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Possible Regulated Exchange for Bitcoin

Feb 12, 2015

When the largest and first Bitcoin exchange, Mt. Gox, collapsed last year, I pondered in my blog whether Bitcoin exchanges would eventually embrace regulation and internal controls to ensure consumer protection. In the beginning of January, a security breach at a European Bitcoin exchange further dampened consumer confidence. The price of a Bitcoin plummeted from over $1200 (at the end of 2013) to below $200 recently.

With such wild fluctuations, how can consumers have confidence in Bitcoin currency? Cameron and Tyler Winklevoss (a.k.a. the Winklevoss Twins), who are perhaps most notorious for waging a legal battle with Facebook’s Mark Zuckerberg, are now hopeful they can change public sentiment by creating the first regulated Bitcoin exchange.  The exchange, named ‘Gemini’ for the twins, already has a test model running and is waiting for regulatory approval.

Even if the Winklevoss Twins succeed in creating the first regulated American exchange, is there really a need for another investment vehicle or currency?  What are the advantages/disadvantages of such an exchange?

In some circles, Bitcoin is being touted as the next ‘global’ currency. With the number of international ecommerce transactions sharply rising every year, a digital currency like Bitcoin might be the payment system of the future.  If regulation can instill consumer confidence in Bitcoin, the Winklevoss twins might be at the forefront of a historic event. Given the fact that they are financing the project themselves, you might say they are banking on it.

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Marc Fogarty

Marc Fogarty, Audit Partner within Technology and Life Sciences Group, and member of the firm's Public Companies, Cleantech and International Services Groups. Marc is experienced in public accounting, serving public and private organizations and has presented on IFRS to professional groups.

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