banking provider Barclays terminated its business account. CoinJournal received no official warnings prior to its account closure. Even more alarmingly, Barclays still hasnt given a reason for the extreme action.

CoinJournal believes the decision taken by Barclays to close its business account was an automated call, after seeing a pattern of banking transactions involving prominent bitcoin exchange and service provider Circle.

The decision was likely a result of us using Circle to transfer fiat from ad revenue into bitcoin to pay our writers and some overheads, a representative for the publication told CCN.

Similar scenarios have played out in Australia and New Zealand.

BitNZ, a New Zealand bitcoin exchange, has announced it is closing due to the refusal of New Zealand banks to allow bank accounts to trade bitcoins, and has advised customers to withdraw all funds before April 15, 2017.

The Australian Competition and Consumer Commission is scrutinizing attempts by Australias biggest banks to swallow fintech companies developing technologies like blockchain solutions in the financial sector.

Peer-to-peer services match individual buyers and sellers in the U.K. in lieu of traditional exchanges. Trust is established by reputation.

Once a buyer has paid, usually with a bank transfer the seller sends the bitcoins.

As for other nations, Russia recently relaxed its regulatory position and taken a wait and see approach. It has effectively legalized bitcoin and allowed for exchanges to operate. Switzerland is a more progressive country. It is easy to buy bitcoins through a network of ATMs on the rail system.

In Japan, it is possible to pay electric bills with bitcoin.

The United States has a more complex regulatory framework. But progress is on the horizon since the New York BitLicense took effect in 2015, with other states following a similar approach.

Bitcoin is legal in China, although the central bank recently stopped highly leveraged trading.

The banking sector is clearly at odds with the U.K. government, which is openly pro-blockchain. The situation is peculiar, with the government saying the country is open to bitcoin but the banking sector standing in the way.

Since the financial crisis, the taxpayer has become the majority shareholder in the Royal Bank of Scotland, holding at around 82% of the bank. This would normallytranslate into a certain amount of leverage by the taxpayer.

The U.K. also has a reputation for being a fintech hub, to which the banking sector seems to have taken exception.

For whatever reason, the banks have closed ranks and chosen not to work with bitcoin.

The fact that bitcoin is decentralized and fiat currency is centralized could be at the root of the conflict.

Also read: Blockchain platform Waves raises more than $2m at the start of the crowdsale campaign

Money cannot flow easily from the blockchain economy to the traditional financial sector and vice versa without banks cooperation. The bitcoin sector is not large enough to offer all the goods and services needed to make bitcoin a sufficiently broad means of payment.

Bitcoins volatility also makes it an unsuitable unit of account or store of value. While its a great transfer medium, its price against fiat fluctuates too much for most people.

The bitcoin economy wont expand until bitcoin is better suited as a means of payment. But it wont be better suited without more growth and stability.

Waves, a custom blockchain tokens platform, offers a solution fiat-backed blockchain tokens. It raised $16 million last summer through crowdfunding. Waves can act as a gateway between the blockchain and the fiat world.

Customers pay money into the gateway using a bank transfer or another suitable means, and the gateway issues them the same sum in blockchain tokens

The same exchange occurs in reverse when customers cash out their Waves GBP and have them sent as real GBP to their bank account. Waves essentially serves as a toolkit.

Sasha Ivanov, CEO and founder of Waves, noted that Waves can make money more efficient. By putting fiat money on the blockchain, Waves can make it more transparent and faster, and it can reduce the cost of sending it abroad.

Ivanov thinks Waves can introduce competition and encourage banks to become more accountable. If banks in one sector in one country wont work with Waves, it will work with those in another jurisdiction.

Waves does not immediately solve the problem of U.K. banks hostility to bitcoin, but it suggests the roadblocks are not insurmountable. The answer may be to work around them rather than with them.

Image from Shutterstock.

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Bitcoin's Growth in the UK Continues to Be Stifled by Banks - CryptoCoinsNews

As one of the more high-profile bitcoin ETF efforts edges closer to possible approval, analyst Needham & Co has released a deeper look at the factors that could influence the US Securities and Exchange Commission'sdecision on the matter.

Published Friday, the report doesn't go so far as to alter its outlook for the Winklevoss Bitcoin ETF, positioning its odds of approval at below 25% while continuing to state strongly that any positive outcome would be a substantial boon for the technology.

Perhaps most notably, however, the report offers a wider lens-look at three investment vehicles vying for the title of 'first bitcoin ETF' (including those by startups SolidX and Grayscale Investments), ultimately concluding that none have a substantially better or worse chance of being given the green light by the SEC.

"While there are some interesting differences between the various filings, we dont see any differentiations that drastically increase the probability of one filing over another," the report reads.

Needham goes on to state that it believes the unfamiliarity of bitcoin and the SEC's emphasis on consumer protection is likely to be the biggest hurdle.

"Our sense is that the latter group (questions about bitcoin itself) is the bigger hurdle to SEC approval of a bitcoin ETF," it continues.

