
Bitcoin's UK future looks bleak - AshleysBrain
https://www.scirra.com/blog/tom/4/bitcoins-uk-future-looks-bleak
======
cynicalkane
The author misunderstands the current bank regulatory environment.

Banks are not only obliged not to participate in criminal activity, the way
the laws work is that they are increasingly required to do the policing
themselves. If a bank does business with some guys and it turns out the guys
are money laundering, that can be the bank's fault. For instance, one of the
charges against HSBC is that they built up a backlog of fraud alerts. Another
charge is that they didn't tune their fraud alert levels in a manner requested
by the government. HSBC is also charged with actual money laundering _but
these two charges I mentioned are not money laundering_ in the sense
understood by most people. And the more ethical reg execs at the more ethical
banks have, among their top priorities nowdays, avoiding charges like these.
There's even been a sort of reverse regulatory capture: top bankers see among
their ethical responsibilities the job of being the world's money police.

This is a natural consequence of voters demanding politicians "hold banks
responsible" when their accounts are used for nefarious purposes. Many HN
commenters, I've noticed, share the same view. Well, be careful what you wish
for. A regulatory environment in which banks are liable if they handle digital
cryptomoney from who-knows-where is a regulatory environment in which they
will refuse to do so. The knee-jerk urge to paint big banks as shady criminals
will only intensify, not mitigate, the regulatory pressure.

~~~
eterm
They also from my reading misunderstand VAT. If they bought BC at £1 and sold
at £1.20, then the VAT would be effectively only on £0.20 as they could claim
back the VAT from the purchase when they sold. VAT would only scupper them if
they were selling BC they had mined themselves, but their talk of trying to
set up a bank makes it sound like this isn't the case.

~~~
DanBC
They buy bitcoin at £1.

They add a markup of 5%, taking it to £1.05

Then they add 20% vat, taking it to £1.26

The final customer pays the VAT, which is collected from the OP. They reclaim
VAT on things they buy, not things they sell.

~~~
TranceMan
This has always confused me - maybe somebody can help me.

I still don't understand how just re-selling something at a profit is 'adding
value' in VAT terms. I thought the 'value' added was not monetary but actually
doing something to the product(s) to make them more valuable.

[http://www.investopedia.com/terms/v/valueaddedtax.asp](http://www.investopedia.com/terms/v/valueaddedtax.asp)

~~~
tspiteri
With a 20% VAT rate, I buy something at 1.20 (1 + 0.20 VAT). So in effect I
paid 0.20 as tax. Then I sell it at 1.80 (1.50 + 0.30 VAT). So I have
collected 0.30 as tax. But I do not pass on all of the 0.30 tax to the
government, I subtract the 0.20 I have already paid as VAT, and give the
government 0.10. In effect, the consumer has paid the 0.30 VAT on the final
price of 1.50 excluding VAT.

I find the definitions in the investopedia link you provided very confusing.

~~~
Swannie
Well explained.

Essentially becoming VAT registered turns you into a tax collector :-)

------
dotBen
As a British citizen I admire his interest to operate the business
domestically within the UK _(and thus create UK tax nexus)_ , but given the
nature of the business and the run-around he's unsurprisingly receiving, I'm
surprised he doesn't/didn't incorporate the business off-shore in the
Caymens/Luxembourg/etc.

You can still operate it from within the UK, especially if you have the proof
from HMRC (UK IRS) that it's not illegal practice, etc.

~~~
TomGullen
I did consider it. But my first exercise was to attempt to do things in what I
consider to be the right way, open and upfront. For example the business name
was "bitcoin anchor ltd" when I was repeatedly advised to name it something
else to subvert bank flags. I wanted to see what resistance I would run into
and I could see no compelling reason why I shouldn't be able to do this.

As events unfolded (slowly) I've become more interested In working to level
the playing field instead rather than running a second business that would
require far more investment in time than it would if I was as to operate
wholly in the uk. Don't mistake this for lack of drive, I have obligations to
my current business which take priority.

~~~
yapcguy
The banks are committed to fighting fraud? What a joke.

Any letter to the banks should inculde a list of all their recent scams and
fraud, from interest rate rigging, to mis-selling of products, along with the
penalties they've paid.

