The European Central Bank is showing its distaste for bitcoin, denying it the status of a real currency and highlighting its vulnerability to cyberattack threats. And this all flies in the face of the Bank of England’s stance, which recently cited possible tangible financial advantages of blockchain and digital currencies. Will the EU and the Brits every stop squabbling?
The European Central Bank (ECB) is flip-flopping on its stance on bitcoin almost as much as the Russian government. In Oct. 2012, the report “Virtual Currency Schemes” warned that virtual currencies could have a substitution effect on central bank money, could decrease the use of “real” money and could reduce the cash needed to conduct transactions generated by nominal income. The bank argued that the substitution of central bank money by privately issued virtual currency could reduce central banks’ balance sheets and their ability to influence short-term interest rates.
Recently, the ECB has stopped producing the €500 bill and is promoting a shift away from real, paper money to electronic alternatives. Now, the ECB has turned tail again and is asking EU lawmakers to tighten proposed new rules on digital currencies, such as bitcoin, fearing a loss of control of the money supply in the eurozone.
So, the ECB can’t decide whether to go after cash or digital currencies. According to Reuters, the underlying dilemma is how to fight terrorism, and the ECB wants the currency exchanges to check the identities of those exchanging digital currencies for real money. The ECB even said on Oct. 18 that “EU institutions should not promote the use of digital currencies and should make clear they lack the legal status of currency or money,” according to Reuters.
Reuters translated the ECB’s statement to mean that, although they would love to eliminate cash, which is a barrier to its negative interest rate policy strategy, it advocates debit and credit card transactions, which are tracked and taxed by both central banks and local governments, and not digital currencies.
The ECB’s statements contradict those of the Bank of England, which recently suggested that issuing a digital currency on a distributed ledger could bring benefits of an additional 3 percent on a country’s economic output.
Fancy that? A disagreement on fiscal policy between the Bank of England and the ECB.
But Circle’s Allegiance Is With The Brits
One FinTech is siding with the U.K. and not heeding the EU at all. CryptoCoinsNews reported on Oct. 19 that P2P FinTech firm Circle now supports bitcoin buying and selling in 16 European countries, as well as the U.K., after receiving an electronic money license from the British government six months ago. Users in countries including Belgium, France, Germany, Italy and Spain can now link their euro-based credit and debit cards to Circle’s platform. In nine of the 16 countries, users can hold euros in their accounts, as well as bitcoin.
In mid-2016, Circle completed a $60 million round of funding in China.
And in September, Circle announced an integration with Apple’s iMessage app, allowing users to send and receive personal payments in fiat currencies and bitcoin. The company said that users would be able to “cash out using almost any bank in the U.S., U.K. and, soon, Europe … We’re excited to add European cards and the euro to the growing list of supported card currencies and countries, a list that already includes Visa and Mastercard debit cards from both the U.S. and U.K.”
Coinsecure Goes Mobile
Other positive movements for bitcoin were in India, where Indian bitcoin exchange Coinsecure launched a mobile app on Oct. 19 for the Android OS as a step towards serving the ever-expanding smartphone user base, according to Finance Magnates.
Mohit Kalra, Coinsecure CEO and founder, was brimming with confidence and said: “With over 190 million smartphone users in India, putting a technology so disruptive like bitcoin in their hands is a win-win situation.”
Developers have designed the app for use by traders, but it is sufficiently user-friendly for beginner bitcoin users. The app will buy, sell, send, receive and accept bitcoin. It also shows live order books. With one click, users can place bids and asks, check pending orders and withdraw and deposit funds.
Coinsecure first launched in Jan. 2015, and the exchange is a real-time, spot-trading exchange. Customers have access to a merchant payment gateway, a public API and digital wallet services. Coinsecure raised $1.2 million in Series A funding earlier this year. Coinsecure has also recently signed partnerships with BitPay for merchant services and with OKLink for remittance services.
Winklevoss ETF — A Revision But No Decision
Still waiting for a decision on their bitcoin ETF but eager to get all their ducks in a row ahead of time, the Winklevoss brothers have named State Street as their bitcoin ETF administrator, according to Fortune.
If approved by the SEC — that “if” has been hanging around for three years now since the twins filed their first application — the Winklevoss fund would be the first bitcoin ETF issued by a U.S. entity. Cameron and Tyler Winklevoss filed the amendment to their proposed bitcoin exchange-traded fund, listing State Street as the administrator, according to the SEC.
State Street will provide administration and accounting services and calculate the bitcoin trust’s net asset value. Also, another change to the filing stated that the Winklevoss’ Gemini Trust Company would perform a monthly “proof of control” and publish reports on the ETF’s website.
Burr Pilger Mayer, who has experience with venture-backed digital currency companies, has been named the ETF’s auditor. The SEC filing also states that Gemini’s daily auction price at 4 p.m. EDT will be the basis for the price of the NAV of the ETF. The Gemini spot price was to be used originally. Gemini hosts a digital currency trading auction, which, since its launch in September, handles 16 percent of U.S.-based bitcoin exchange volume, according to Gemini. The ETF would trade under the ticker symbol COIN.
Nothing like being prepared … and using pressure tactics with the SEC.
Now For The Disappointments
According to Newsweek, Blockchain.info, a leading global bitcoin wallet service, suffered a DNS hijack and was forced to power down its service, leaving 8 million users vulnerable to cyberattack. News of the domain name resolution (DNS) attack found its way to message boards almost as quickly as one of the 100,000 bitcoin transactions the service completes in a single day.
Administrators later found that the website’s DNS information had been altered to redirect website visitors to a potentially malicious website URL in the U.S.
The service said on Reddit: “Our DNS provider was targeted. It’s going to be several hours before our services are fully restored. The CloudFlare DNS is propagating now.” Typically, a DNS attack redirects users to a malicious site in order to obtain personal details or financial information. The correct domain was up within 24 hours.
Rubbing salt into the wound, a security researcher at OpenDNS, Artsiom Holub, confirmed that this type of hijacking is not unusual among cybercriminals, and he warned that bitcoin and blockchain are particularly vulnerable to hackers.
“Bitcoins and blockchain technology might replace traditional banking, but first, it is the community who have to solve a lot of security problems … Traditional banks have controls to detect and prevent laundering schemes, but in the crypto currency world, we face bitcoin mixers that make the tracking of stolen funds a complicated challenge.”
Holub’s parting words: “Controlling a domain name allows attackers to potentially gather credentials of the wallets. So, treat your bitcoin wallet as your real one, and be aware of the ongoing malicious campaigns.”
Or just stick with a real wallet.
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