The purpose of this blog is to describe and explore the new economy of blockchain and Crypto Currencies. More and more people are seeking detailed, specific examples and a basic understanding of the rules and regulations of this new economy. Therefore, this week I’m going to dive into creating a wallet, buying a crypto currency and some of regulations from an Australian perspective.
Firstly, – let’s eat the frog (do the hard stuff first) – a brief overview of rules and regulations – there are plenty of them for us Australians. ASIC have already hit the ground running with the “Innovation Hub” and a whole host of regulations concerning ICOs, Crypto Currencies and digital crowd funding structures.
Recently, (April 16) Design Post Digital attended an Open Session with John Price (ASIC Commissioner)and senior ATO & AUSTRAC officials – their presentation is available online – however the 2 main points of the presentation are;
1: they have an open-door policy and want to assist start-up and entrepreneurs get a better understanding of ICOs digital currencies and the regulations.
2: there is a lot of established regulation that covers ICO’s and digital currency payments, specifically;
“ICOs are sometimes referred to by industry as a form of crowd funding. Crowd funding using an ICO is not the same as the 'crowd-sourced funding' (CSF) that will be regulated by the Corporations Act from 29 September 2017. Care should be taken to ensure the public is not misled about the application of the CSF laws to an ICO.”
Overall, many businesses have opted to set up and manage their ICOs from Switzerland – as the Swiss have a mature and low regulatory stance on ICOs and crypto currencies. Also, specific states in USA have passed their own legislation, an example of this is New York City’s Bitlicense – this led to the exodus of nearly 200 businesses and staff to other parts of the US (California and Texas). Finally, there is massive and varied vault of information on rules and regulations around this new economy (ranging from discussion papers to changes in the corporation’s act) – I would personally recommend contacting ASIC directly and asking them the specific questions on starting up, investing and managing crypto currencies – or move to Zurich.
Back to creating a wallet and getting started…
My selection process was narrowed down to using one of two coins Bitcoin or Ether – I selected Ether as I wanted to investigate Smart Contracts and Dapps (Decentralised Applications).
Essentially the main difference between Bitcoin and Ethereum (Ether is the coin used for the network) is that Bitcoin uses the blockchain for a peer to peer transaction - essentially a payments application. Whereas Ethereum is a specialised network that uses smart contracts (code as rules) to trigger specific actions based on a certain set of circumstances – these smart contracts form decentralised applications (dapps) – somewhat like a large decentralised super computer running lots of different applications.
Both Bitcoin and Ethereum have the largest market capitalisation according to coinmarket cap.com - at the time of writing Bitcoin is worth USD $154,939,681,102 and Ethereum is worth USD $67,255,563,693.
To trade crypto you need an exchange and a digital wallet – here are a range of exchanges that are available to Australians. However, here in Australia, our options are limited compared to Asia & the US, fortunately there are some exchanges offering a reliable service. Here is list of 5 exchanges, including information on the location, currency, available cryptocurrencies and the fees. This exchange space is changing daily and government regulation is also having an impact so do some research and see what works best for you situation.
CoinSpot Australia: Trades in AUD 100+ Cryptocurrencies adding more weekly, charges 1% on trades
Independent Reserve Australia: Trades in AUD USD NZD Bitcoin, Ethereum, BitcoinCash, 0.5% on trades
eToro Europe: Trades in GBP, USD Bitcoin, Ethereum, Ripple,3 others, charges Daily Fees on trades
Binance CHN: Trades in USD 120+ Cryptocurrencies charges 0.1% on trades
Bittrex USA: Trades in USD 190+ Cryptocurrencies charges 0.25% on trades
I have personally used coinbase for my bitcoin investing – here is brief outline of Coinbase and the services offered.
Coinbase supplies an Ethereum wallet as well as a Bitcoin wallet. Coinbase’s wallet is simple to set up and very easy to use, however it has a few limitations you’ll need to be aware of:
- The company holds the private key of the wallet for you. This means you’re not in control of your funds and Coinbase can decide to shut down your account if they want to.
- There are past cases where Coinbase shut down user accounts due to illegal activity.
- The Coinbase ETH wallet doesn’t support ETC (Ethereum Classic).
- Coinbase supports four coins currently but soon to be expanding into four platforms for private and institutional investors.
A note of warning on using international exchanges – please check with your local bank and credit card if they accept payments from the exchange before registering and investing through a foreign exchange – you might be left holding crypto that you cannot liquidate in Australia.
Coinbase is introducing a virtual gift card system for over 120 retailers, notable ones include Uber, Google Play, Nike, Ticketmaster, and fashion brands like Ted Baker and Clarks. So real world buying is now possible without going via your bank.
Finally, becoming a crypto investor does not take a lot of time or technical smarts and is very similar to opening a bank account and an etrade account with your bank. Doing the research and due diligence is always a prerequisite, no matter what the investment strategy – and blockchain / crypto currencies are just the latest thing – does it match your appetite for risk?
The blockchain technology and coin platforms being built are becoming more and more widespread and robust. The question is - are you comfortable about getting in at the start and sticking around for the long run?