~~~
madaxe
Fighting fraud which loses them money. Fraud which makes them money is fine,
because it's not fraud, it's "for your convenience".

------
Pitarou
TL;DR British financial institutions would like Bitcoin to go away. Any UK
based Bitcoin exchange will be taxed out of existence.

I really admire Tom Gullen for going the extra mile to get answers from those
in power.

------
rurounijones
Wow, that was a very in-depth investigation he did.

Kudos, unfortunately outcome, but kudos none-the-less.

~~~
TomGullen
Author here, thank you! It's tiring meeting all the resistance I do when
trying to investigate these issues. As cheesy as it sounds any thanks I do get
really does motivate me.

~~~
sarreph
Dude, despite not owning any bitcoins myself, it's a depressing picture that
you've painted of our institutions' reluctance to accept what could be a
revolutionary currency. I hope you keep us posted.

~~~
mseebach
> our institutions' reluctance to accept what could be a revolutionary
> currency

So, that's a pretty inherent quality of revolutionary things.

UK banks are under a lot of regulatory pressure to not facilitate money
laundering. An important part of that is to be able to follow the paper trails
of who has when money when. It's not just Bitcoin businesses that can't easily
open accounts, there's trickiness across the board.

~~~
sarreph
It is simply my opinion that the UK considers itself too much of a financial
stalwart in the schema of grandiose capitalism, where it feels as though it
has to stand by its archaic principles, in the face of many other much more
conventionally strict economies' (such as German) ability to accept a new
concept that, for once, is gaining credible traction and interest.

Were it not for the immense usage, support, and extensive literature that I
would not take such an issue with the UK's reluctance to Bitcoin as I do.

~~~
rurounijones
s/UK/City of London and their ilk/g

------
PaulAJ
I think the OP needs to decide if he is going into business or politics. If
business then incorporate outside the UK, get a bank account in Poland or
Slovenia, and get on with it. If politics then set up a political association,
call for members/donations, lobby parliament and organise demonstrations.

Being effective at either requires single-minded dedication. Don't try to do
both at the same time.

~~~
user40
The problem with going offshore are the bank fees for international wire
transfers. The UK uses GBP not EUR so that is also a barrier to overcome.

edit: also, don't forget about what happened with transferwise.com. It was
used to transfer GBP to EUR to get bitcoins from a Polish bank account.
Transferwise then blocked people from using the service to buy bitcoins
presumably due to UK bank pressure.

------
jebus989
I think a remaining problem with Bitcoin is that people think it somehow owes
them free money, as detailed by this post. (While that may have been true in
the early GPU and CPU mining days, now to venture down that road requires
serious investment for diminishing returns.) The further away the currency
gets from this way of thinking, the more stable and accepted it'll become.

~~~
brador
Stable? It will crash and rise and crash and rise. Once we get faster
tradability we'll start to see flash crashes. That's when the fun begins.

~~~
vbuterin
Umm, we see flash crashes already. What else would you call the drop from $350
to $310 here:
[http://bitcoincharts.com/charts/bitstampUSD#rg5zig15-minzczs...](http://bitcoincharts.com/charts/bitstampUSD#rg5zig15-minzczsg2013-11-07zeg2013-11-09ztgSzm1g10zm2g25)
?

~~~
brador
I'd call that a correction not a crash.

------
handelaar
Is there some reason he went to the Office of Fair Trading and not -- say --
to the Banking Ombudsman, whose actual job this is?

~~~
TomGullen
Is OFT not a suitable first port of call? I believe the banks are abusing
their dominant market position, to suppress the competition bitcoin offers. I
also suspect that collectively they may be working as a cartel on this issue
again which falls under OFTs interest.

They might claim otherwise but in my view they've lost the right for me to
give them the benefit of doubt. For me to change my view they need to explain
themselves better, certainly the reply from BBA failed on that.

As to why I didn't approach the ombudsman, I'm an amateur at politics and
government and this is all new to me. Doing the best I can and I'm well aware
some of my choices may be sub optimal.

