Bitcoin in the UK

Today, the first of (hopefully) many guest posts on the state of bitcoin in various countries across the globe. Let’s kick it off with a look at one of the most hospitable bitcoin markets in the world, the UK. Tom Robinson, the Chief Operating Officer of London-based Elliptic, breaks it down for us. Elliptic offers full-service Bitcoin custody for investment funds and trading firms, and they have some open positions that you can check out below in the jobs section and at www.elliptic.co.

“Bitcoin in the UK” | Tom Robinson, COO, Elliptic

In late 2013, the UK was not a great place to be a Bitcoin user or entrepreneur. Value-added tax (VAT) was being levied on sales of digital currencies, few retailers were even aware of its existence, and banking or funding for startups in the space was almost non-existent. Fast-forward to today and the UK is now regarded as one of the most promising places in the world to operate a Bitcoin business. This has been largely due to the work of the Bitcoin community, as well as growing engagement by a government eager to bolster London’s current “fintech” boom and maintain the city’s status as a global financial hub.
Last year, the London Bitcoin Meetup grew from a few people in a pub near Paddington station, to the world’s largest regular gathering of digital currency enthusiasts. It was out of these gatherings that the UK Digital Currency Association was formed, to promote the sector and provide a single point of contact for policymakers and regulators. The culture of the UK Bitcoin community is quite different to that in many countries, with many of those involved having worked in the UK’s large financial services sector. This results in a pragmatic approach to promoting and increasing digital currency adoption, and the general consensus is that light-touch regulation of certain types of business should be welcomed — to legitimize the technology and to help prevent episodes such as the Moolah (dogecoin-related) debacle. This proactive mentality has led to some early successes with regulators; in April, the UK tax authorities rescinded the aforementioned VAT on digital currency sales and trading fees.
While bitcoin retail acceptance has slowed somewhat, UK bitcoin startups held their own against their US counterparts in 2014. Blockchain.info, established in the unlikely setting of Yorkshire in the north of England, announced in October that it had raised a bitcoin-record setting $30.5 million. Bitnet, a payment processor whose team had previously sold a $2 billion payments business to Visa, established operations in Belfast and raised $14.5 million. Elliptic launched the world’s first insured bitcoin custody service in January, later raising $2m in seed funding. Coinfloor and Netagio launched bitcoin exchanges, and two established Australian bitcoin businesses, BTC.sx and Coinjar, even moved their headquarters to London, attracted by the city’s financial pedigree and favorable tax regime.
That’s not to mention the raft of new startups that launched last year, including XBTerminal (a POS system), pockio (gift cards for crypto), Queueco (automated trading platform) and Wyre (mobile payments), with many others in development. And it’s not just bitcoin. Alternative blockchain-based technologies and applications from UK-based companies such as Eris Industries and Maidsafe have the potential to facilitate smart contracts and propel all sorts of decentralized applications in the years to come.
Still, all of this success belies the significant structural challenges that remain in the UK. It remains almost impossible for Bitcoin companies to obtain bank accounts, particularly if they wish to hold client deposits. Although a widespread issue, it appears to be particularly acute in the UK, with banks citing the money laundering risk, an issue to which they are particularly sensitive since the levying of huge fines against HSBC and others. This difficulty has been exacerbated by the reluctance of the Financial Conduct Authority and other regulators to take responsibility for overseeing Bitcoin businesses.
There is hope, though; Swedish exchange Safello has proven to be a recent exception to the rule, securing a UK banking relationship. The Bank of England weighed-in on crypto-currencies, releasing two detailed reports on digital currency technologies and their economic implications. In July, the London-based European Banking Authority suggested that the issue could be resolved by bringing digital currency businesses within the scope of anti-money laundering regulations. And in August, Chancellor of the Exchequer George Osborne took the politically significant step of buying bitcoins from an ATM at a fintech event in London, before announcing a government consultation on digital currencies.
The global regulatory uncertainty has created an opportunity upon which some of the UK’s Crown dependencies are capitalizing. These self-governing territories have in the past been able to carve-out lucrative niches in finance and e-gaming, thanks to their political and legal independence from the UK, and they are now looking to do the same with digital currencies. For example the Isle of Man has promised to regulate Bitcoin businesses, while Jersey has become home to GABI — the world’s first regulated Bitcoin investment vehicle. [Banking still remains an issue as Capital Treasury Services was forced to cut ties with the Isle of Man’s Bitcoin companies, and HSBC ended its relationship with the Jersey sponsor of the GABI fund.]
Developments over the next year will be critical in determining the future of digital currencies in the UK and perhaps elsewhere in the world. The UK’s legal and regulatory frameworks are respected globally, and the government’s conclusions to its review of the sector (expected in the next few months) will be closely monitored and likely emulated. If the government moves to further legitimize digital currencies we can expect to see an explosion of interest from the City of London’s financial institutions.
Huge progress was made in the UK in 2014. By harnessing the UK’s current fintech boom, its financial expertise and its passionate Bitcoin community, it looks set to become a major hub for digital currencies.