In further commentary, Needham said it believes the market is now more realistic about the changes of approval. It cited changes to a contract on a cryptocurrency exchange that enables traders to speculate on the ETF decision. (As reported by CoinDesk, eager traders have largely already built this forecast into their trading strategies). Ultimately, the firm said, the thin trading in the markets coupled with the relative lack of changes to the Winklevoss ETF in a recent filing were both cited as reasons why it was reluctant to change its outlook.

For more details, read the full report below:

Bitcoin ETF - Digging Deeper on Probability and Potential Effect (1) by Pete Rizzo on Scribd

Disclaimer:CoinDesk is a subsidiary of Digital Currency Group, the owner of Grayscale Investments.

Piggy bank image via Shutterstock

Bitcoin ETFPrices

Continue reading here:
Needham: Outlook For Bitcoin ETF Approval Remains Unchanged - CoinDesk

Forbes

Bitcoin Or Bust: Taking British Banking Out Of Exchanges Forbes Despite the UK government's pro-blockchain stance, commercial banks have put a dozen or more bitcoin exchanges out of business by denying or withdrawing facilities. Without a fundamental change in approach, the banking sector will hamstring progress in ... Is It Time To Remove UK Banks From the Bitcoin Ecosystem?newsBTC Austria gets first dedicated 'Bitcoin Bank'EconoTimes Bitcoin-BankBanking Technology all 4 news articles »

Read more here:
Bitcoin Or Bust: Taking British Banking Out Of Exchanges - Forbes

Slide: 1 / of 1. Caption: Twelveofour

Jeffrey Tarrant is a Wall Street guy. He spent the last thirty years investing in new hedge funds. As the founder and CEO of a firm called Protege Partners, he compares himself to Sam Altman, the president of Y Combinator. What Altman does for Silicon Valley tech startups, Tarrant does for hedge funds. I help seed them and incubate them, he says.

The analogy has never been more true than right now. Tarrant is beginning to explore hedge funds built on ideas that have sparked so many companies and created so much wealth in Silicon Valleyideas that span artificial intelligence, crowdsourcing, and digital currencies. He believes the hedge fund world is on the verge of a new revolution, a revolution he calls the Third Wave.

Hedge funds are moving beyond the quants.

The 1970s saw the rise of discretionary funds, where iconic investors like George Soros used their very human judgments to find new opportunities in the market. Then came the quants at funds like Renaissance Technologies, who found even greater opportunities through statistics and computer algorithms. Now, Tarrant says hedge funds are moving beyond the quants.

As a prime example, he cites Numerai, a San Francisco hedge fund that makes trades using machine learning models built by thousands of anonymous data scientists paid in bitcoin. Funds such as Quantopian and Quantiacs are tapping the wisdom of the masses in other ways. And then theres Polychain, a fund that invests exclusively in bitcoin and other digital tokens housed on a blockchain, the distributed online ledger that makes cryptocurrencies possible. As its name suggests, Polychain isnt just investing in digital coinsits investing in a radically new breed of businesses owned, funded, and operated entirely by decentralized networks of anonymous online investors.

Such funds arent always easy to wrap your head around. But as Wall Street tries to make sense of them, these new tech-driven approaches to investing are proliferating. In the late `90s, Tarrant helped build an online directory of hedge funds called AltVest. Now, hes building a directory for this new wave of funds. It includes roughly fifty players, many of whom have yet to publicly announce themselvesthough Tarrant admits that only about half have demonstrated real promise so far.

Not surprisingly, some financial vets question how effective Tarrants new wave will be. In a recent Bloomberg story, several fund managers said that recent enthusiasm for machine learning is overblown. In some cases, even the founders of these Third Wave funds urge caution.

Regardless of what method you use in quantitative financebe it machine learning or traditional quant methodsthere are an infinite number of ways to fail, says Martin Froehler, a former quant with Superfund Asset Management GmbH in Switzerland who went on to found Quantiacs. Machine learning models are no superweapon, he says. In his experience, ninety percent of live machine learning tests fail.

But Froehlers fund benefits from machine learning, too. Based in Silicon Valley, Quantiacs attempts to crowdsource the quant model, and many of the quants feeding the fund are using machine learning technologies. Among other things, theyre making use of deep neural networks, complex mathematical systems for recognizing patterns in vast amounts of data. In other words, the Third Wave is not just about using one new technique. Its about combining techniques, from machine learning to crowdsourcing to the blockchain.

Nor is this just a battle of the old guard and the new. The founder of Renaissance has invested in Numerai, and Point72 Asset Management, the fund founded by billionaire Stephen Cohen, has put money into Quantopian. These people who I considered old school really understood what I was getting at, says Numerai founder Richard Craib. And I thought I was going to be ahead of my time.

Even the apparent skeptics are embracing the trend. Im concerned that people may have unrealistic expectations of what is possible with the current state of the art, David Siegel, co-founder of storied quant fund Two Sigma Investments, said last fall. But more recently, his fund ran an online contest through Silicon Valley data scientist marketplace Kaggle, offering a $100,000 prize for the best machine learning model. One company director indicated the contest was more of a recruitment tool than a full embrace of crowdsourcing or machine learning. But whatever the intention, it was yet another example of Silicon Valley and Wall Street drawing closer than ever before.

Read more:
AI and Bitcoin Are Driving the Next Big Hedge Fund Wave - WIRED