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Bitcoin's UK future looks bleak (scirra.com)
174 points by AshleysBrain on Nov 11, 2013 | hide | past | web | favorite | 102 comments

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.

This is correct. They are also not singling out Bitcoins either. It has been in the news recently with banks closing accounts of money transfer businesses [1] due to the risk of money laundering. Therefore if money transfer businesses dealing with "conventional" currency are too much of a risk it is no surprise they'd not allow a company dealing in Bitcoins to hold an account.


[1] http://www.theguardian.com/global-development/2013/jun/24/so...

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.

So, given the right culture and flows of information, the mechanisms of regulatory capture can also do the right things?

EDIT: Nice, HN. Someone asks an interesting question, so it's immediately read as a position then downvoted. How about taking this at face value as a question?

If you think big banks should be the world's money police, then yes.

Honestly, I would rather have that than have the federal government do it with a giant NSA-for-banks program. But my inner libertarian finds this arrangement suboptimal. And the government is probably watching it anyway. They certainly have an enormous amount of subpoena power, to the extent that big finance companies have IT systems just for satisfying subpoenas and ever-increasing regulatory data requirements.

Edit: the answer to your question, supposing it's not rhetorical, is "yes". Elites and their subordinates have the same ethical incentives as everyone else, but are closer to the political source. This can be good or bad. I think a lot of history happens because of elites realigning their moral goals in response to incentives.

There is no reason for money laundering to even be a crime. Rather than cracking down hard on everyone's freedom, we should just go to proper war (not a 10-year occupaiton, I mean get in it to win it) when we have to to destroy enemy governments or terrorist training camps.

This is a root cause analysis.

So basically, the US government should spend even more money and kill even more people to prosecute the "war on drugs" and "war on terror" whilst not impinging upon the "freedom" of regulated financial institutions to intentionally fund the mafiosi and terrorists they're fighting against. Really?

The "war on drugs" is a massive self-sacrifice for America and should not be prosecuted.

The "war on terror" is also an improper "war" that has no victory/termination condition, ever.

So neither of those points are valid objections to my argument.

The alternative to the "war on terror," which also allows America to be safe, is to draw a bright red line: Any government that harbors terrorists will be deposed via a very swift war using the full brunt of the American military. (We would probably only have to wage such a war once; repeated examples would be unnecessary, presuming we don't elect weak presidents.)

Do you think the Somali government could actually do something about their terrorist problem even if they really really wanted to? Do think the terrorists in Somalia would in any way be opposed to the US invading their country and toppling the government? And finally what do you think should happen the week after the US finishes toppling said government and withdraws and how will that negatively affect the terrorists?

The US government has only one proper purpose, and it is to protect Americans from physical force.

I think that if a country harbors terrorists, the US should depose the government, and withdraw. The US should threated to come back and do it again, repeating as necessary, until the government stops harboring terrorists.

In fact, that it the only way to stop terrorism. And it would be incredibly effective, since the US would only have to do it once or twice in the whole world (or maybe even 0 times), to prove that they will do it.

I don't believe in the use of initiated force. But a government that harbors terrorists is initiating force against the US, and it's morally proper for the US to use retaliatory force to resolve the problem.

Force will be met with force. Don't use force, and you won't be subject to it.

In the 1 case in the world of a failed state---Somalia---I think a reasonable strategy would be to pick a winner and provide them with funding and weapons to establish a government over the territory.

That would be the greatest present ever to the terrorists. Current government not backing your crazy interpretation of sharia law strongly enough? Don't bother launching some kind of arduous civil war to topple them. Simply launch the laziest possible terrorist attack against the US or maybe just a nearby US embassy if you don't feel like traveling (don't worry too much about it, it doesn't really matter if you succeed or fail), make sure to leave enough evidence about your country of origin and then just sit back, relax and wait for the US to do the hard work for you. Once they're gone, move in and take over.

You seem to be under some sort of delusion that most terrorist groups would see the toppling of the government of the country they are operating out of as a bad thing.

The terrorists taking over the government won't do any good for the terrorists. It will just lead to the US having to once again unmercilessly completely demolish the country's government and let someone else step into the power vacuum.

If that someone is more terrorists, rinse and repeat.

There is not an infinite supply of terrorists. And if more terrorists fill the power vacuum, you're likely to eventually get a groups that decides they'd rather keep being in power than be aggressively wiped out.

Moreover, this greatly incentivizes all non-terrorists to cooperate and work together to form a government that will not be subject to US attack and will not cause their country to stay in a permanent state of war.

