Coinmkt Using E-Trade to Move Funds to Digital Currency Exchange
Coinmkt, a digital currency exchange based in Los Angeles, has opened an account with E-Trade to allow users to deposit U.S. dollars into the exchange as wire transfers from U.S. bank accounts.
The exchange has been seeking a bank for two months, says Travis Skweres, CEO of Coinmkt. Many digital currency businesses have had trouble obtaining bank accounts because banks were concerned about risk and regulatory issues.
"A lot of banks that said 'no' in the beginning of 2013 have started to loosen up because of how much the market went up in 2013 and all the attention it continued to receive," Skweres says.
A screen in Coinmkt's mobile app informs users that their wire transfers are handled by E-Trade Bank. A representative from E-Trade says it is not in a "partnership" with Coinmkt but did not respond to inquiries about the specifics of the customer relationship.
Before the E-Trade option, users had to send a money order, which takes about five or six days to clear, Skweres says. Afterwards, customers use those funds to purchase digital "cryptocurrency" such as Bitcoin, he says.
Funds wired to Coinmkt can be used to purchase any of nine digital currencies. In addition to Bitcoin, the other currencies are Litecoin, PeerCoin, NameCoin, FeatherCoin, PrimeCoin, MegaCoin, WorldCoin and QuarkCoin.
The existence of alternative currencies, including many that are based on the Bitcoin protocol, demonstrates that the market for digital currency is still developing.
"We think there will be multiple winners," Skweres says. "I don't know if Bitcoin is the MySpace or Facebook of cryptocurrency," he says.
A growing number of merchants accept Bitcoin for payment, including Overstock.com and the Sacramento Kings basketball team. Small merchants, who were early adopters of Bitcoin, have also started accepting alternatives such as Litecoin for payment as well.
Coinmkt customers previously had to purchase Litecoin with Bitcoin. Because Coinmkt was able to open a bank account, its customers can now purchase Litecoin directly with U.S. dollars.
The price per bitcoin continues to hover above $800 on Coinbase, a popular U.S.-based Bitcoin exchange. And Litecoin, previously has been purchasable only with bitcoins, has wavered between $20 and $25 for some time.
"The reality is that a lot of these altcoins are complete throwaways and scams and people trying to make a quick buck, but a lot of them also have innovative features and a valid community behind them," says Skweres. "We shouldn't squash them just because Bitcoin is popular; I think there will be a gold, silver and bronze so to speak and we'll see institutions, such as Amazon, come out with their own cryptocurrencies as well."
Skweres says Coinmkt will soon announce another bank relationship to use as an additional funding source.
"Every Bitcoin business fights over bank accounts." Skweres says. "If you have a banking partner you have a tremendous advantage."
The Financial Crimes Enforcement Network (Fincen) has continued to fill in the gray areas in the regulatory guidance it issued over virtual currency businesses last year. Recently Fincen clarified its stance on investors of digital currency, saying that these entities are not money services businesses and thus do not have to obtain state licenses.
"Bitcoin companies in the industry needed to grow up more," says Skweres. "This is a tech-heavy industry and many of these entrepreneurs have never had to deal with regulation," he says. Now they're more prepared to comply with Anti-Money Laundering and Know Your Customer rules, he says.
The U.S. has continued to warm up to Bitcoin, with Senate hearings in November showing that federal departments see Bitcoin as a technology that could change the payments system for the better but with its own set of risks. Some Bitcoin businesses have looked outside the U.S. for bank accounts or to start operations, but other countries have recently started tightening the reins on Bitcoin businesses. China recently banned financial institutions and payment companies from transacting and clearing Bitcoin.