------
olefoo
The cynical side of me would like to point out that he future of just about
everything in the UK looks pretty bleak. Unless you're a banker or an
authoritarian nutcase. And with no guarantee of press freedom, a massive
surveillance state internally; etc. etc.

It does not sound like an appealing place to do business.

~~~
r00fus
The US proves that a "guarantee of press freedom" means squat, when it's
ignored in high profile with other guaranteed rights.

Where in the world is a good place to do business then?

~~~
olefoo
You have a valid point; although in the US you will have advocacy groups that
can field convincing legal arguments if you are being tortured, prosecuted for
espionage for whistle blowing, etc. But yes, in the US the mask is slipping
more and more. I mean it's nice that when bad things go down we can point to
the bill of rights and scream about it's being violated; even if it is cold
comfort to the victims of official malfeasance.

But hey at least we aren't a 1000-year old theocracy with no bill of rights
whatsoever. And our guarantees of freedom of the press, means that those who
want to know about stories that Very Serious People don't want heard will hear
about them; even if they don't break out into open discussion until long after
the fact.

As to where is a good place to do business...?

It depends on what your business is.

------
ekpyrotic
I cannot find a contact address. Please send me an email - see my profile for
my address.

~~~
AshleysBrain
His email is tom@scirra.com btw.

~~~
ekpyrotic
Thanks. Pinged him.

------
pmorici
Isn't one of the largest Bitcoin exchanges, BitStamp.net, based in the UK?
They list a UK address on there website, why don't they have these problems...

5 Jupiter House Calleva Park, Aldermaston Reading Berkshire RG7 8NN United
Kingdom

~~~
TomGullen
Yes, but they run with international bank accounts. This means users of the
service are often required to pay international transfer fees (was £25 for
us).

On the face of it this seems like a good solution, but it's another barrier
for wider adoption. Also observe the gbp/usd value difference on a site like
bitcoinaverage.com. It's often ~10% dearer when buying in gbp. This expensive
price difference is caused by illiquidity and higher logistical differences
when buying btc from a uk point of view. Uk buyers are suffering for it. It's
not fair.

------
rheide
Offtopic but I have to mention it: this is one of the worst mobile experiences
I've ever had. The text after initial load is too small, and when you try to
zoom in it blurs the text until it finally loads, which on a crappy internet
connection can take ages. seriously, why go out of your way to make reading
text, one of the lightest possible activities on a mobile device, so horrible?

~~~
TomGullen
I know, and sorry. Me and my brother run Scirra, along with our artist from
Brazil. We've got a huge amount of work on our plate and were only a 3 man
team.

When I developed the website from the beginning I took the decision to not
care too much for mobile friendliness as I'd rather spend the time developing
new sections rather than testing on multiply evolving devices for a minority
audience. Also consider our app is for desktop so mobile users are a minority.
The sites already a lot for a small team, working on better mobile support
isn't high on my list right now.

------
tomrobinson
The BitPrice team has been in discussions with the UK government and
regulators about Bitcoin for the past 9 months. Although I share many of the
frustrations expressed here, I am much more optimistic about the outlook for
Bitcoin in the UK.

As a prospective UK Bitcoin exchange, we have managed to secure meetings with
the FCA, HM Treasury and Number 10 Policy Unit - in fact we’ve managed to get
into Downing Street twice to talk about Bitcoin. At the higher levels there
does seem to be a genuine desire to engage with and promote new financial
technologies such as Bitcoin, and to increase competition in the UK banking
and payments sector.

Educating people is still 99% of the battle – explaining what Bitcoin is,
dispelling the myths and spelling out the benefits, whilst not ignoring the
risks. The VAT issue is an example of the obvious lack of understanding of
Bitcoin in some quarters. We were also notified by HMRC that they consider
Bitcoin to be a voucher: "most likely a face-value voucher", on which VAT must
be paid. For anyone with even a basic understanding of Bitcoin, this obviously
doesn't make sense: they aren't issued by anyone, they don't have a "face
value" and they can be redeemed for a wide range of goods and services. If
they insist on using the "voucher" classification, the "credit voucher", which
can be "redeemed at a number of retailers" and on which VAT is not usually
due, seems more appropriate. Hopefully this issue can be resolved quickly by
simply switching to this classification.

