Bitstamp Becomes First Nationally Regulated Bitcoin Exchange :: Blockchain Letter, April 2016

Dear Community,

Portfolio company Bitstamp, one of the longest-standing bitcoin exchanges and the leading Europe-based bitcoin exchange, announced today that Luxembourg has granted the company a license as a fully regulated Payment Institution. The license has been signed by Luxembourg’s Minister of Finance Pierre Gramegna. Bitstamp will become the first fully licensed bitcoin exchange in Europe, going into effect on July 1st, when the company will be fully operational from their new headquarters in Luxembourg.

The news is the result of a rigorous two–year application process with the Luxembourg financial regulator, the Luxembourg Financial Industry Supervisory Commission (known as CSSF), which included government security reviews in addition to a third-party audit by Ernst & Young Luxembourg.

Bitstamp’s license is passportable into all of the 28 E.U. member states, enabling all Europeans with a robust, secure platform for bitcoin trading. In effect, Bitstamp is the first bitcoin/blockchain company to be fully regulated E.U.-wide.

EUR/BTC Trading

In addition Bitstamp has simultaneously launched EUR/BTC trading to better serve European markets. Bitstamp is offering free trading in EUR/BTC for both new and existing customers for the next seven days.

History of Furthering Innovation

In response to this news, Luxembourg’s Minister of Finance Pierre Gramegna stated, “Luxembourg has a long-standing history as an international leader in innovation. That Bitstamp has chosen Luxembourg as its European hub only strengthens that reputation. I believe this announcement marks a milestone for bitcoin and digital finance in Europe. Bitstamp is a most welcome addition to Luxembourg’s fin-tech ecosystem.”

Bitstamp’s decision to headquarter in Luxembourg comes from the country’s long and established history of fostering innovation. A historical leader in e-payments and data privacy as well as the European headquarters for many global players including Amazon and PayPal, Luxembourg features an exceptionally strong infrastructure and the financial and security awareness Bitstamp initially sought.

Having broken major ground today, Bitstamp becoming the first nationally regulated bitcoin exchange is a historic achievement for the digital currency and blockchain industry.

When Pantera first invested in Bitstamp in 2013, the digital currency industry was a virtual Wild West — a promising frontier, yet unregulated and uncertain. Today’s announcement represents a major step in the industry’s maturation.

Luxembourg recognizes the economic potential of nurturing bitcoin and blockchain as per its enthusiastic coordination with Bitstamp these past two years. It has set a resounding example for other nations to embrace this technological innovation.

I’m proud of the work Bitstamp has done to receive this license and proud of how far the industry has come.

Commitment to Compliance

This announcement marks the latest demonstration of Bitstamp’s commitment to be at the forefront of regulatory compliance. Bitstamp has led the bitcoin industry on several key security and regulatory decisions, including being the first bitcoin exchange to require full Anti-Money Laundering/Know Your Customer protocols and to implement highly secure multi-signature accounts.

“We have put a lot of time and resources into the regulatory process with the goal of ensuring customers feel more confident in using Bitstamp’s exchange and products across the European Union,” said Nejc Kodric, co-founder and CEO of Bitstamp. “We are proud to have taken this important step for our customers and the digital currency/blockchain industry globally.”

New and current Bitstamp customers can now use the platform knowing that the company and its services have achieved the highest levels of security and consumer protection previously only recognized in traditional financial institutions.

Implications for the Industry

Bitstamp’s successful licensure will have several important implications for the digital currency and blockchain industry:

  • Increase in general consumer confidence. One of the purposes of regulation is to ensure that consumers and investors can consume and invest in products safely. Bitstamp’s successful licensure will increase the confidence consumers and investors have not only in Bitstamp’s products, but also in digital currency and blockchain-related products and ventures generally.
  • Increased incentive for governments to get pro-active about regulating and nurturing the digital currency and blockchain industry. As an investment firm focusing exclusively on digital currency and blockchain, we believe this industry has the potential to be immensely valuable in the future. Governments like Luxembourg are beginning to recognize this potential future value too. Countries playing host to major blockchain industry epicenters in the future may prove lucrative for their economies. Governments may feel pressure to compete after announcements like these by similarly enabling the industry, a clear benefit.
  • Further maturation of the industry. Concerns whether digital currency and blockchain are regulatorily kosher are subsiding as a result of new licensure processes, clarifications, and publicized regulator sentiments. While much of the regulatory climate is still taking shape, Bitstamp’s licensure indicates that this historic reservation towards the industry can and will be overcome.

We’re eager to see what lies ahead for Bitstamp, bitcoin, digital currency, and blockchain post this regulatory epoch of the technology’s lifetime. Clarification about the rules and companies in the space formally following them will facilitate new entrants and better productivity in the coming years.


BITCOIN PRICE ANALYSIS

After fluctuating around $420 for that past month, the price of bitcoin passed $448 for the first time in two months on April 21.

Volatility

Bitcoin one-year volatility continues to achieve new all-time lows.

Bitcoin volatility — which used to be off the charts — is now below many major assets. Bitcoin is becoming a “normal” currency.

Bitcoin Price vs. Transactions Per Day

Bitcoin transactions per day are still rising in tandem with price. Increasing real-use of the Bitcoin network may have resulted in a sustained price increase. Price is catching up with Bitcoin’s underlying fundamentals.