This post was edited for length and clarity. Smart stuff attributed to Tom, idiot stuff attributed to your favorite Idiot.

Events

The North American Bitcoin Conference, Miami, FL (January 16–18)
Winter doesn’t have to suck. It’s not too late to escape down to Florida for the second annual Miami Bitcoin conference this MLK weekend. Tickets are just $200, and this is the best Bitcoin or fintech conference you’ll be able to go to for months. The Chamber of Digital Commerce is also hosting a “Regulatory Hackathon” at the Miami event, an AML compliance bootcamp focused on how to establish and keep banking relationships as a digital currency venture. Hope to see you there!
http://btcmiami.com/

Jobs, Jobs, Jobs

Bitnet, San Francisco, Belfast, London (VC-backed)
-Leading digital commerce platform & former Visa team.
-Open positions: Engineering (Customer Success, Lead UI, Product, DevOps), Sales Director (EMEA), Sales Engineer (San Francisco)
-Check out Bitnet (https://bitnet.io/careers.html) and email jobs@bitnet.io

Coinbase, San Francisco (VC-backed)
-Largest “universal services” bitcoin company.
-Open positions: Security Engineer, Software Engineer (2–3 years mobile product development), Regulatory Compliance Investigator, (1 year conducting SAR investigations)
-Check out Coinbase (https://www.coinbase.com/careers/)

BitGo, Palo Alto (VC-backed)
-The leading Bitcoin multi-sig security company
-Open positions: Back-end / Front-End / iOS / Security Engineers, UX Designer
-Check out BitGo (www.bitgoinc.com/jobs) and email jobs@bitgo.com

Bolt, San Francisco (VC-backed)
-Stealth startup focused on consumer applications of Bitcoin.
-Open positions: Security Engineer, Ruby Engineer, UI/UX Designer, Executive Assistant.
-Check out Bolt (bolt.com) and email jobs@bolt.com.

Elliptic, London (VC-backed)
-Vault and enterprise digital currency services.
-Open positions: Software engineers and business development gurus.
-Learn more and apply at elliptic.workable.com

Today’s Tid Bits

Much More Than Digital Cash
http://www.economist.com/news/business-books-quarterly/21638093-rise-and-fall-crypto-currency-good-news-authors-least-much
Nearly 200 books this past year about bitcoin have been published, but only a few are really worth reading. Paul Vigna and Michael Casey, two journalists at the WSJ, wrote the “The Age of Cryptocurrency” a book centered on the blockchain. Vigna and Casey begin by describing the history of money and the role government plays, and go on to predict that bitcoin will be a disruptive payment system. “The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order,” is a must read for bitcoin enthusiasts.
The Magic of Mining
http://www.economist.com/news/business/21638124-minting-digital-currency-has-become-big-ruthlessly-competitive-business-magic
Bitcoins are hard to earn, limited in supply and easy to verify making the bitcoin mining business a big, ruthlessly competitive business. In the early days, most miners were small-scale users trying to mint money on their home computers, today bitcoin mining firms are based in countries such as Sweden, where electricity is cheap and reliable, and the actual mining takes place in large warehouses or even aircraft hangers. Some are concerned the mining industry is becoming too concentrated, or comes with too high of environmental costs, but nonetheless this new branch of the global IT industry will continue.
Apple Approves iOS Game That Tips Players in Bitcoin
http://www.coindesk.com/apple-approves-ios-game-tips-players-bitcoin/
SaruTobi, a retro-styled iOS game that Apple has approved tips for players in real bitcoin. The game lets users swing a monkey from a vine, building momentum before releasing him to collect power-ups and bitcoin tokens as he frolics through the air. After users play the game for a certain amount of time, the game will reward the user by sending him/her a bitcoin tip.
Bitcoin Broker LibertyX Raises $400k for Hiring Push
http://www.coindesk.com/libertyx-400k-funding-us-expansion/
LibertyX, a Boston-based bitcoin buying network company supported by 2,500 US merchants, has raised more than $400,000 in funding from early-stage VC firm Project 11 as a part of a seed round and its first public fundraising. Chris Yem, co-founder, explained the new capital will be used to expand LibertyX’s three man team.
Academic Research on Bitcoin Tripled in 2014
http://www.coindesk.com/academic-research-bitcoin-tripled-2014/
In 2014, more than three times as many papers were published about bitcoin as in the previous year. 205 academic papers were published this past year, and most expect this number to increase in 2015. It should also be noted that there is also lots of research focused on the technical side of bitcoin, delving into cryptography, computer science and systems design were also conducted this past year.
Butterfly Labs Resumes Services Following Court’s Approval
http://newsbtc.com/2015/01/08/butterfly-labs-resumes-services-following-courts-approval/
Buttefly Labs, a bitcoin mining hardware supplier, resumed its business operations this week following the court’s permission. The company was shut down in September, following a complaint made by the Federal Trade Comission (FTC). Butterfly Labs promises to addresses a number of issued related to on-time shopping of Monarch Bitcoin mining hardware and refund requests.

Have a tip or feedback? Email me! (2bitidiot@gmail.com)