I think these incentives are so strong, that only 1 country would ever need to be made an example of.

If it weren't for Obama destroying American credibility to act on its threats, it would likely take 0 actual examples. But since nobody believes America will enact its own foreign policy anymore, it would now probably take 1 example.

There are only two ways to deal with force: cower in fear forever, which is what the US is doing now, to the massive detriment of its citizens' safety (mainly due to overgrowth of government such as the NSA), or just eliminate the threat.

And there is nothing morally wrong with responding with force to someone who threatens you with force.

Foruntately, the US military is so overwhelmingly dominant that pretty much any "terrorist threat" is like a fly to a giant. Even eliminating Saddam, a professional warload with a whole country at his disposal, was a sure thing---it was just a question of how few lives the US could lose.

Unfortunately, the US leadership will not adopt this doctrine in the short term, and probably never. The current Republicans and Democrats are totally opposed to using the kind of rational, moral clarity that is necessary. They would prefer to waffle and "negotiate." It would take a sea-change in the structure of the Republican party for America to ever adopt this doctrine, and is even less likely for the Democrats.

fuck you, seriously fuck your self

> This is a root cause analysis.

Colour me impressed. I'm comforted to learn that the US and its various allied countries did not go to Iraq and Afghanistan to "win it", and did not prosecute a "proper war" in Iraq. Presumably, Saddam's military will emerge any time now. I look forward to the US invading various parts of South America, and escalating to the "proper" level of violence in Afghanistan.

> I'm comforted to learn that the US and its various allied countries did not go to Iraq and Afghanistan to "win it", and did not prosecute a "proper war" in Iraq.

Those wars were massive self-sacrifices for America, just like Vietnam. For instance, Saddam was defeated very easily, in the very beginning.

> I look forward to the US invading various parts of South America

That's not an argument against what I said. We have no reason to attack South America.

> Those wars were massive self-sacrifices for America, just like Vietnam. For instance, Saddam was defeated very easily, in the very beginning.

Self-sacrifice? These wars were strategic failures, in spite of the US' best efforts, simply because you can't defeat guerillas the same way you defeat regular armies. You sound like you haven't been paying attention to what has been going on since, well, WWII. How many asymmetrical conflicts have been won by large modern armies since? The various decolonization wars, Vietnam, Afghanistan (you can't really accuse Russia of playing soft, there) ended up the same way. The UK were successful in Malaya, and the French had effectively destroyed the operational capabilities of the FLN by the end of the war in Algeria, but even this was not enough to ensure victory. Hell, even in Northern Ireland, it took decades to turn the IRA away from terrorism (and that after it managed to kick the UK out of the rest of Ireland).

Asymmetrical warfare is hard. Moreover, suggesting that a "proper war" should be prosecuted, presumably with heightened levels of violence, after hundreds of thousands of people died or were maimed for life is insulting.

> That's not an argument against what I said. We have no reason to attack South America.

Your argument was that in order to defend "freedom" (because, really, these money-laundering rules are just too repressive), the US should attack the issue at the root. Guess what? Most of the money being laundered is drug money. It's an absolutely astounding amount of cash. Most of the world's cocaine comes from Colombia and Bolivia, while the opiates come from Afghanistan.

> Self-sacrifice? These wars were strategic failures, in spite of the US' best efforts, simply because you can't defeat guerillas the same way you defeat regular armies.

These wars were self-sacrificial because they had no valuable objective for the American people (i.e., to secure their safety). Trying to "democratize" them is a futile act, and is not worth spending trillions of dollars on, and killing thousands of American soldiers.

> Your argument was that in order to defend "freedom" (because, really, these money-laundering rules are just too repressive), the US should attack the issue at the root. Guess what? Most of the money being laundered is drug money. It's an absolutely astounding amount of cash. Most of the world's cocaine comes from Colombia and Bolivia, while the opiates come from Afghanistan.

Right, and the "war on drugs" is also self-sacrificial, because, again, it has no value for the American people. Again, it is a war that can't be won, that simply calls for sacrificing unlimited amounts of money and some lives, and turns northern Mexico into a war zone as part of a perverse side-effect.

So I'm saying: Let these countries produce as much coke and opium as they want; we will be happy to import them freely.

Money laundering is a crime for exactly the same reason that destruction of evidence is a crime.

> There is no reason for money laundering to even be a crime. Thats a funny idea, have you ever heard about criminal organisations ? what should US do about criminality, attack its own land ?

> The knee-jerk urge to paint big banks as shady criminals will only intensify, not mitigate, the regulatory pressure.

