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Month In Review: May

Op-ed - Month In Review: May

The Bitcoin community took a rather heavy beating this month. Our leading exchange, Mt. Gox, was sued by its former partner Coinlab, lost three of its deposit and withdrawal partners, and the company is under federal investigation in the US. Another digital payment network, Liberty Reserve, was shut down by federal investigators, and the government specifically mentioned the service’s anonymity as a major reason behind the shutdown. However, judging by the price the community has proven to be surprisingly resilient. Bitcoin dropped 7.5 during the month, but the entire drop and more took place during the initial days of the month following the Coinlab suit. Since then, it recovered from a low of $79 and now stands at $117. A major piece of positive news driving the comeback was a series of investments from Silicon Valley, and A hugely successful Bitcoin conference, with over a thousand people attending, bolstered the community’s spirits and sent the world a clear message: Bitcoin is here to stay.

For those interested specifically in the Bitcoin conference, you can find our full collection of articles on the topic here.

The Regulators Are Moving In

  • Coinlab, a company that had signed an agreement with Mt. Gox in February to take over the exchange’s operations in North America, turned against its former partner with a $75 million lawsuit on May 2. Coinlab claims that Mt. Gox has failed to uphold a single one of its contractual promises to assist the company with the migration, and has violated its agreement to discontinue serving customers in North America itself (whether this was actually part of the agreement as written is one of the questions in dispute).
  • Mt. Gox’s Dwolla account in the United States was frozen by the Department of Homeland security, with the DHS claiming that Mt. Gox was acting as a money transmitter without applying for a money services business (MSB) license from FINCEN, the US money transmission regulator. According to the DHS warrant, Mt. Gox (specifically, its US subsidiary Mutum Sigillum LLC) also falsely claimed that they were not going to be involved in money transmission when signing up for their bank account in 2011.
  • SatoshiDice started blocking US-based IP addresses, citing legal worries.
  • Liberty Reserve was shut down by US regulators and its operators criminally charged, with Liberty Reserve’s anonymity being cited as a major reason behind the investigation and shutdown.
  • After some Bitcoin users became worried that Bitcoin would be next, FINCEN followed up with an interview where chief Jennifer Calvery clarified that “that action was against one financial institution and one type of financial service” and “exchange providers that comply with the law [ie . the FINCEN guidance href=""] have nothing to fear from Treasury.”
  • In Canada, the regulators are taking a different path. The Canadian money transmission regulator, FINTRAC, sent a letter to Bitcoin exchanges saying that the exchanges are “not, at this time, engaged as a money services business in Canada”, and therefore “do not have to register your entity with us.”
  • BitInstant told Bitcoin Magazine that they now have money transmitter licenses in 30 states – suggesting that the task of getting fully licensed is not quite so daunting as was originally thought.
  • OKPay reduced the scope of its operations in the Bitcoin community to only processing payments for verified merchants, citing legal concerns to explain the decision

The Silicon Valley’s Embrace

  • Coinbase received $5 million of investment mainly from the Silicon Valley venture capital firm Union Square Ventures, with additional support from Ribbit Capital, SV Angel and Founders Club.
  • The Boost VC accelerator program announced that it would be investing an additional $50,000 into every Bitcoin company in the next group of startups that they would be working with starting June 24.
  • BitPay raised $2 million from the Founders Fund, of which Peter Thiel is one of the two founding members.
  • BitInstant announced that it has raised $1.5 million from Cameron and Tyler Winklevoss (best known for their role in founding Facebook). The two brothers also appeared as keynote speakers at the Bitcoin conference in San Jose.
  • A new, Bitcoin-specific, venture capital group, BitAngels, was created at the Bitcoin conference, attracting 60 investors and raising a total of $6.7 million in capital.

Business and Charity Adoption

  • BitPremier, a marketplace for luxury products and real estate targeting wealthy Bitcoin users, opened its doors on May 2.
  • ASICMiner started selling its Block Erupter USB mining products, offering 336 MH/s for 1.99 BTC, and the company is continuing to sell its Block Erupter Blade devices with 10 GH/s for 49.99 BTC. The company’s valuation also crossed $100 million, making it the most highly valued “publicly traded” company in Bitcoin history.
  • Gyft, a mobile gift card platform that offers digital gift cards for 50,000 physical retail locations across the United States, started accepting bitcoins.
  • The Electronic Frontier Foundation began once again accepting Bitcoin donations. When the EFF stopped accepting Bitcoin in June 2011, the organization donated their 3505 BTC of existing donations to the Bitcoin Faucet run by lead Bitcoin developer Gavin Andresen. Now, Gavin returned the remaining 726 BTC from that fund to the EFF, which are now worth more than the 3505 BTC were when the EFF turned them away in 2011.
  • The Free State Project-affiliated medical group Fr33Aid announced that the organization is now using Bitcoin as its main currency.
  • The money transfer system WebMoney added a new unit to its repertoire of digital currencies, WMX, representing bitcoins, allowing Bitcoin users to buy WMX which can then be converted to other WebMoney currencies to purchase products at many merchants worldwide.
  •, a website for renting living accomodations in Germany, started accepting Bitcoin payments.
  • The Bitcoin payment processor BitPay passed 7000 merchants.
  • Second-tier Bitcoin exchanges like BitStamp saw a considerable increase in volume relative to the dominant exchange Mt. Gox, with BitStamp on some days seeing up to half the volume of its main competitor


Bitcoin Wallets Galore

  • Bitcoin 0.8.2 was released, reducing the fee needed for small-value transactions to get fast confirmations from 0.0005 BTC to 0.0001 BTC. BitcoinQt and bitcoind clients will now also enforce a minimum transaction output size of 0.0000543 BTC (optionally changeable with a custom setting).
  • CarbonWallet, an Electrum-compatible, browser-based Bitcoin wallet saw its first release.
  • RushWallet, an improved version of the now-defunct InstaWallet that works without the site’s operators ever finding out their users’ URLs (and therefore private keys), also opened itself up to public use.
  • Conformal, a company focused on building open-source software for privacy and security, revealed their latest project: btcd, an alternative Bitcoin implementation written in the Google-developed programming language Go.
  • libbitcoin, another alternative Bitcoin implementation in C++ targeting asynchronicity and modularity, released a tutorial.