Bitcoin Developers and Miners Exempt from BitLicense

Developers, miners and individuals using bitcoin will generally not be regulated by the impending ‘BitLicense’ proposals, according to Benjamin Lawsky, superintendent of the New York Department Financial Services (NYDFS).
Speaking at the Benjamin N Cardozo School of Law, New York, Lawsky clarified that many individuals and companies working within the bitcoin space will not need regulatory approval or a BitLicense to operate in New York State.
“We are regulating financial intermediaries. We are not regulating software development,” he said, adding:

“To clarify, we do not intend to regulate software or software development. For example, a software developer who creates and provides wallet software to customers for their own use will not need a license. Those who are innovating and developing the latest platforms for digital currencies will not need a license.”

However, Lawsky stressed that companies involved in safeguarding customers’ money will not be exempt. “We do not, for example, let someone run a bank out of their garage,” he said.

Banking and tech ‘collide’

According to Lawsky, the banking industry and the tech industry are starting to “collide” and create new challenges for regulators.
The NYDFS was forced to operated with money transmitter regulations drafted at a time when there was no Internet or cryptocurrencies, he said, explaining that the department has an obligation to license and regulate such companies.
On a positive note, Lawsky said the NYDFS quickly recognised the potential of block-chain technology:

 “As we began looking at bitcoin last year and getting deeper into it, we began to see the power of the technology that underlies it.”

The technology has the potential to provide cheaper fees and remittances, he said.
New York residents who send money abroad usually pay fees of 8-9%, while digital currencies could operate with fees of about 1%, Lawsky pointed out. Digital currencies do not require people to disclose their credit card information and offer faster transactions, he added.

Lawsky clarifies provisions

The NYDFS started working on the first controversial BitLicense drafts following the fall of Mt Gox, earlier this year, said Lawsky.
The comment period for the original proposal was extended following requests from industry leaders. The revised proposal will take those comments into account and, once published, a new comment period for the revised regulation will begin.

Compared to Japan, the United States is in the Dark Ages

Professional trading platform Kraken has announced it will open up operations in Japan sometime next month.
After Mt. Gox was shattered by a US$470 million heist, a vacuum was created in the Japanese Bitcoin market. One of Mt. Gox’s insiders, Jesse Powell, tried to help and restore the flailing giant after a hacking attack back in 2011. That is when he decided to found a competitor – Kraken.
In result of Mt. Gox’s collapse, the newly founded Kraken soon found itself as one of the top Bitcoin exchanges with its base surging 50 percent in two months. “The company accounts for about half of the virtual currency’s daily euro trading,” says Powell.
Kraken was also part of CoinTelegraph’s online exchange reviews, which you can read here.

Long way to Japan

Jesse Powell has over a decade long experience in the industry. His company Lewt, an equivalent of Amazon.com for virtual potions, runes etc, prospered even after the so-called real money trading and sale of in-games items were banned by many companies responsible for running big online multiplayer games.
“The whole game currency space was very interesting to me, which is how I was able to notice bitcoin,” Powell said. “It has all the benefits of these gaming currencies without that centralized point of weakness. I think it’s really the future.”
The United States’ law made it difficult for Kraken to launch and then to get custodial bank accounts to hold customer funds. Because of the guidance on virtual currencies issued by the Financial Crimes Enforcement Network, the launch of Kraken’s services was delayed for half a year. According to US law, the company had to limit their US services to only five states, so Powell decided to look for another market to introduce Kraken.
That is why he got accustomed with a Japanese law making his company one of the founding members of the Japan Authority of Digital Asset along with CoinPass and BitFlyer. Kraken’s founder observed that a lot of difficulties with opening new markets for Bitcoin businesses are a result of regulatory hurdles and uncertainty. After the struggle with the American law, Powell admitted:

“I was really surprised how open-minded Japanese politicians are. Compared to Japan, the United States is in the Dark Ages.”

Turning points

The partnership with Germany’s Fidor Bank AG (F5R) was one of the company’s breakthroughs. Powell comments on this fact:

“Euro trading of virtual currencies, including bitcoin, litecoin and dogecoin, accounts for about 95 percent of the company’s volume. The exchange also allows deposits and withdrawals in South Korean won.”

Powell also admits that the launch into a new region depends on finding a bank partner in this region as it requires not only a lot of hard work, but also involves a great sum of financial resources. Kraken acquired its own bank partner in Japan, whose name remains unknown, and is now ready to open up the service to Japanese traders.

Read more at:
http://cointelegraph.com/news/112310/kraken-sets-sight-on-japan-company-ceo-compared-to-japan-the-united-states-is-in-the-dark-ages

IRS Says Bitcoins are Property and Not Currency

BITCOIN IS NOW A TAXABLE ASSET – IRS Says Bitcoins are Property and Not Currency
Wading into a murky tax question for the digital age, the U.S. Internal Revenue Service said on Tuesday that bitcoins and other virtual currencies are to be treated, for tax purposes, as property and not as currency.
“General tax principles that apply to property transactions apply to transactions using virtual currency,” the IRS said in a statement, meaning that bitcoins would be taxed as ordinary income or as assets subject to capital gains taxes, depending on the circumstance.
Bitcoin, the best-known virtual currency, started circulating in 2009. Its present market value is around $8 billion, with up to 80,000 transactions occurring daily, according to accounting firm PricewaterhouseCoopers LLP.
Recent incidents have brought the currency under new regulatory scrutiny, such as the failure of Mt. Gox, a Tokyo-based exchange that filed for bankruptcy after losing an estimated $650 million worth of customer bitcoins.
Unlike conventional money, bitcoin is generated by computers and is independent of control or backing by any government or central bank, which its proponents like, but which also has led to calls for more guidance on U.S. tax treatment.
The IRS supplied that in its statement, which dealt a blow to bitcoin “miners,” who unlock new bitcoins online. The IRS said miners must include the fair market value of the virtual currency as gross income on the date of receipt.
This change “is a disincentive to start looking for bitcoins,” said John Barrie, a partner with law firm Bryan Cave LLP, who advises charities that receive bitcoins as donations.
NOT LEGAL TENDER

Read more at:
http://www.cryptonews.biz/irs-says-bitcoins-are-property-and-not-currency/