Fifteen months ago, hackers lifted more than $5 million from the bitcoin exchange operated by Bitstamp, a Slovenian company that aspired to push the digital currency across Western Europe. The hack wasn't nearly as large or as devastating as the one that pilfered $460 million from Mt. Gox and sent the Japan-based exchange, then one of the world's largest, spiraling into bankruptcy. But it was yet another black eye for bitcoin, the digital currency that holds so much promise as an alternative to fiat currencies but has never really broken into the mainstream.
In small ways, however, bitcoin is climbing back towards respectability. This morning, Bitstamp announced that it has received a license from the Luxembourg Ministry of Finance to operate as a payment institution, and according to the company, this license applies to the European Union as a whole. "With this," says Dan Morehead, the chairman of Bitstamp and the CEO of Pantera Capital, a firm that specializes in investments related to bitcoin, "Bitstamp is able to do business in all 28 countries of the EU."
According to Jean-Louis Schiltz, a Luxembourg-based lawyer who helped Bitstamp secure the license, it's the first bitcoin exchange to gain such approval in the EU. The news follows similar regulatory progress for bitcoin companies in the U.S. In October, Gemini, the exchange operated by Facebook nemesi Tyler and Cameron Winklevoss, received approval to operate in the state of New York through what's called a limited liability trust charter, and a few months before that, the state granted a similar charter to a third exchange, itBit. Meanwhile, the state has granted one of its new BitLicenses to online wallet company Circle.
In the US, bitcoin regulation still happens largely on a state-by-state business, with most companies operating under ordinary money transmitter licenses. But New York is pushing towards a more formal approach that's specific to bitcoin and other digital currencies. And BitStamp has provided a blueprint for other companies to gain regulatory approval across the EU. "I believe that others will follow relatively quickly," says Bitstamp CEO and founder Nejc Kondrič. "They have an easier task."
All this may provide more peace of mind for businesses and consumers that use these various bitcoin services. But in the US and across Europe, bitcoin is still a solution looking for a problem. In the developing world, the digital currency can provide a much needed way of more easily spending and moving money, particularly across borders. But within developing countries, spending and moving money isn't all that difficult.
Ultimately, something like bitcoin could help provide all of us a global network for sending money across the Internet as easily as we send emails and texts. But that's a long way off. Since Mt Gox imploded in early 2014, bitcoin has faced a perception problem. In turn, this probably slowed down regulatory process in so many parts of the world. And that has helped keep the digital currency well outside the mainstream.
Bitstamp started working for its Luxembourg license about two years ago, after failing to receive similar approval in the United Kingdom. And the company acknowledges that the hack didn't help. "With that happening during the [regulatory] process," Kondrič says, "it does bring extra scrutiny to our IT security."
