Inside Bitcoins

Posted

By
Inside Bitcoins.png
Explore the Future of Bitcoins

After taking Inside Bitcoins to Las Vegas this past winter, this definitive Bitcoin event is returning to New York City, April 7-8 at the Javits Convention Center. Join us in New York City as our industry experts, business visionaries, and virtual currency veterans converge to analyze the first digital, decentralized, peer-to-peer based global currency. These thought leaders will also share their insights and knowledge on the implications of bitcoin, along with predictions on what lies ahead. Whether you're a venture capitalist, lawyer, technologist, entrepreneur, regulator, cryptographer, payment pioneer, or public policy expert, our agenda offers the latest intelligence for everyone and anyone interested in learning more about bitcoin. Can bitcoin carve out a significant place for itself alongside today's mainstream payment technologies? What technical and regulatory obstacles does bitcoin need to overcome? Will large-scale bitcoin mining help to push the price of bitcoins higher? Is bitcoin going to save the global economy, or is it today's answer to 17th-century tulip mania? Be sure to attend Inside Bitcoins and get answers to all of your burning questions!


Who Should Attend?
Anyone with a vested interest in bitcoins and other virtual currencies, including:
  • Developers
  • Entrepreneurs
  • Financial professionals
  • Private equity, corporate, angel and venture capital investors
  • Banks and financial institutions
  • Brick-and-mortar merchants and online retailers
  • Credit and loyalty solution providers
  • Consultants
  • Daily deal and group buying networks
  • Data and payment processors
  • Legal professionals
  • Security solution providers
  • Founders of early stage and emerging growth companies

PARTICIPANTS

James G. Gatto, Leader, Social Media, Entertainment & Technology, Pillsbury
Deborah Thoren-Peden
, Leader, Consumer & Retail; Co-Leader, Privacy, Data Security & Information Use, Pillsbury

Mt. Gox's Bankruptcy Case Will Be Unlike Any Other

Posted

By

Originally seen in MoneyBeat - a Wall Street Journal blog.

One thing we can tell you about the Mt. Gox bankruptcy case: It won't be like any other bankruptcy case you've seen.

MoneyBeat had a very enlightening and interesting talk with Christopher Mirick, a partner at the bitcoin1.pnginternational law firm Pillsbury Winthrop Shaw Pittman, operating in the firm's Insolvency & Restructuring practice. He is also one of two educational directors at American Bankruptcy Institute's international committee and co-author of the book "Strategies for Creditors in Bankruptcy Proceedings."

One point he made, that seems obvious in retrospect, is that there's never quite been a bankruptcy case like this one. It involves a new technology, a company that seemed to operate with only a few employees and almost no presence in the countries across the globe where it did business, and questions of cross-border bankruptcy law.

What follows is a paraphrased version of our conversation.


How messy is this bankruptcy going to be?

It's going to be "very messy," Mr. Mirick said. There are a couple of things to think about. For one thing, Mt. Gox has creditors all over the world. Of their roughly 130,000 creditors, only about 1,000 are in Japan. According to Mt. Gox, they don't have U.S. bank accounts. "So what's a person in Illinois going to get? There's nothing there," Mr. Mirick said.  Mt. Gox did business in a lot of places where it didn't have any physical existence. "What's there to recover?"


Is your firm involved in the case?

Mr. Mirick said this kind of case would be "up our alley," but the firm isn't currently involved, although it does have a Tokyo office. "But we would jump at the chance."


Why's that?

"You've never had a case like this." It involves a cutting-edge technology, and questions about cross-border enforcement of bankruptcy proceedings. Mr. Mirick pointed to Lehman Brothers, for comparison [a case that, we'd note is still being settled.] Unlike Mt. Gox, Lehman had entities in each jurisdiction where they operated. "This [Mt. Gox] is just like a couple of guys with some computers who happened to be in Japan, and handling half a billion dollars that went missing."


What can a creditor hope to recover?

Mr. Mirick said creditors of Mt. Gox should be looking for a way to track the money and bring it back, if possible. They should also examine the timeline, for when the money first disappeared, he said. Was it three months ago? Six? "If they were making payments during that time, maybe you could claw some of that back."