It may not be money laundering, but if past history is any guide, it certainly looks like your average Goldman Sachs high-ranking executive thinks "ethics" is something that happens to other people. Or, closer to home, the recent Libor scandal. Big banks may not be shady, but they should probably come out of the dark corners they're standing with big bulges in their pockets.

> The knee-jerk urge to paint big banks as shady criminals will only intensify, not mitigate, the regulatory pressure.

This knee jerk urge is an excellent heuristic: big banks seem to act in shady, criminal ways whenever they think they can get away with it.

It's even worse than this. They actively pay compliance companies to make their criminal activity look legitimate enough to pass audits or find out where they can ship it to that has a more favourable legal environment.

I'm disgusted to say that I work in the financial services sector in the UK. Every time the FCA introduces regulations, many people bail out of the financial services market because the loopholes and illegality they built their businesses on are no longer usable. God forbid any legitimacy.

Rather than "be care what I wish for", I'm more inclined to see a warning that holding banks accountable for criminal activity is a bad thing for cryptomoney as a reductio ad absurdum argument against cryptomoney.

Your statement is ambiguous between "holding banks accountable for their crimes" or "holding banks accountable for the crimes of others".

Cryptocurrency advocates mostly dislike the result of the latter, but I don't think most people even understand that the latter is what's driving bank actions, precisely because anti-banking rhetoric tends to conflate the two in the same way.

> precisely because anti-banking rhetoric tends to conflate the two in the same way.

I don't think that people conflate them as much as you suggest. All the things I hear people complaining about are to do with misselling of insurance and mortgages, excessive overdraft fees, creating and trading insanely complicated derivatives at insane levels, foreclosing on property they don't actually have an interest in, cavalierly playing with the interest rates that the rest of the world are forced to treat as a fact of nature, insider trading, selling financial products to companies without revealing that they were created with the express intention of failing, breaking sanctions, actual money laundering, running and falling victim to ponzi schemes, paying giant sums of money to people who as far as anyone can tell from the outside failed in their duty and job, unduly influencing elected officials, deliberately manipulating the books so as to cripple entire countries and profiting in the process and then being caught on tape laughing about it.

I pretty much never hear people complaining about banks because they offer a good service to criminals.

Even if some of those criticisms are misguided, all I'm saying is that there is plenty of direct guilt that people impute to banks and bankers without having to start complaining that they are imputing indirect guilt too.

The question is whether banks should be a "common carrier" for money, just as the postman carries no responsibility if you send drugs through the post.

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.

They can only reclaim the VAT on BTC they bought IF THEY WERE CHARGED VAT ON THEM. They won't be charged VAT on them in 99% of cases because sellers are individuals.

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.

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.


The terminology is based around the traditional business model of physical goods. Buy stuff, put them together, sell the result. You reclaim the VAT on your purchases, and charge VAT on your sales. Thus the net VAT you collect is on the "value added". But you collect and your customer pays the full (eg. 20%) on the full sale amount, since he's paying for the complete value added all the way down the supply chain.

This is effectively the same as a sales tax; just the mechanism for collection is different.

For service-orientated businesses, the mechanism is the same; the terminology just makes less direct sense. In general, a business still get to reclaim all the VAT it pays on stuff it buys, and must charge VAT on all the stuff it sells.

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.

Well explained.

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

Money is an expression or a carrier of value.

If you do something to the product, that only adds value when you sell it for more than it was worth before.

Adding value to something can be as simple as buying it in a time when no one needs it, and selling it when everyone wants it. Basically you added value by carrying risk or storing the asset.

Distribution is value as well - for example, it's quite clear (and traditional) that wholesalers and retailers add value to product, i.e., a shirt in a store near you where you can try it on is worth much more than the exact same shirt in a container coming out of the factory. But technically, it's exactly the same as simply reselling something at a profit.

In essence, the unstated assumption is that if you bought it at $1 then it had a value of $1; and if you sell it at $2 then you added value, and we don't need to know how that value was added. Did you improve the item itself? Did you move the item where it was needed more? Did you offer it to customers who weren't served by others? Did you advertise&market the item to make it more attractive? These all are valid means of adding value.

Yes, so they reclaim VAT on the bitcoins they bought for £1 (and paid £1.20 for including the VAT).

Firstly they have to be charged VAT to reclaim it, you can't just claim money back from HMRC that was never paid to HMRC in the first place.

Assuming you found a company selling Bitcoins and charged VAT you'd pay £1.20 but claim 20p back from HMRC therefore the total cost would be £1.

