London’s greatest strength as a startup hub is its financial technology (fintech) scene, so it may come as a surprise that it’s taken until now for a fully-fledged Bitcoin exchange to open there. But then again, that new exchange — Coinfloor — is taking a bit of a chance as the UK doesn’t offer much regulatory certainty around the rapidly evolving cryptocurrency yet.
Coinfloor opened for registration on Tuesday, ahead of going live in a week’s time (it needs to perform anti-money-laundering identity checks on its customers before they start swapping pounds sterling for Bitcoin). It promises “sophisticated charting packages,” simple integration of Bitcoin payment functionality into websites, and a “state-of-the-art trading engine [that] can handle trade volumes up to 50x higher than other Bitcoin exchanges without breaking a sweat.”
The company is backed by Passion Capital and, interestingly, also by Taavet Hinrikus, a former Skype director and the CEO of international money transfer outfit TransferWise.
As Coindesk has noted, there have been other British Bitcoin exchanges, but none as developed as Coinfloor looks set to be. Coinfloor already has several banking partners, which is crucial for perceived legitimacy and smooth operations, but according to the Financial Times it is not accepting U.S. customers at the start.
This is apparently due to U.S. regulation, as Coinfloor founder Mark Lamb suggested “legally it is not safe to open up to U.S. customers in the beginning.” It’s certainly the case that Bitcoin’s legal situation in the U.S. is a bit fuzzy — the FT also noted the Bitcoin Foundation industry body is planning to establish a headquarters outside the U.S. to reflect this uncertainty – but is it much better in the UK?
For now, Coinfloor is safe. The British Financial Conduct Authority (FCA) does not regulate Bitcoin because its use is not widespread enough, an FCA spokesman confirmed to me today, but that doesn’t mean the virtual currency will escape regulation there forever. “We keep an eye on all developments in the market,” the spokesman said.
So in that sense, Coinfloor is taking a bit of a gamble – it doesn’t know what sort of regulation it will have to deal with down the line. What’s more, there is a certain advantage to being a regulated financial services outfit in one European country, because it means you then get to roll out across the EU without having to deal with financial regulators, and all their disparate attitudes towards Bitcoin, in each member state.
But being the first serious player on the block might make up for that uncertainty, of course. These are very early days for the European Bitcoin scene and there’s a tentative gold-rush vibe in the air. Even if Coinfloor doesn’t make it, I imagine the experience will prove valuable for its backers – Bitcoin integration with TransferWise or Passion investment Flattr could be mightily interesting, for example.