From the creditors' point of view, Mr. Mirick said, somebody has to be blamed, whether it's the Mark Karpeles, the directors, or the officers. That person or people may have insurance, if not assets, and creditors may be able to go after that, he added.

"But, for a company without physical assets, the ability to get a recovery is quite limited."

 

Link to story: http://blogs.wsj.com/moneybeat/2014/03/05/mt-goxs-bankruptcy-case-will-be-unlike-any-other/

Ever Lost -- or Worse Yet, Had Stolen -- a Smart Phone, Laptop, Tablet, Etc.?

Posted

By

MPL pic 2.jpgMany of us have been focused on cyber-security, especially in the wake of the recent data breaches over the holidays, among other things.  Two Maryland Law Enforcement Officers are leveraging the power of social media and the Internet to enable you to "Secure What's Yours."   In 2013, acting on their vision, they introduced an innovative approach to reuniting owners with their tangible personal property that was stolen or is missing, e.g., iPhones, Androids, laptops, iPads, TVs, etc., working with law enforcement officers across the nation.

My Property Locker's database allows its users to register valuables that are serialized or contain identifiable marks, enabling them to add pictures of the items along with a copy of their purchase receipts.  Its Apple and Android apps also allow users to scan product UPC codes as part of the registration process. If an item is stolen or comes up missing, the owner can report the loss to My Property Locker -- according to My Property Locker, in 2011, there were an estimated 9,063,173 property crimes offenses across the nation, totaling an estimated $15.6 billion in losses.  Law enforcement officers across the U.S. are able to register with credential verification and to use the Police Advanced Search function to identify the owners of stolen or missing items.  Law enforcement officers and the property owners are then able to work together to reunite the owner with their stolen or lost property.  And, My Property Locker is free to consumers. 

My Property Locker reports that it has been endorsed by the Maryland Crime Prevention Association and the Virginia Crime Prevention Association.  Additional information about My Property Locker is expected to be available on Officer.com.   

Additional Sources:  YouTube, My Property Locker Tutorial - How to add/remove property; Facebook, My Property Locker; iTunes App Store; Google play Android App

Photo:  Courtesy of My Property Locker, All Rights Reserved

Russia Cracks Down On Bitcoin

Posted

By

Both the Central Bank of Russia and the Russian Prosecutor General's Office explained that the rouble is the country's sole official currency and that the production of alternative monetary products, such as Bitcoin and other virtual currencies, is illegal under current lawRussian regulators also warned that anyone who exchanges virtual currency for national or foreign currency, goods, or services will be treated as if they are potentially involved in suspicious activities, money laundering, or terrorism financing.

Virtual Currency - Acronyms, Abbreviations and Key Definitions

Posted

By
Although many of you are obviously fascinated by the fast-paced virtual currency industry, trying to read a news article or blog can sometimes be incredibly difficult due to the sheer number of acronyms and terms of art commonly used by industry participants. The author of the attached document endeavored to capture the key acronyms, abbreviations and definitions relevant to the VC industry to assist you so that you can keep up with key developments. Still have questions or additional acronyms, abbreviations or definitions that you would like us to add? Please contact the author, Amy Pierce, or any of our Social Media & Games attorneys.

Check out our helpful guide here: Virtual Currency - Acronyms Abbreviations and Key Definitions

28 Million Dollars in Bitcoins Deemed Forfeited to the U.S. Government

Posted

By

The United States Attorney's Office for the Southern District of New York announced the forfeiture of approximately 29,655 Bitcoins in connection with the seizure of the Silk Road website.  The Silk Road operated as a marketplace for illicit goods and services before it was shutdown in October 2013.  At the time the U.S. Attorney's Office seized the Silk Road website and its servers, a large number of Bitcoins was found in a digital wallet stored on the website's servers.  Since the seizure, no claims have been filed for the wallet, and on January 16, 2014, United States District Judge J. Paul Oetken held that the wallet was deemed forfeited to the U.S. Government.

