This article is an excerpt from “Digital Gold: How Bitcoin Can Become a Mainstream Investment,” included in the Q4 2015 issue of the Finance Magnates Quarterly Industry Report.
Recent advances in the way we invest in bitcoin have had a profound effect in contributing to the newfound stability. Until recently, bitcoin trading has been conducted solely in unregulated marketplaces. This meant that price manipulation, “pumps dumps”, flash crashes and a variety of irrational behavior could take place, unpoliced and unimpeded. There were no assurances as to whether reported trades were conducted by real people, if the exchange was merely trading with itself, or if they ever happened at all.
This changed significantly in 2015. The introduction of virtual currency regulations i.e. the “BitLicense” in New York State has changed the way Bitcoin businesses can operate in the world’s financial capital. The regulations are highly controversial; they be loosely viewed as separating between the large, well-capitalized Bitcoin companies, some of which welcomed the regulations, and small startups, many of which opposed them.
Interestingly, only one Bitcoin company- Circle Internet Financial- has secured a BitLicense to date. Two bitcoin exchanges, itBit and Gemini, have exempted themselves from the regulations by securing trust charters, allowing