The upshot of these meetings is that we do now have a commitment from the
Treasury that they will seriously consider how Bitcoin might achieve official
recognition in the UK. In doing this the government is seeking input from
Bitcoin businesses, for example through the FinTech Challenger Business
Workshop that NewFinance organised a couple of weeks ago. Any interested
parties can submit comments, which will be passed on to the government, see:

[http://files.meetup.com/2243521/RFC%20-%20FinTech%20Challeng...](http://files.meetup.com/2243521/RFC%20-%20FinTech%20Challenger%20Businesses%20Workshop%20-%20Oct%202013%20.pdf)

A common concern expressed by many fintech businesses at this event was the
difficulty in obtaining bank accounts and accessing the UK payments network.
This issue isn’t restricted to Bitcoin businesses – at the moment it is almost
impossible for any money service business to obtain a bank account in the UK.
The current lack of recognition of Bitcoin by financial regulators doesn't
help the situation, but it is a wider money laundering issue.

Overall, I am optimistic that the UK will take an enlightened approach to
Bitcoin, and that banking and tax issues will be resolved soon. London has
become so dependent on the financial services sector that it simply cannot
afford to ignore such a revolutionary financial innovation.

Tom Robinson

BitPrice

www.bitprice.com

------
corford
Isn't bitstamp a UK incorporated company?

~~~
hackerboos
Incorporating isn't the problem. The problem is obtaining a bank account which
is why Bitstamp doesn't have UK accounts.

~~~
corford
Sorry, I was wondering more about the VAT issue alluded to in the blog.

------
BTCatFidorBank
Hi there,

upfront, the disclaimer: I'm the product manager for Bitcoin business at Fidor
Bank, Munich (The bank, operating with the marketplaces Bitcoin.de and
Kraken.com)

The discussion in the article is interesting, though it misses the point (in
my opinion).

As what i've heard from the Bitcoin industry, indeed it may be a problem in
getting support from banks.

But the denail of this support is not in the sense as mentioned in the
article; and yes, big sorry for that, this article obviously smells to me like
conspiracy+aliens+nazis-on-the-moon+"guys-meeting-in-a-carpeted-room-and-
having-a-cigar-and-a-bottle-of-wine-to-decide-whom-to-support".

No one ever has asked and discussed the role of banks in the whole thing.

#1: I haven't checked the banks the colleague in the article has tried to work
with. But: For "big banks" (whatever this may mean in your perspective), it
may be somewhat problematic to support companies on a level beyond a regular
bank account, because if you need regulatory consulting, this is something
that doesn't work straight-through - instead, it involves a lot of tailormade
solutions (and country by country, in the worst case)

#2: If you do a business, that a bank can't judge, the bank is free to deny
support. Classic business, a standard banks understands it. But Bitcoin? Since
this is new, and since no body has real(!) experience with it, they do not
know how to evaluate. Plus: If the police/government/regulatory-authority
finds out that you are supporting a big money-laundering-factory (by giving a
bank account to them), there are people at the bank who may be put in jail,
just because they didn't understand/didn't know. (And if you are not
specialized in those new things, and if you have no experience with this new
phenomena, its very likely that you do not understand whats going on! People
in good-'ol corporate banking come from a completely different background, so
they _can 't_ have the experience) And thats the rub: Instead of complaining
why someone doesn't get a bank account, try to imagine -for a second- if
anybody of you would be in that position - and i guess, no one of you would
take the risk, right? :-) So, the most simple thing is just to deny the
application for a bank account, instead of spending hours and hours of
investigating and jumping into the materia...