A spokesman for the U.S. Attorney's Office stated that it has not yet been determined how the Bitcoins will be liquidated.  Since the seizure of the Bitcoins, the value of the virtual currency has grown with the market's increasing demand.  At the present exchange rate, the Bitcoins are valued at approximately $28 million, approximately 4x their value at the time of the seizure.

 

Source; Source

More fallout from Silk Road

Posted

By

Another set of Bitcoin-related arrests for failing to comply with the Bank Secrecy Act. http://www.cnbc.com/id/101366511

Interestingly, investors in one of the companies include the Winkelvoss twins. Anyone who is involved in Bitcoin or other virtual currency endeavors needs to ensure that they understand and comply with the law. This includes getting licensed when necessary and complying with all disclosure obligations. While there are many legal, sound investment opportunities in this space. Investors should be particularly careful in conducting legal diligence in these companies before investing.

A Discussion of BitLicenses Starring the Winklevoss Twins: NY Announces Details on Upcoming Hearings to Discuss Regulation of Virtual Currencies

Posted

By

On January 28th and 29th, the New York Department of Financial Services (DFS) will hold hearings to discuss the regulation of virtual currencies, including the potential issuance of a "BitLicense" specific to virtual currencies.  The DFS previously expressed concern about virtual currencies remaining a "virtual Wild West for narcotraffickers and other criminals...."   Despite this concern, the DFS, like FinCEN, has indicated a willingness to work with the virtual currency industry and other stakeholders to establish "appropriate regulatory guardrails to protect consumers and our national security."  The DFS "is concerned that - at a minimum - virtual currency exchangers may be engaged in money transmission as defined in New York law, which is an activity that is licensed and regulated by DFS."  Thus, even though the DFS has stated that it has not made a determination at this point about the necessary regulatory guidelines for virtual currencies, one might anticipate that, at a minimum, these guidelines will include additional oversight and licensure "to bring virtual currencies out of the darkness and into the light of day." 

The upcoming hearings will be held in New York City and will include some high-profile players in virtual currency, such as Cameron and Tyler Winklevoss, Principals of Winklevoss Capital Management, Barry Silbert, Founder & CEO of SecondMarket and Founder of the Bitcoin Investment Trust, Fred Ehrsam, Co-Founder of Coinbase, and Cyrus R. Vance, Jr., District Attorney of New York County.

Sacramento Kings Announce They Will Be The First Pro Sports Franchise To Accept Bitcoin

Posted

By and

On January 16, 2014, The Sacramento Bee in its article Kings will be first pro sports franchise to accept online currency Bitcoins announced that by March 1, 2014, Sacramento Kings fans "will be able to purchase team merchandise and tickets using Bitcoins through BitPay."  Bitcoin is a virtual currency which can be transferred through various exchanges.  In the article, Vivek Ranadive, the Kings managing partner and founder of the Silicon Valley tech firm Tibco Software Inc., confirms that "he wants the team to be among the most technologically-advanced franchises in the world. He calls his philosophy 'NBA 3.0.'"  Among other technological advancements the Kings plan are a technology-rich proposed new arena and "a new Kings app for smartphones that allows fans to upgrade their seats at games, provides detailed maps of Sleep Train Arena and includes a virtual noise-making cowbell."  Their approach is intended to make "the experience for those fans more seamless and hassle free." 


Read more here: http://www.sacbee.com/2014/01/16/6077399/kings-will-be-first-pro-sports.html#storylink=cpy

Read more here: http://www.sacbee.com/2014/01/16/6077399/kings-will-be-first-pro-sports.html#storylink=cpy

Read more here: http://www.sacbee.com/2014/01/16/6077399/kings-will-be-first-pro-sports.html#storylink=cpy

Read more here: http://www.sacbee.com/2014/01/16/6077399/kings-will-be-first-pro-sports.html#storylink=cpy

Read more here: http://www.sacbee.com/2014/01/16/6077399/kings-will-be-first-pro-sports.html#storylink=cpy

