Category Archives: Coinbase

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Coinbase Looks to Acquire Banking Licenses

Coinbase is currently looking into the processes involved in acquiring banking licenses. The Wall Street Journal reports that an undisclosed source revealed that the exchange engaged in conversations with members of the US Office of the Comptroller of the Currency in earlier this year:

“Coinbase Inc and another cryptocurrency firm talked to US regulators about the possibility of obtaining banking licenses, a move that would allow the startups to broaden the types of products they offer.”

Additional Coinbase services

Coinbase has been expanding its services this year to become more than just an exchange. Its commerce API or its “PayPal-like service”, was released in February. Merchants could quickly implement cryptocurrencies as a payment method supporting BitcoinBitcoin CashEthereum, and Litecoin. The platform adds a “PayPal-like” button to e-commerce sites allowing streamlined payments straight to the vendor’s wallet.

Coinbase isn’t the only company to offer these types of services, with BitPay also letting customers pay in Bitcoin and Bitcoin Cash. With the volatility within the cryptocurrency market this year it may take more to encourage merchants to adopt this additional payment method.

Coinbase announced this month that it would be releasing its Coinbase Custody platform. The new product could entice institutional investors, it went on to explain: “The cryptocurrency market is maturing rapidly as more sophisticated institutional participants enter the space. In fact, in the past few months over 100 hedge funds were created that exclusively invest in and trade cryptocurrency. Some of the world’s largest financial institutions have also recently announced their plans to begin trading cryptocurrency.”

Coinbase Custody is a storage service for a minimum of USD 10 million in crypto. Financial institutions will be expected to pay USD 100,000 as a set-up fee and an additional monthly premium dependant on holdings. Coinbase claimed: “We have leveraged our experience safely storing more than $20 billion of cryptocurrency to create Coinbase Custody, the most secure crypto storage solution available.”

Industry issues

Coinbase believes its recent progress will accelerate the world’s adoption of cryptocurrency by bringing new capital and greater awareness to the industry.

The volatility of Bitcoin still stands to be an issue and has led to merchants withdrawing the payment option. This was one of the main reasons for Steam halting Bitcoin payments at the end of 2017. The rise of crypto-related crime is enough to deter investors in the interim.

As much as 30,000 people who have fallen victim to Ethereum-related theft, suffering an average loss of USD 7,500 each, according to Chainalysis. Exchanges have been targeted in large-scale hacks with Coincheck losing USD 550 million worth of NEM cryptocurrency (XEM) in January and Coinsecure losing USD 3.5 million in Bitcoin (BTC). With legislation and regulation becoming a hot topic among unions and governments, 2018 is set to be an interesting year for cryptocurrencies.

Coinbases profitability values the company at around USD 8 billion. The growth and reinvestment into new ventures such as the banking industry shows Coinbase’s faith in the future of cryptocurrencies.

However, not everyone believes that the company is heading in the right direction. Reddit user Bitcoin Yoda explains how Coinbase Commerce is moving in a different direction to Satoshi’s vision: “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Any intermediary between your BTC payment and the merchant is violating the definition of Bitcoin and your privacy.”

Is Coinbase’s pursuit of becoming a bank turning its back on the ideologies behind crypto?

 

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Robinhood’s $363 Million Expansion to Rival Coinbase

The free stock trading app, Robinhood, announced on Thursday that it has raised USD 363 million in a new investment round, reports Fortune.

This makes the company the second most valuable private fintech startup in the US after online payments company Stripe, valuing it at USD 5.6 billion. Fortune reports that Robinhood has shown an ability to rapidly overtake incumbents in one of the oldest Wall Street industries after its valuation has quadrupled in the last year.

Growth has largely been driven by new product launches and commission-free trading. The new funding will allow the company to expand its workforce from barely 200 employees, and hire more experienced executives and technical talent.

Baiju Bhatt, Robinhood’s co-founder, explained why the company experienced such a rapid rise in after only three years of operation:

“I think the real ‘X factor’ that made investors even more excited about being a part of Robinhood was seeing our ability to, with a very, very limited workforce, to ship three brand new products in these last six months, while maintaining and growing one of the largest brokerages in the US”

Robinhood Crypto, which launched in February, is expected to be rolled out throughout the US by the end of 2018 and could become a viable challenge to US giant Coinbase, according to Bhatt. It is currently only available in 10 states around the US.

