Quote from: geoburke on August 29, 2013, 03:28:58 PM

What's worse, is Tradehill is suspending bitcoin trading!! This is nuts.

I received an announcement from Tradehill last night saying

Quote

This correspondence is to inform you Tradehill is suspending its relationship with the Internet Archive Federal Credit Union (IAFCU). Tradehill is also suspending its Bitcoin trading activities, for the time being, and will reach out to you as soon as trading operations resume.

If you would like Tradehill to wire you your US Dollar balance (if applicable), or if you have any questions or concerns, please feel free to contact your Personal Account Manager at Tradehill.

Sincerely,

The Tradehill Team

They don't seem to be saying much about what their regulatory problems are.

I suspect that the problem is that the SEC says they have to register as a broker/dealer. Since there's now a court opinion that Bitcoin is a security, it follows that regular securities laws apply. A securities broker is defined as "any person engaged in the business of effecting transactions in securities for the account of others." That's Tradehill. Also, the SEC says "A firm that advertises publicly that it makes a market in securities is obviously a dealer." That's Tradehill.

That means audits, capital requirements, insurance, etc. - all the stuff you have to do to handle other people's money.

This is a tougher requirement than registering as a money transfer firm. It's harder than complying with anti-money laundering laws. AML is all about disclosure and reporting. Broker/dealer regulation is all about broker/dealers not screwing their customers.

A broker-dealer may not begin business until:

it has properly filed Form BD, and the SEC has granted its registration;
it has become a member of an SRO; (a "self-regulation organization, like NASDAQ or FINRA).
it has become a member of SIPC, the Securities Investor Protection Corporation; (Customers get $500K coverage, the broker pays premiums for this.)
it complies with all applicable state requirements; and
its "associated persons" have satisfied applicable qualification requirements. (There's a background check and an exam.)

While all this is a pain for Bitcoin exchanges, it means you get your money back if the "exchange" goes belly-up, which about half of Bitcoin exchanges have done so far. Big win for investors. And no broker/dealer selling to US customers can get away with things like the Mt. Gox withdrawal "hiatus". A broker that gets two or three days behind gets closed down, like Lehman or MF Global. This is a no-bullshit business at the getting-paid level.

Welcome to the real world, Bitcoin.