What a US-based exchange means for bitcoin

1 March, 2015

For those who would contend that bitcoin is just a passing fad, the latest news that the first regulated U.S.-based bitcoin exchange opened shop in late January could be a solid indication that bitcoin is not going anywhere anytime soon.

The new exchange, established by the well-known bitcoin broker Coinbase, could well be just what the industry needs to help finally legitimize bitcoin and bring it fully into the mainstream.

New Bitcoin Exchange Overcoming Challenges

In the past, one of the biggest challenges faced by bitcoin is gaining trust. The fact that it is still so relatively new has not helped matters any. While there have been plenty of people who have been quick to jump on the bitcoin bandwagon, there are still many people who find it difficult to understand bitcoin. Add in the fact that it is designed to be unregulated, and it has been difficult for bitcoin to find acceptance with many.

The establishment of the first regulated bitcoin exchange in the United States could go a long way toward resolving those problems. After the exchange first went live at the end of January, bitcoin's value experienced an initial spike in value. Along with the fact that a U.S.-based exchange could help to boost bitcoin's legitimacy, traders will likely find it to be far more convenient. In the past, traders had few other choices but to make exchanges overseas.

San Francisco-based Coinbase claims that it has already amassed almost 2 million users and has signed up some 38,000 merchants. Add in the fact that Coinbase has raised in excess of $100 million and it is easy to see why the first U.S.-based bitcoin exchange is making waves in the cryptocurrency world. Reports indicate that Coinbase will be taking a .25 percent cut from transactions that occur on the exchange.

While the launch of the first U.S.-based bitcoin exchange is certainly a victory in terms of helping to cement bitcoin's reputation and legitimacy, there is still work to be done. Only about half of the states in the United States have provided regulatory approval for Coinbase. Over the course of the last five months, the founders behind Coinbase have been working diligently to obtain licenses from those states, which include California and New York. The exchange is open to the public, but it should be noted that Coinbase is only able to legally conduct business with customers living in states that have provided regulatory approval.

New Bitcoin Exchange Waiting in the Wings

Coming on the heels of establishment of the bitcoin exchange is news from Cameron and Tyler Winklevoss, better known as The Winklevoss Twins that they too are in the process of developing a bitcoin exchange. The brothers are known to be two of the largest holders of bitcoin in the world. Known as Gemini, the exchange is expected to be launched later this year. During the last year, the infamous twins have put together a team of compliance experts and engineers to build their new venture. Recognizing that one of the biggest hurdles that such an exchange faces today is legitimacy, the twins have also formed a partnership with a New York-based bank.

As a result, one of the biggest advantages of a U.S.-based bitcoin exchange is that users can be assured that their funds will not leave the United States. Furthermore, their funds could also be eligible for protection by federal deposit insurance.

Currently, one of the biggest challenges preventing Gemini from launching is that it has yet to receive the go-ahead from the head of New York City's financial services. Even so, prospective users who are interested in Gemini can sign up to express that interest. Given that the Winklevoss Twins have invested a significant portion of their own currency in the venture, there is a lot riding on this deal.

CBS News reports that approximately $50 million in bitcoin transactions are conducted daily. As an increasing number of businesses begin to accept bitcoin as a payment option, it is clear to see that bitcoin is here to stay. 1 With regulated U.S.-based bitcoin exchanges now available, bitcoin is well on its way to becoming accepted in the mainstream.


1) CBS News. Does Bitcoin still matter?