Should price continue to appreciate at the pace with the historical compound annual growth rate of transactions per day, bitcoin price will surpass the previous December 2013 all-time high in January.


CONSENSUS 2016

This May 2–4, professionals from leading blockchain, finance, and tech industry startups, investment firms, financial services institutions, academic and policy groups will congregate at the New York Marriott Marquis for Consensus 2016. The multi-day event will define what is “real” in blockchain technology and focus on how to mainstream real-world applications for consumers and enterprises alike.

Join us as Pantera CEO Dan Morehead will be speaking on the Proof-Of-Work Pitch Competition on May 3rd. Several of our team members will be on the ground too. If your interested in meeting up in New York, contact us at (415)-360–3600 or via ir@panteracapital.com.

For more information about the event: http://www.coindesk.com/events/consensus-2016/.


ROADSHOW

We will be visiting several cities over the next few months to discuss the blockchain ecosystem. Some of our dates include:

  • Luxembourg, April 25–26
  • Princeton, April 29
  • New York City, May 1–6, 27–31
  • Los Angeles, May 31
  • North Carolina, June 1
  • New York City, June 27–31
  • Boston, June 30-July 1

If you are interested in a meeting, please contact Pantera’s investor relations team at 415–360–3600 or via ir@panteracapital.com.

Interesting times,

Dan Morehead
@Dan_Pantera


MAJOR BLOCKCHAIN INDUSTRY DEVELOPMENTS

Republic Of Georgia To Pilot Land Titling On Blockchain With Economist Hernando De Soto, BitFury

Excerpts: “Bitcoin mining company BitFury, the Republic of Georgia’s National Agency of Public Registry and renowned Peruvian economist Hernando DeSoto will announce Friday a partnership to design and pilot a blockchain land titling project.

“The experiment revives blockchain enthusiasts’ dreams of using the technology — a transparent and secure ledger — for managing land titles. While in the United States and Western Europe, it’s common to have legal title to property such as homes, cars, etc., in many parts of the world, people do not have legal title to their assets. De Soto, president of Lima-based think tank, the Institute for Liberty and Democracy, estimates that the value of this “dead capital” totals $20 trillion….” [Forbes]

Bitcoin’s Blockchain Technology Proves Itself in Wall Street Test

An excerpt: “Banks including J.P. Morgan Chase & Co. and Citigroup Inc. have successfully tested the record-keeping technology behind bitcoin on credit-default swaps, a move that could help it gain a foothold in mainstream finance….” [WSJ]

Is Bitcoin Becoming More Stable Than Gold?

Excerpts: “…Since its inception several years ago, bitcoin has seen wild prices swings as advocates have tried to establish the nascent technology as a widely-used digital currency. But for the past three weeks, the price volatility of bitcoin has remained below or equal to that of safe-haven gold, according to data analysis from FactSet and CoinDesk.

“The last 24 days mark the longest period in which bitcoin prices have been less volatile than gold prices, going back to 2010. Some point to the drop as a sign that investor perception of bitcoin is drawing closer to gold as a safe store of value.

“Gil Luria, a managing director at Wedbush Securities who covers e-commerce and payments, said that as bitcoin has gathered steam, it’s taken on a similar role to gold. Holding bitcoin or gold can appeal to a coinciding demographic of investors, since both may be used as an alternative when investors lose faith in traditional asset classes.

“’It has a lot to do with the perception of value,’ Mr. Luria said. ‘Gold used to be the only refuge for those who have grave concerns over the global economy and monetary system….’” [WSJ]

MIT Media Lab Digital Currency Initiative Announces a $900,000 Bitcoin Developer Fund

Excerpts: “…Amidst block size debates and proclamations that Bitcoin is dead, we’re glad the first action we took was to offer positions in a neutral academic environment at the MIT Media Lab to Wlad, Cory and Gavin to continue their open-source development work on Bitcoin.

“When we offered these positions, we heard from companies and individuals with offers of financial support, which led to the creation of the Bitcoin Developer Fund. The goal of the fund is to cover salaries, travel and overall support of Bitcoin protocol development efforts, including events like the Scaling Bitcoin workshop series.

“Together, we’ve raised $900,000. Donors include companies (BitFury, Bitmain, Chain, Circle and Nasdaq) and individuals (Jim Breyer, Jim Pallotta, Jeff Tarrant, Reid Hoffman and Fred Wilson)….” [Brian Forde on Medium]

Barclays Partners with Goldman-Backed Bitcoin Payments App Circle

Excerpts: “Barclays is linking up with Circle Internet Financial, a US mobile payment start-up backed by Goldman Sachs that uses bitcoin to transfer central bank currencies, as digital money increasingly moves into mainstream finance.

“It is the first time a European bank has allowed a digital currency company to use its infrastructure — enabling it to transfer sterling and euros — according to the two companies….

“…From Wednesday the payment app — which transfers dollars by first converting them to bitcoin — will also be able to transmit sterling between users of the app by linking to their debit cards.

“The tie-up with Barclays means Circle will be able to move sterling across the blockchain — a public ledger where bitcoin transactions are verified and recorded….” [FT]


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