exchanges Archives

Banking problems hound Bitcoin exchanges, force few more exchanges to ban withdrawals

Posted on April 21, 2017 | by [email protected]

Bitcoin exchanges have been plagued by the problem of Commercial banks sometimes denying transfers affecting their functioning. Most of the times, the banks back up their actions by citing that with Bitcoin’s stature still being unregulated, they don’t want to get involved in anything that might turn out to be illegal. Most of the Bitcoin exchanges have great KYC and AML frameworks that allow them to put in the guardrails that prevent their customers from engaging in illicit activities. The question is are the banks really fearing regulation to put an end to transactions related to Bitcoin? Or is just an excuse to hamper the growth of the cryptocurrency that might outplay the banks. Whatever the case might be, the issue has escalated and is taking a toll on traditional Bitcoin exchanges. Let’s delve deeper into the dynamics of the problem and its effects:

Bitfinex’s lawsuit and the implications:

Bitfinex initially took Wells Fargo to the court for having reversed US Dollar cash deposits designated to their customer accounts coming from the exchange. The legal basis for the lawsuit lies in the fact that Bitfinex works with Taiwanese banks, including a bank called ‘Taishin’. Tashin is responsible for relaying the transfers to US customers using Wells Fargo, among others. Wells Fargo recently sent a letter to the Taiwanese bank informing them that they would no longer be accepting the deposits from these accounts until “further due diligence” was obtained.

However a week later Bitfinex withdrew the lawsuit as experts believed there was not enough legal standing for the case. However, they followed up with an announcement which announced that they would be banning withdrawals indefinitely.

Other Exchanges report the same issue:

A couple of days later major Bitcoin exchanges like BTCe and Okcoin reported the same issue. The bitcoin exchange Btc-e has announced on Twitter that it is not accepting U.S. dollar wire transfers until the end of the month. This has been attributed to a bank account problem. Following this Okcoin has also suspended US dollar deposits have been suspended because of issues with intermediary banks. The exchange has also gone on to warn the customers against making any deposits as they might be rejected. The announcement cited that the deposits will resume as the exchange find alternatives for the complication.

Third party banks de-risking or putting up a fight with Bitcoin?

Intermediary banks like Wells Fargo are known as third party banks that are responsible for these transfers. They support international transactions and transaction settlements. Since Bitcoin businesses don’t have a defined regulation, what these major banks are doing can put them in a position of risk. Hence what they are doing can be defined as ‘de-risking’ to avoid any possible legal issues. However, this might also turn out to be a move to hamper Bitcoin’s growth and its growing reputation. How exchanges will circumvent the challenges to operating smoothly again is to be seen.

How Bitcoin exchanges are planning to tackle the Bitcoin Hard Fork

Posted on March 20, 2017 | by [email protected]

With the Bitcoin markets fixated on slowly making the switch to bigger blocksize, speculation has taken over the Bitcoin market prices. The number of outstanding transactions to be processed on the Bitcoin Network has been piling up due to the limit on the Blocksize of the Bitcoin network. With piling transactions, there has been a delay in the validation of the exchange. This has defeated the unique selling point of the cryptocurrency and the Bitcoin community has concentrated their efforts towards tackling the problem. Let’s dive deep into how proposed alternative for Bitcoin fork will be impacting the exchanges and how they plan to handle the ordeal of fork in the days to come:

Speeding up transactions:

The Bitcoin community has resolved to speed up the transaction by increasing the block size in which the transactions are produced and stored per every ten minutes. This would mean by proposed terms the blocksize would increase from 2 M.B to 8 M.B being able to process more transactions per 10 minutes and thereby delivering on the transaction speed. These bigger blocks would be on the blockchain labelled as Bitcoin Unlimited and already 11% of the nodes are running on Bitcoin Unlimited. But this would mean exchanges also have to shift to the agreed upon currency depending on the final decision.

Exchange’s plan:

According to the statement released by a group of 20 exchanges, their plan for tackling the hard forking would be to list Bitcoin Unlimited as a separate currency. Since the digital currency would be splitting up into two currencies, Bitcoin Core and Bitcoin Unlimited would be the two blockchains on which the currency would be splitting up depending on the Block sizes. Bitcoin Unlimited would now be listed as an alternative cryptocurrency under the BTU or XBU tickers in the event of a network split.