“We expect by the end of the year to be either the largest or one of the largest crypto platforms out there, but we also really feel we’ll have the absolute best experience for investing in crypto as well — from having a large variety of coins available to a more favorable cost structure — mainly no commissions — to just quality of product.”

Robinhood plans to bring on board other currencies in order to make the challenge to Coinbase, which lists only four cryptocurrencies on its exchange: Bitcoin, Bitcoin Cash, Ethereum and Litecoin. Robinhood currently only offers trading of Bitcoin and Ethereum, but also allows its users to track market data for 16 different cryptocurrencies, including Ripple and Zcash.

 

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Reddit to Resume Crypto Payments via Coinbase Commerce

Reddit, one of the biggest social media communities, is looking to re-establish cryptocurrency payments through Coinbase’s commerce platform. Users will be able to pay for the gold membership using Bitcoin and a variety of altcoins such as Bitcoin Cash, Ethereum, and Litecoin.

Reddit had previously accepted Bitcoin payments and was an early adopter of the payment method, working with Coinbase from as far back as 2013. However, Bitcoin had recently been met with mixed interest with companies withdrawing these services.

Reddit administrator emoney04 said, “The upcoming Coinbase change, combined with some bugs around the Bitcoin payment option that were affecting purchases for certain users, led us to remove Bitcoin as a payment option.”

The implementation of a more streamlined crypto payment system and with cryptocurrencies on what appears to be a steady bull run may see an adoption of digital payments again.

Reddit is not the only company to drop out of crypto payments

Stripe was another early adopter of Bitcoin payments, processing payments for businesses using crypto since 2014. Slow transaction speeds and high transaction fees led to virtual currencies being dropped as a payment method earlier this year.

Dell, which was once one of the largest companies to take Bitcoin payments, and Valve, stopped due to the cost of transaction fees and price volatility. The payment method hasn’t been as popular due to a lack of user interest with PayPal calling cryptocurrency “an experiment”.

Statistics show that Coinbase received around 14 million registrations in 2017 and with the announcement of their new payment platform we could see a wider adoption of crypto payments, as well as companies revisiting the idea of accepting Bitcoin.

With companies such as Santander and Mastercard investing heavily in blockchain as well as a larger public awareness of cryptocurrencies, companies may begin to feel confident in supporting alternative payment methods.

 

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Bitcoin Charges Past $8,000 on Bullish Run

Bitcoin moved above the USD 8,000 mark yesterday for the first time since March after a bearish run and today jumped nearly USD 400 in an hour.

Bitcoin is currently hovering just above USD 8,000 (2pm UTC), representing a 17% gain since this time yesterday. The cryptocurrency topped out at USD 8,011 on Coinbase yesterday and against some analysts’ expectations, has maintained these recent price gains. According to Coinbase, Bitcoin moved through some volatile trading, reaching a low of USD 6,786 on Thursday morning.

The sharp rally was reportedly fueled by the unwinding of short trades (also known as short liquidation). The rise confirmed a double bottom bullish breakout backed by strong volumes encouraging buyers back into the market.

BTC margin shorts on Bitfinex stood well above December 2017 highs and volume analysis suggests that the rally is here to stay. Yesterday, the total trading volume across all exchanges topped USD 8 billion according to CoinMarketCap. Exchange platform Bitfinex registered a two-week trading high.

Cryptocurrencies have been under pressure over the course of the year, due in part to pending government regulations in the virtual currency environment and tax considerations. According to David Johnson, CEO of Latinum, another factor was the Mt Gox trustee’s sale of hundreds of millions worth of the digital currency. He added, “I believe the surge in Bitcoin price is connected more with decreased selling pressure than anything else.”

Another theory on the Bitcoin revival is the current global geopolitical situation with US tariffs threats on China and the threat of military action by the US in Syria, both events tempting Russians and Chinese to secure assets in Bitcoin.

Bitcoin investors had been bracing themselves for a market sell-off after it was announced at the beginning of April that US households could owe USD 5 billion in capital gains taxes for crypto holdings.

Recent developments regarding big players entering the industry such as George Soros and the Rockefellers are often viewed by commentators with a degree of positivity for the future of virtual currencies. Billionaire trader Tim Draper made his 2018 Bitcoin prediction in the last 24 hours, suggesting a coin value of USD 250,000 by 2022.