Then same same calculation that is in the post you replied to applies. The customer would end up having to pay £1.26 of which ~21p would be payable to HMRC, leaving you with ~6p profit. But who is going to pay £1.26 for bitcoins when you can buy them for £1.05 elsewhere? If the UK based company sold them for £1.05 they'd be losing money every time they sold them due to the VAT they'd owe to HMRC.

I had a read through the Revenue's guidelines, and it looks to me as if he would be exempt from VAT, because it's just FX:

  A supplier of an exempt intermediary service is a person who:
    - brings together a person seeking a financial service with a person who provides a financial service
    - stands between the parties to a contract and acts in an intermediary capacity, and
    - undertakes work preparatory to the completion of a contract for the provision of financial services, whether or not it is completed.
all three of those apply (but IANATaxAdvisor)

Yes, if you only mediate between buyer and seller then you don't need to pay vat. However if he was to do the trading himself (buy from one person, sell to another), then that provision does not apply.

I'll also add that a very similar regulatory environment for banks exists in the US—it's not just the UK.

I think what the blog post is getting at is currencies like USD, GBP, EUR etc. are still better for fraud than bitcoin. Hence the suspicion of anticompetitive behavior.

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.

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.

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.

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

> when I was repeatedly advised to name it something else to subvert bank flags

I presume it wasn't the banks who advised you about this - I wonder how many people know about the situation with Bitcoin?

Regardless, good on you for trying to level the playing field. Judging by nearly every issue of Private Eye recently we need a bit of help cleaning up financial services here.

The UK is sadly becoming increasingly like defective ex-soviet states, where doing things in the "right, open and upfront" way is no longer possible, as one is actively punished for honesty.

Had a fascinating chat with a Latvian chap who was telling me how literally every business in the country keeps two sets of books.

I think thi post is meant to serve as more of a warning to to the U.K. government than a venting of frustration.

If the OP does indeed have a valid business plan I am sure that he will implement it in other regions if he hasn't dont so already.

Yes exactly. My opening point to Dr Cable is that the UK stands to lose a lot in the future if they don't position themselves early on and support startups in this space.

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.

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

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

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.

Well, in that spirit, let me give you my thanks too.

Also, with my experience of government, your letters never reached anyone with any understanding let alone authority within each organisation. I can assure you that there are smart people in government who know about Bitcoin and have been looking into it as I have met and discussed it with them. But these people are probably above the pay grade of the £20k pa staff handling these requests. And their job is basically to make all these Freedom of Information requests go away so they stop bothering everybody else, as quickly and efficiently as possible.

Another thing to bare in mind, is that at BIS (and I suspect other government agencies and departments too) there is a focus to destroy all information not immediately useful. This way they can truthfully answer "we don't collect this information", which is a lot cheaper than actually fetching, reviewing and releasing it.

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.

> 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.

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.

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

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.

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.

I have taken the decision to not pursue the business side of it. I'm more interested in helping BTC politically.

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.

> I think a remaining problem with Bitcoin is that people think it somehow owes them free money, as detailed by this post

That's not the impression I got from the post.

I understood the OP to be asking for fair, equal, footing for dealing bitcoin as with other money.

Financial services in the UK tend to be VAT free. Bitcoins have been given a classification which means VAT, at 20%, is payable.

Perhaps OP should check what other EU bitcoin vendors pay in VAT. Or maybe set up complex routes of bitcoins from tax havens to the customers, ala Starbucks etc.

Wouldn't fair, equal footing for dealing with Bitcoin involve paying £5000 to apply to register with the FSA and dealing with the same and money laundering regulations that financial services firms have to?

Here's 145 pages to get you started on some of the rules you might have to follow as a provider of VAT-exempt "e-money" instead of "single purpose vouchers" http://www.fsa.gov.uk/pubs/international/approach_emoney.pdf

These are in turn a lot less onerous than some of those those for exchangers and remitters of currency...

Sure. Was perfectly willing to register for MLR if it was necessary, and so would be happy to pay £5k or any other fees in the process. That's a small startup cost.

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.

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... ?

I'd call that a correction not a crash.

As an established currency we can only assume it'll become as largely uninteresting as the others (major economic events aside). Of course, we need the infrastructure and diversification of exchanges etc. etc.

I for one will be pretty disappointed if in a few years people can still make money shorting BTC and DDoS'ing exchange front-ends.

A flash crash will be caused by panic selling. And it will happen soon after average joe gets a way to sell his bitcoins into traditional currency, reliably, within an hour or a day. And it will be unstoppable. The current stability/rise is from a reluctance to sell, which dissapears fast when markets are falling.

