Despite increasing talk of a bubble in the peer-to-peer Bitcoin economy, an Australian company is looking to ‘legitimise’ the online currency with the proposed launch of a Bitcoin bank.
Web technology company HotwirePE yesterday announced the launch of Denariuz Bank, which it claimed would be “the first bank based solely on crypto-currency in the world”.
Speaking to InvestorDaily, HotwirePE chief executive Dr Steven Wright said his firm was working with the Australian Taxation Office and ASIC and is aiming to “have a full banking licence from APRA based on Bitcoin”.
HotwirePE has been working closely with senior government officials for the last 10 months to help them understand Bitcoin and how to regulate it – and the ATO is currently considering the tax treatment of Bitcoin, according to a HotwirePE statement.
“We seek to turn Bitcoin into an internationally-regulated currency and investment tool that uses secured micro-payments for e-commerce transactions between anyone, at anytime, anywhere, and on any-device,” said Dr Wright.
“The great thing with Bitcoin is you can’t loan more than you have; you can have a variety of different contracts and derivatives and all the rest actually set up, but you are limited in that you can’t loan Bitcoins that you don’t actually have,” he said.
With multi-layer security in place, Denariuz will guarantee the safety and protection of customer’s Bitcoins in its secured cold storage vault, removing internet risks and security concerns, according to HotwirePE.
“The UK recently reversed its classification of Bitcoin and said VAT would not be due on sales using Bitcoins,” said Dr Wright said.
“We hope the ATO follows suit and does not force GST to be applied to transactions using the crypto-currency.
“It would be an embarrassment if the regulatory outcome excludes Australia … Incorrect handling of what is essentially money could see a $100 million investment forced to move away from Australia,” said Dr Wright.
However, the virtual currency debate is a continuing one and Bitcoin is not without its detractors.
Euro Pacific Capital chief executive Peter Schiff told CNBC, “the online currency more closely resembles tulip mania 2.0”.
"A bubble is a bubble," he said, "and there's a bubble in Bitcoins."
Yesterday, the Wall Street Journal reported on a ‘technical glitch’ that had impacted the currency.
“A leading Bitcoin exchange Monday blamed a long-unresolved technical issue for its decision to abruptly halt customer withdrawals last week,” the Wall Street Journal reported.
“Prices of Bitcoin were sent reeling to their lowest level in two months Monday — quickly falling to below $550 from Friday's close of $703.57, according to an index compiled by CoinDesk, a Bitcoin-data provider based in London,” the paper said.
“The exchange, Tokyo-based Mt. Gox, said the software issue could affect all Bitcoin transactions to third parties and needed to be addressed in cooperation with the core development team of the payment system,” it said.
HotwirePE’s Dr Wright said the Japanese system glitch is “unfortunate to say the least”.
“There is a reason we have taken a lot longer to come to market the way we have; we want everything to be rock solid first,” he said.
“That has meant rewriting the Bitcoin daemon [programming code] and a whole lot of other things that we’ve had to do.”
Dr Wright said that these glitches do lead to a lot of volatility in the market.
“That is why we are working with the tax office and ASIC and thinking down the track to have a full banking licence from APRA based on Bitcoin,” he said.
Dr Wright confirmed he is meeting with ATO officials in Canberra this week.