 

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Employees of Cryptocurrency Companies Take Bitcoin Salary Share

With the popularity of cryptocurrency on the rise, company employees working at startups such as Coinbase and Bitpay are happy to receive much of their salaries in Bitcoin.

Amongst cryptocurrency companies, payroll systems vary as to how they decide to pay their staff but frequently employees are offered to opt into systems where they can select their pay preferences and decide on a traditional paycheck to Bitcoin ratio.

Bitpay and Coinbase

Atlanta-based Bitpay handles a payroll for 52 employees, but it’s generally only the smaller percentage of younger workers who choose to be paid totally in Bitcoin. These younger employees with limited family commitments are often happy to invest their earnings across a number of other cryptocurrencies. For these employees, the financial banking crash of 2008 remains a stark warning of what can happen when banks get it wrong. They prefer to handle their own financial destiny.

Forty percent of Coinbase employees receive a percentage of their pay in Bitcoin and many have traditional investment strategies in addition to an allocation to cryptocurrencies. An interesting incentive programme gives new employees cryptocurrency to experiment with. These funds can either be invested or even sent to family members or friends.

Bitpay’s Jeremie Beaudry, the company’s financial services legal counsel, suggests that being invested in cryptocurrency can make one a “better researcher and educator”. If this is the case, then the Coinbase bonus scheme for new staff has some merit. However, Coinbase, like many other companies do have a strict trading policy. Also, many cryptocurrency online news sources have disclosure rules regarding personal crypto investments held by their employees which may limit their writers’ scope and coverage of news.

The future

External companies which handle payment of employee salaries under contract is by no means a new concept but online companies such as California-based Bitwage, operating since 2014, offers a premium account which enables users to receive salary payments in up to 25 different currencies including Bitcoin. Workers also can receive part of their pay in Bitcoin, even if this option is not offered by their employer.

 

 

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Ethereum Tokens Surge on Coinbase Announcement of ERC20 Token Support

Cryptocurrency exchange Coinbase has announced that it will be adding support for ERC20 tokens “in the coming months”, prompting a slight price rise across the board for ERC20 assets in trading markets.

The first step will involve its “Custody” team in a process to evaluate a set of ERC20 assets to support for withdrawal and deposits. Having identified them, it will seek to obtain regulatory clarity for selected assets, which will first be listed on its Global Digital Asset Exchange (GDAX) exchange and trading platform.

Coinbase has a policy of monitoring performance digital assets listed on its GDAX exchange, eyeing aspects of “market health metrics” such as liquidity and price stability before eventually offering them on its flagship Coinbase exchange, which offers easier buying and selling of major cryptocurrencies in exchange for fiat currencies in over 30 countries.

Despite the lack of announcements to list specific tokens, speculators reacted to the news by buying up ERC20 tokens believed most likely to make the cut. This resulted in a noticeable surge in prices of 0x (a protocol for trading tokens) and REP (ERC20 token native to the Augur predictions platform), offering some respite to an altcoin market weary from weeks of diminishing prices.

Things did not go too well the last time Coinbase added a new asset to its exchanges, as its botched addition of Bitcoin Cash saw live trading moments before the official announcement. Several traders apparently took advantage of the momentary spike in price, leading to accusations of insider trading and fraud.

Coinbase has no plans to add any approved ERC20 tokens to its Coinbase Commerce service.

ERC20 tokens are digital assets created using the official Ethereum Request for Comments (ERC) protocol 20 for proposing improvements to the Ethereum network. There are several protocols, among which ERC20 has been the most popular, with the majority of projects launching since 2017 creating smart contract tokens on the Ethereum blockchain that comply with the ERC20 protocol.

To date, over 500 ERC20 tokens are actively trading, as tracked by CoinmarketCap.

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IRS Issues Reminder to Report Crypto Earnings

The US Internal Revenue Service (IRS) has published a document ahead of a 17 April deadline to report all income derived from virtual currency transactions, including from cryptocurrencies.

Referring to the IRS Notice 2014-21, which is a guidance on general tax principles, the revenue agency views all virtual and digital currency transactions as taxable, just as any other transactions on properties would. It also warned citizens against withholding such information, noting the privacy features of major cryptocurrencies such as Bitcoin:

“Virtual currency, as generally defined, is a digital representation of value that functions in the same manner as a country’s traditional currency… because transactions in virtual currencies can be difficult to trace and have an inherently pseudo-anonymous aspect, some taxpayers may be tempted to hide taxable income from the IRS.”

