Regulatory risks, challenges and opportunities of cryptocurrencies in China and elsewhere

On Monday I had lunch with a couple of tech investors based in Shanghai.  We chatted about a number of topics but spent the bulk of the time discussing Bitcoin and specifically Bitcoin-related opportunities in China.  As an aside, a few months ago I wrote a post about the small BTC community in China.

As enthusiastic as I might be regarding the positive merits cryptocurrencies such as Bitcoin and Litecoin offer, I do think that regulatory oversight specifically in the form of Known Your Customer (KYC) and Anti-money Laundering laws (AML) will present serious hurdles for the entire ecosystem.  (Here is a podcast I did with David Veksler back in April regarding some of these challenges.)

In fact, all Bitcoin money exchanges based in the US have closed down and Mt. Gox, the largest exchange has recently suspended US dollar withdrawals for the next couple of weeks.  This is not to say that the cryptocurrency experiment is doomed to fail but it does mean that going forward all entrepreneurs and investors should be cognizant of the fact that the state — globally — has its eye on it.

Below are some links to relevant news stories about various exchanges and money transmitters being shut down/suspended:

In terms of the volume of various exchanges, Bitcoin Charts has an up-to-date spread of the major exchanges for BTC.  And based on CryptocoinCharts it appears that BTC-E has the lionshare of volume for Litecoin right now (~90%).

If you have a VPN or are based outside of China you can listen to a recent interview with Charles Lee, the creator of Litecoin (here was the first public announcement of Litecoin back in October 2011 made by Charles).  And if you are interested in visualizing the profitability and popularity of mining other alternative cryptocoins, visit CoinWarz.

Reader who were wondering who the lead developer of Bitcoin was now, his name is Gavin Andresen.  A few weeks ago the WSJ published an in-depth profile of him as did HuffingtonPost here as well.  Warren Togami is currently part of the core development team of Litecoin, he also works at Red Hat developing Fedora (he put together a LTC fundraiser the past couple months).

Lastly if you’re interested in knowing exactly what FinCEN announced back in March, here is the full guidance notice and the American Banker recently interviewed Jennifer Calvery, the director at FinCEN for her thoughts on cryptocurrencies.

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