Scammers Continue to Target Customers

Posted

By

Targetbillboard.jpgThere have been numerous reports that West Virginia Attorney General Patrick Morrisey issued a warning to consumers on Monday, January 13, 204, about a Target gift card scam occurring throughout the country on social media websites. Evidently, consumers are purportedly offered a Target gift card to make up for the widely-reported December data breach. This is apparently a scam that directs consumers to fake domains pretending to be Target. Morrisey warns that "[c]onsumers also need to be wary of fake domain names pretending to Target popping up."  He further suggested that "[I]f consumers receive communications or offers appearing to be from Target, they should call Target to confirm the communication is legitimate and report any instances of fraud to our office."

 

Other Sources:  Legal Newsline, W. Va. AG warns of Target gift card scam (Jan. 15, 2014); Register Herald, AG warns Target gift card offer is a scam (Jan. 13, 2014); Charleston Daily Mail, Attorney General says Target gift card offers are scams (Jan. 13, 2014)
Image Source: Creative Commons

Retail Therapy Anytime, Anywhere

Posted

By

Joe Jensen, general manager of Intel's Retail Solutions Division, at the National Retail Federation Convention & Expo, New York, Jan. 13, 2014, confirmed that "Intel has been actively working with leading retailers and the industry for several years to enable retailers to use the Internet of Things to deliver more entertaining brand experiences while also reducing operational costs." Intel is "taking those efforts a step further by delivering more intelligent solutions and enabling retailers to make better use of big data to deliver a more personalized shopping experience." 

Avid shoppers may be excited to learn that, as reported by Intel, "[w]ith Intel-based Shopping Anywhere, consumers can intuitively shop the looks from their favorite television programs right from their couch."  Or, "[I]f a consumer prefers to bring the ease of online shopping with them in-store, the Intel® Core™ i7-based MemoryMirror* full-length, digital 'mirror,' allows store shoppers to virtually try on multiple outfits, and view and compare previous looks on the mirror or via smartphone or tablet."  The mirror will use "Intel integrated graphics technology to create avatars of the shopper wearing various clothing that can be shared with friends to solicit feedback or viewed instantly to make an immediate in-store purchase."  This approaches is expected to provide shoppers with "an engaging and seamless buying experience, regardless of where they are or what device they are using."

Additional Sources, Intel Newsroom, Intel Personalizes Shopping with Internet of Things, Big Data Technologies (Jan. 13, 2014)

Singapore Issues Bitcoin Tax Guidance

Posted

By

The Singapore tax authority has issued guidance which confirms the viability of certain Bitcoin transactions. Like the central bank in China, the Inland Revenue Authority of Singapore (IRAS) took the position that Bitcoin is not a type of money or currency. This is still an unsettled question in other jurisdictions.

Even if Bitcoin is not currency, transactions in Bitcoins can lead to profits which the Singapore authority is happy to tax, at least in some situations. According to the IRAS guidance, short-term speculative transactions in Bitcoins will be taxed, while capital gains generated from long-term investment will be tax free.  The IRAS guidance also distinguishes using Bitcoins in purchase of physical goods (taxable) and of virtual goods (not taxable).

The IRAS guidance has been warmly welcomed within the Bitcoin community in Singapore for being "rational and well thought-out." Some observers believe that, given the embryonic state of the Bitcoin economy, an incremental and pragmatic approach to regulation makes more sense than attempts to impose blanket definitions or characterization, let alone any outright prohibitions, on transactions in this new and emerging unit of value.

Taxation of Virtual Currencies

Posted

By

The taxation of virtual currencies has garnered increasing attention, in part due to the princely fortunes some are making from the rapid increase in the price of Bitcoins. Yet, the U.S. IRS has issued little guidance in this area. This is likely to change soon. In May 2013, the GAO issued a report on Virtual Economies and Currencies. In part, the report states:

Transactions within virtual economies or using virtual currencies could produce taxable income in various ways, depending on the facts and circumstances of each transaction. For example, transactions within a "closed-flow" virtual currency system do not produce taxable income because a virtual currency can be used only to purchase virtual goods or services. An example of a closed-flow transaction is the purchase of items to use within an online game. In an "open-flow" system, a taxpayer who receives virtual currency as payment for real goods or services may have earned taxable income since the virtual currency can be exchanged for real goods or services or readily exchanged for government-issued currency, such as U.S. dollars.

