SecondMarket, an online marketplace of privately owned company shares for accredited investors, has begun to pilot a new bitcoin exchange program on its site. Announced via a tweet on Friday, by SecondMarket CEO Barry Silbert, the company has begun a bitcoin buying program where it will be making a market in the digital currency in minimum blocks of 25 bitcoins (currently about $17,500). As a registered broker dealer in the US, with this new initiative, SecondMarket is positioning itself as a trusted counterparty for large bitcoin transactions. As such, sellers are required to open accounts and issue documents to fulfill know your customer (KYC) and anti-money laundering (AML) requirements that are typical of regulated financial institutions.
The new buying program follows previous initiatives of SecondMarket in the digital currency space. The company created a Bitcoin Education portal in July of 2013 as well as launched the Bitcoin Investment Trust, a fund that invests exclusively in bitcoins and is offered to accredited investors. In addition, Silbert himself has been an active investor in the space through his funding startups such as Coinsetter, Gyft, Coinbase and Bitpay.
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Coming exchange or cheap way to buy bitcoins?
One of the questions being asked by miners over the weekend is whether this program from SecondMarket is their first foray into launching a regulate US exchange, or just an opportunity to buy bitcoins for their Bitcoin Investment Fund. On the new page of their buying program, SecondMarket still refers individuals who want to purchase bitcoins to their Bitcoin Investment Fund, with the current initiative focused on sellers. Therefore, as SecondMarket hasn’t created a marketplace yet of both buyers and sellers, a professional miner expressed to DC Magnates that “SecondMarket may be trying to buy bitcoins directly from miners for their investment fund at lower prices and without the fees of using exchanges”.
While SecondMarket may be using the opportunity to purchase bitcoins for its fund, Silbert was quoted as hinting that they may be going down the directions of launching a full bitcoin exchange. In a comment to CoinDesk about the news, Silbert stated that “There is a clear need for a US-based, regulated, compliant and trustworthy bitcoin exchange. This could be the first step in that direction.” As such, whether launched on their own or in partnership with another firm, of which Silbert has a long list of potential companies he has invested in, it is apparent that SecondMarket has its eyes on being part of a regulated bitcoin exchange. In terms of advantages of a regulated exchange, as a central counterparty that handles all trades, such a venue would be required to report about its financial health as well as maintain minimum investment capital. With MtGox teetering on the edge of extinction and the whereabouts of client funds in question, if and when SecondMarket launches a regulated exchange, it would be expected to meet healthy demand in the market.