This is why Bitcoin is essentially a pyramid scheme. People are gonna get burnt. The Vancouver ATM shows the authorities still don't know what they're dealing with and how to apply the laws already in place in this area.

"slow boom, fast crash" is pretty much a property of any financial investment of any kind. Most assuredly, it will be the case with bitcoins as well. It hasn't destroyed stocks, it hasn't destroyed bonds (which not very easy to sell btw, but crash just fine), it won't destroy bitcoin either.

It's exactly the opposite -- it's lack of an ability to quickly turn bitcoins into regular currency, and slowness of transaction processing, that has a chance of dooming the whole enterprise. As it stands, these are constraints on growth, and an incentive to develop and use alternatives.

BTW, the "flash crash" term is usually used to refer to transitory liquidity events followed by equally fast recoveries, rather than regular busts after which price tends to stay depressed for a while, which seems to be what you are talking about here.

How did "average joe" purchase the the bitcoins that he is unable to sell? When this hypothetical selloff occurs, who will buy his bitcoins? How is this hypothetical selloff different than those that have already occurred in the bitcoin markets? Why will it be unstoppable? Please explain the "current stability" of bitcoin that you referenced. How is bitcoin like a pyramid scheme (http://en.wikipedia.org/wiki/Pyramid_scheme)? What are the laws that the Vancouver ATM is circumventing? Thank you in advance.

"How did "average joe" purchase the the bitcoins that he is unable to sell?"

The same way he purchased stock he could not sell of. Time elapsed between the buying and the selling.

"When this hypothetical selloff occurs, who will buy his bitcoins?"

Who buys stock during a sell-off? There will be people who believe that Bitcoin will rise again, and who see a chance to profit from that.

Hi Brador,

here i can give more infos on that:

Our partnerplatform Bitcoin.de will enable near-relatime trading & settlement of Bitcoins for German customers. And with realtime, we are talking about seconds to max. a few minutes.

Regards from Munich,


How does my post detail that bitcoin owes people free money? I'm just trying to push for a more level playing field.

From what I gather you're attempting a high-volume, low-margin resale "business" and you want to currency to be on a level playing field with forex? Because then you're dealing with more efficient markets (hence won't get free money) and will have to leverage your kidneys just to bring home a few satoshis.

Interesting you mention forex. We get paid commission via Steam each month in USD. Using our banks forex, it costs us a lot in crappy non competitive spreads. Using Bitcoin, we save literal thousands.

We don't actually use Bitcoin for this process because transfer wise is competitive in comparison. But if transfer wise didn't exist, we'd definitely do it that way.

Low level forex might have razor sharp margins, but consumer forex is a fixed rip-off industry.

Another reason I support bitcoin. Free markets should be driving prices down and exist in competitive markets. Consumer forex does not exist in a market with these conditions. Bitcoin is a good mechanism some startups could use to introduce more competition and introduce significantly more value for consumers.

Sorry I think there's been some confusion. Forex refers to the currencies exchange markets, not swapping holiday money at a bureau de change or doing the same through your bank. (As an aside it's pretty straightforward to open a USD account in the UK.) While HN is great and all it sounds like you need to consult an accountant.

Looking further into it, it seems pretty much any forex in the UK is subject to VAT[1]. Even though Bitcoin is classified as a single-purpose voucher, I suspect it comes out to being the same amount of taxes (from the perspective of running an exchange). (EDIT: completely wrong, heh)


[1] http://www.hmrc.gov.uk/manuals/vatfinmanual/vatfin2740.htm

“Foreign exchange transactions are normally exempt supplies.” [1]

[1] http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPort...

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

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.

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.

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?

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.

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

His email is tom@scirra.com btw.

Thanks. Pinged him.

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

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.

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?

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.

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:


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



Isn't bitstamp a UK incorporated company?

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

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

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,


Thats a really nice answer to the article!

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.

"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.

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.

I hate it when people inject their own political bias into my statements, thereby misinterpreting them before they proceed to knock the strawman down. It's such a waste of time for all involved.

That statement included no specific reason for widespread adoption. I merely said that if people wish to use bitcoin for whatever reason, then I hope that they succeed. Whether they use it for convenience (the many) or for principle (the very few), I care not. Their reasons for using it are irrelevant. What matters in the long run is that consenting adults are allowed to do as they wish without interference from meddlesome third parties. That is all.

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

This is one: https://www.secondmarket.com/company/bitcoin-investment-trus...

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

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