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Bitcoin bank hits ATO roadblock

Australian web tech company HotwirePE is determined to launch “the world’s first bitcoin bank” despite “difficult” dealings with the ATO, according to the company’s founder.

Speaking to InvestorDaily, HotwirePE chief executive Dr Steven Wright said the launch of Denariuz Bank was still a work in progress with the ATO being “particularly difficult”.

On 12 February InvestorDaily reported that HotwirePE was working with the Australian Taxation Office and ASIC and was aiming to have a full APRA banking licence based on the online bitcoin currency.

However since the collapse of Tokyo-based bitcoin exchange Mt Gox on 28 February, in which 850,000 bitcoins – worth $560,000 today – went missing, investors have been worried about the security of the virtual currency. 

“I don’t think the collapse of Mt Gox has damaged bitcoin’s reputation as a virtual currency,” Dr Wright said. “If you look at the price it has started going up again; lots of people are trading.”

The Mt Gox collpase cannot be blamed on bitcoin but rather the poor software and security implementation at the exchange, said Dr Wright, who maintains the collapse will not impact bitcoin’s reputation. 

“There was never any flaw with bitcoin,” he said. “There was never any coding error with bitcoin and there was never any protocol error with bitcoin.”

Dr Wright said there was a custom implementation at Mt Gox that was the “worst piece of software [he] has seen in a long time”.

“I have seen software developed by 11 year old kids that has a better structure and code orientation than the source code at Mt Gox,” he said. “It is really not very surprising that the bitcoins at Mt Gox went missing.”

“Mt Gox treated it like a game; they didn’t treat it like they were actually running an exchange,” said Dr Wright, who is adamant his bitcoin bank will not suffer the same fate. 

Before a career in gaming, Dr Wright worked with banks and the Australian Stock Exchange (ASX). 

“Processes with the core systems at the stock exchange had system engineering principles,” he said.

“It wasn’t just about pulling out a bit of code and hoping it works. It was doing unit testing, functional testing and everything else – and then you released it. That’s partly why we have not launched yet.”

While the bitcoin bank could in theory launch today, Dr Wright said he will follow rigorous testing and regulatory protocol before Denariuz Bank is released. 

“I’ll do that when I know my system is right,” he said.

“Yes, I’ll lose profit, but I’ll launch when my system is right, when in it is documented, when it is coded, when it can be knocked over, and then I will have people pull apart the system and see what they can find and go back over it and over it and over it. Then you release it.”

In the meantime, investors who lost bitcoins through the Mt Gox collapse have taken to internet forums as the search for their missing currency continues. 

“Forum websites like Reddit and internet relay chatrooms have attracted hordes of users as the Mt Gox debacle unfolded in recent weeks,” according to Reuters newswires, “but their crowdsourcing investigations have uncovered little in the way of real evidence about what happened.”


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Killian Plastow

Staff Reporter

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