Four years ago in crypto
On the 27th of June 2014, the US Marshals Service offered 30,000 bitcoins seized from Silk Road for sale by auction. Many saw the closure of Silk Road and subsequent sale of its bitcoin assets as a further move towards legitimacy for bitcoin. It sent a message that bitcoin or not, law enforcement agencies could still track down and stop criminal activities. But since the bitcoin’s were being auctioned off, they were also sending the message that bitcoin was not dangerous, as many people who associated strictly with criminal activities seemed to imagine.
With a similar goal, the New York State DFS represented by Benjamin Lawsky released its proposal for the ‘BitLicense’ on the 17th of July 2014. In Lawsky’s words, the new regulations for businesses interacting with cryptocurrencies were to ‘protect consumers and root out illegal activity — without stifling beneficial innovation’.
The ‘BitLicense’ affected exchanges, miners, mining pools, bulk bitcoin and altcoin sellers, and software creators based in or having customers in the state of New York. Requirements included background checks and fingerprints for all employees, written state approval of new business activities, and immediate conversion to US dollars of any bitcoin or altcoin profits. Seen as heavy-handed by some, the ‘BitLicense’ would later serve as a platform for Lawsky, who left the New York DFS to set up his own business in advising enterprises… on how to deal with the ‘BitLicense’.
Across the Atlantic, the European Banking Authority (EBA) was also active in July. Its report on virtual currencies recommended that EU legislators move towards compliance for virtual currency exchanges with anti-money laundering and counter-terrorist financing rules. Little by little, regulation was starting to structure bitcoin activities, hopefully without stifling beneficial innovation.
In the same month, the Global Advisors Bitcoin Investment (GABI) fund introduced the world’s first regulated bitcoin investment fund, adding further legitimacy to bitcoin and moving it further into the financial mainstream. Later in the year, in September, TeraExchange would receive approval from the US Commodity Futures Trading Commission (CFTC) for a financial hedging product based on the price of bitcoin, yet another milestone in bitcoin legitimacy and credibility.
On the 18th of July 2014, IT vendor Dell announced via its founder Michael Dell that it would accept certain payments by bitcoin. The offer applied to customers in the US only, for products on Dell’s online marketplace. That made Dell with its annual revenue of $56 billion the largest enterprise to accept bitcoin. Braintree, a PayPal subsidiary, also began accepting payments in bitcoin on the 8th of September. A common factor in Dell’s and Braintree’s moves towards bitcoin was the payment processor and exchange Coinbase.
This is an excerpt of Robert Küfner’s forthcoming book, “The Crypto Decade” a comprehensive review of the ten year since the release of Satoshi Nakamoto’s white paper. If you happen to be in Berlin, join us for the launch party on Thursday, September 20, 2018.
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