Taxpayers who fail to report related earnings can be subject to IRS audits and can be liable for penalties and interest. The reminder states that the tax agency could also resort to criminal prosecution “in more extreme situations”, targeting crimes such as tax evasion and falsification of tax returns. Convictions for tax evasion could result in harsh prison terms of up to five years and a fine of up to $250,000, while false returns could be subject to prison terms of up to three years and a fine of up to $250,000.

Under the same notice, this means that even salaries paid by employers in virtual currency must be filed by employers on the regular Form W-2 and subject to federal income tax withholding and payroll taxes. Freelancers and remote workers classified as independent contractors who get paid in virtual currency are not exempt, either, with self-employment tax rules applying.

However, under current laws, virtual currency is not treated as currency that could generate forex gains or losses and are, therefore, such gains or losses will not be subject to US federal tax.

IRS eyes trained firmly on cryptocurrency

The IRS has been increasingly active in pursuing tax revenue from US citizens involved with virtual currency, especially since 2016 when the combined market capitalization of cryptocurrencies hit USD 8 billion, before racing past USD 600 billion by the end of 2017, with Bitcoin leading the way to an all-time high approaching USD 20,000.

In November 2016, a US federal court ordered cryptocurrency exchanger Coinbase to hand over some 13,000 customer records to the IRS as part of a bid to recover missing revenue from tax evaders who bought Bitcoin from 2013 to 2015.

Despite bitter resistance on the part of Coinbase, they eventually caved in, issuing a statement on their blog last month notifying that Coinbase would hand over data to IRS as per the court summons. It claimed a “partial” victory, after fighting the summons in court “in an effort to protect its customers, and the industry as a whole, from unwarranted intrusions from the government.”.

The data requested includes taxpayer IDs, names, dates of birth, addresses, and transaction records from the period of 2013 to 2015.

 

 

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Weekly Bitcoin and Blockchain News Roundup: Europe, 12 to 18 March 2018

Europe

13 March 2018

The European Central Bank (ECB) executive board member Benoit Coeure and Bank of International Settlements Markets Committee chair Jacqueline Loh wrote that “Bitcoin has put the spotlight on an old failing of our current system: cross-border retail payments.”, urging current banking and financial systems to improve as the best way to “rise to the Bitcoin challenge”.

14 March 2018

Bloomberg reported that Allianz Global Investors, Europe’s biggest insurer’s investment arm, has dismissed Bitcoin as worthless. It does concede that blockchain technology harbours massive potential for investors.

 

Kranj, Slovenia

13 March 2018

The Slovenian city of Kranj have built what it claims to be the “first blockchain monument” in the world. Placed at a roundabout in the city center, it features the familiar Bitcoin logo which can be viewed overhead.

 

The Hague, Netherlands

13 March 2018

Dutch finance minister Wopke Hoekstra called upon the parliament to warn that current supervision and regulatory frameworks in the Netherlands were still insufficiently equipped. The minister revealed that he would actively work in a European context, but that the approach would require a European and international approach.

 

London, UK

14 March 2018

Coinbase UK received an e-money license from the UK Financial Conduct Authority (FCA), effective from 21 March 2018. Essentially, Coinbase customers are now allowed to store their e-money on Coinbase UK accounts, enabling more payment options for them in the UK. The license, however, would not cover cryptocurrency activities.

 

Paris, France

15 March 2018

French regulators Autorité des marchés financiers (AMF) published a blacklist of 15 crypto-related France-based companies soliciting investments from the public. These companies contravened the new “Sapin II” Law No. 2016-1691 of 9 December 2016 on “transparency, the fight against corruption and the modernization of economic life”.

16 March 2018

The same AMF will be working together with its government as France aims to create its first guidelines through which enterprises could legally raise venture capital through so-called initial coin offerings (ICOs). Among some of the proposals include a visa issued to companies wishing to conduct ICOs, giving them official government approval.

 

Vilnius, Lithuania

16 March 2018

The Bank of Lithuania put out a call for tender for a proposal for software developers from around the world to assist it with developing its LBChain blockchain platform. It aims to help businesses to trial and implement sophisticated financial tech innovations.

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