More recently, the 2013 National Taxpayer Advocate Annual Report to Congress notes the increasing use of virtual currencies, particularly Bitcoin and that the IRS has yet to issue specific guidance addressing the tax treatment or reporting requirements applicable to virtual currency transactions. The report concludes that IRS-issued guidance would promote tax compliance, particularly among those who want to report virtual currency transactions properly, and it would reduce the risk that users of virtual currencies will face tax consequences that they did not anticipate.

Despite noting that the IRS website suggests that existing guidance covers these transactions, it states that this guidance did not explain when the transactions are sufficiently analogous to be covered by existing rules. Among the remaining questions it identified the following:

1.     When will receiving or using digital currency trigger gains and losses?

2.     When will these gains and losses be taxed as ordinary income or capital gains?

3.     What information reporting, withholding, backup withholding, and recordkeeping requirements apply to digital currency transactions?

4.     When should digital currency holdings be reported on a Report of Foreign Bank and Financial Accounts (FBAR), or Form 8938, Statement of Specified Foreign Financial Assets?

In the interim, our Social Media Team's tax gurus are monitoring the issues.

Does Bitcoin Violate the Stamp Payments Act?

Posted

By
Based on some recent articles, a number of people have asked whether Bitcoin might be declared illegal under an archaic law known as the "Stamp Payments Act." According to a recent Congressional Research Service report, the answer is .... likely not.

The Stamp Payments Act of 1862 states:
Whoever makes, issues, circulates, or pays out any note, check, memorandum, token, or other obligation for a less sum than $1, intended to circulate as money or to be received or used in lieu of lawful money of the United States, shall be fined under this title or imprisoned not more than six months, or both.
It is questionable whether Bitcoin is an "obligation" and if so who is obligated. It is also not clear whether Bitcoin is a note, check, memorandum or token. The CRS report states:
It does not seem likely that a currency that has no physicality would be held to be covered by  this statute even though it circulates on the internet on a worldwide basis and is used for some payments of less than $1. The language of the statute, "note, check, memorandum, token," seems to contemplate a concrete object rather than a computer file; moreover, a digital currency such as Bitcoin, without a third-party issuer, cannot be said to be an obligation.
Of course, a clever legal mind can always develop a legal argument to the contrary.

One of the more famous cases brought under this act related to the Monongahela Bridge company which issued tickets (worth less than $1) good for one trip over the bridge. The court found that this practice did not violate the act, noting:
these tickets have no resemblance or similitude in shape, design or material, to the coin of the United States, nor to the postage currency, the free and untrammeled circulation of ·which it was the design of the act to advance and protect....They do not contain a promise to pay money, they are not the representatives of money, and therefore cannot be said to circulate, or be intended to circulate as money. Money is the medium of exchange among the people. Its peculiar characteristic is, that it is the one thing acceptable to all men, and in exchange for which they will give any commodity they possess.
Another interesting issue presented is who would be liable. To the extent that a Bitcoin miner "issues" a coin, as long as the price of a coin remains greater the $1, they would not seem to violate the express requirement of the statute that the token be less than $1. Assuming for the sake of argument that the Act did otherwise apply, to the extent that a recipient of a coin uses a partial Bitcoin for a transaction less than $1, then the feds perhaps could go after the user.  But going after users who engage in transactions less than $1 does not seem to be a prudent or effective way to stop Bitcoin use. Assuming the vast majority of the transactions were valued at over $1 it would seem to be a pretty ineffective way to shut down Bitcoin.

If the Federal Government wanted to take action against Bitcoin, it would more likely take action to do so directly through new legislation (or perhaps some other existing legislation) rather than chance an iffy interpretation of an ancient statute that was primarily enacted for another purpose and which might only, at best, provide a basis to go after users in small transactions.