#3: The above mentioned #2 is evebn more important, if you consider how many
requests you get from people interested in running/starting a Bitcoin-
whatever-business: Since market is new, there is a gold rush, barriers are low
(at least it seems like to most people), and every kid today thinks of running
an exchange is that easy. In fact it is not. (and i confirm this to you since
i do have a lof background/insider informations). So, imagine the position of
the bank: \- You do not have the people & experience yet \- You get tons of
requests from startups, most of them will never survive \- If there is a
business opportunity for your company, you just don't know - but you have to
invest a lot of money(!) to get something on the road Now the magical
question: WHAT do you do? :-))

#4: For most Bitcoin businesses out there, its not that you just need a simple
bank account; if you want to operate in the current scenario, you need a lot
more, depending on the country and the opinion of the regulatory authority.
This involves a lot of work, a lot of time, a lot of money, a lot of
uncertainty etc. (By the way: If you want to exchange money, you need a
license - but in Bitcoins, everyone thinks having no regulation is good? Maybe
you wanna think about that twice) And since all of these costs, most banks
just say no, because its the easier and more efficient answer.

#5: Here is now the conspiracy-theory part: Why, ever, should any bank deny a
startup because it works with Bitcoins? Its just a too simple thought, because
every bank is interested in doing & expanding business, so why would they have
a interested in shuting-down you just because you use a new currency? Most
people think, banks do not support it currently, because its a new currency
which will attack "the power structure" of the current monetary system (which
is, obviously, somewhat flawed and i can tell you this because i'm working in
this sector ;-) But maybe you wanna read #6.

#6: Biggest problem is to think, that even if Bitcoin will rule the world
tomorrow, that there are no more banks. Even at T(0) after Bitcoin has taken
over the world, there will be "banks" \- maybe not what you think a bank is
today, but even then there will be banks. Why? Its just not practical for your
parents in their 50's to carry around a USB stick with all their assets on it.
Its just a dumb idea. And even if the todays digital natives have reached
their 50's, and even if they are "native with Bitcoin", also then its a very
very bad idea to have all you assets in your pocket or at your apparment.

No comes the advertorial of my post ;-) Since Fidor Bank is a very young bank,
we are able to support those types of business and we are proud to work with
our partners www.bitcoin.de and www.kraken.com in the area of Bitcoin
exchanges. We do this, because we think that the financial sector needs
innovation and disruption. And yes, even if we are a bank (see #6 above), we
do not belive that banks will be passed away. We have an optimistic approach
on that.

Regards from Munich,

Florian

~~~
tbarbugli
Thats a really nice answer to the article!

------
notdrunkatall
I hold a fair amount of bitcoin as both a speculative investment, and because
I support bitcoin in principle. I've long suspected that the biggest threat to
bitcoin's long-term survival will be the power structure - banks or government
or both - but I hold out hope that the will of the people to use this currency
will overpower the will of the powers that be to suppress it. I've put my
money where my mouth is, and I appreciate good articles like these which delve
into the subject in detail.

~~~
betterunix
"I hold out hope that the will of the people to use this currency will
overpower the will of the powers that be to suppress it."

What makes you think that such will exists beyond a fringe of extreme
libertarians and anarchists? Excluding that fringe and excluding speculators,
what you are left with are people who want to avoid the fees associated with
electronic payments. Those people are using Bitcoin via intermediaries as a
way to send and receive their local fiat currency. In other words, Bitcoin
itself is irrelevant; _any_ electronic payment system with lower fees would
do, regardless of how it is structured.

~~~
aianus
There are a lot of people who live in countries like Argentina where there is
no confidence in the currency as a store of value. Bitcoin provides a way for
people in these countries to bypass unpopular capital controls.

There are also a lot of people who live in countries with a high rate of fraud
or don't have access to banking services or credit cards. Bitcoin, as an
extremely cheap and irreversible payment method, would allow them to
participate in e-commerce.

It's true that the average law-abiding middle-class American isn't going to
see much benefit from Bitcoin but they're a small subset of the population of
the world.

------
ye
Are there any securities, like stocks or mutual funds, tied to the price of
BTC?

~~~
tmoullet
This is one: [https://www.secondmarket.com/company/bitcoin-investment-
trus...](https://www.secondmarket.com/company/bitcoin-investment-trust)

There may be more. I remember reading about the Winkelvoss' trying to do
something similar.