The exchanges said:

“As exchanges, we have a responsibility to maintain orderly markets that trade continuously 24/7/365. It is incumbent upon us to support a coherent, orderly and industry-wide approach to preparing for and responding to a contentious hard fork. In the case of a bitcoin hard fork, we cannot suspend operations and wait for a winner to emerge.”

Why it becomes necessary:

The statement signed by Bitfinex, Bitstamp, BTCC, Bitso, Bitsquare, Bitonic, Bitbank, Coinfloor, Coincheck, itBit, QuadrigaCX, Bitt, Bittrex, Kraken, Ripio, ShapeShift, The Rock Trading and Zaif – the exchanges, clearly stated that the exchanges would be listing BU since the fork seems inevitable. The exchanges feel that with the advantages and integrity of the cryptocurrency being questioned, this would indeed be the right move to give the users of the company best service.

Chinese Bitcoin Exchanges Impose 0.25% Fees To Appease Regulators

Posted on February 8, 2017 | by [email protected]

Bitcoin investors might want to pay more attention to developments in China going forward because the Bitcoin industry tends to catch a cold every time Chine sneezes. China is one of Bitcoin’s biggest markets and the cryptocurrency has an impressive adoption and market penetration in the country. In fact, analysts have submitted that Chinese Bitcoin exchanges recorded about 42% of Bitcoin transactions globally in 2016.

In the last couple of weeks however, Bitcoin has been facing increased pressure stemming from the Chinese government’s efforts to put a muzzle on the use of Bitcoin in the country. The People’s Bank of China (PBOC) has said that it considers Bitcoin as a commodity (probably on par with gold) and not a currency. The PBOC also hinted that it would step up its regulatory oversight on the use of Bitcoin in the country. The development in China caused Bitcoin to lose its footing from around $1100 to its current $923 trading price.

China’s Bitcoin exchanges impose trading fees to appease regulators

Breaking news on Monday (January 23) shows that Bitcoin exchanges in China are trying to appease regulators by charging a 0.2% fee per Bitcoin transaction starting on Tuesday (January 24). The three biggest Bitcoin exchanges in China, BTCC, Houbi, and OKCcoin have all released statements on their intent to start charging 0.25% per transactions. All the three exchanges in separate statements noted that the reason for the charges is to “to further curb market manipulation and extreme volatility.”

At the start 2017, the People’s Bank of China has called for stricter regulation on the use of Bitcoin in China. The PBOC said it would start investigating Bitcoin transactions in order know the extent to which the cryptocurrency is being used to aid illegal transactions such as money laundering. Of a truth, many people in China are using Bitcoin to evade the country’s draconian laws aimed to stopping capital outflow from the country.

However, the increased adoption of Bitcoin for transactions and payments at lieu of the Chinese Yuan has reduced the demand for the Yuan and the Yuan is under pressure in the forex markets. For instance, in 2016, the Yuan CNY=CFXS declined 6.6% against the USD to mark its weakest full year performance since 1994. Hence, it doesn’t take much analysis to deduce that the PBOC is mounting pressure on Bitcoin in order to reduce interest in the cryptocurrency.

How far will China’s exchanges go to please regulators

Chinese authorities are worried (and with good reason) that people are using Bitcoin to move their wealth out of China. Hence, they have a strong enough motive to frustrate Bitcoin users in the country. Bitcoin exchanges are businesses and they must remain in the good books of the government to succeed especially in places like China where the government lords it over all.

In addition to the transaction charges, the three biggest Bitcoin exchanges in China have also stopped leverage trades that allow people to do something akin to margin trading with Bitcoin. The ending of leveraged trades will also reduce the speculator element in Bitcoin transactions.

The fact that the exchanges all decided to start charging 0.25 transaction fee (on the same day) suggests that the move was a coordinated action even though the exchanges have avoided hinting that they made the decision under duress. Hence, we can submit that the exchanges won’t mind caving in to some of the demands of regulators inasmuch as the demand would help them stay in business even if it causes a ‘little’ inconvenience for their clients.