SecondMarket Takes First Step to Becoming a US Bitcoin Exchange

(@pete_rizzo_) | Published on February 7, 2014 at 17:52 BST | Companies, Exchanges, Investors, News

SecondMarket has taken its first step to becoming a US-based bitcoin exchange, the company’s founder and CEO Barry Silbert has suggested.

Silbert took to Twitter today to announce that his alternative investment company is now buying bitcoins from interested sellers, then told CoinDesk this could mark a move into the US exchange market. He said:

“There is a clear need for a US-based, regulated, compliant and trustworthy bitcoin exchange. This could be the first step in that direction.”

The announcement follows Mt. Gox’s decision to halt all bitcoin withdrawals from its service one day earlier. The surprise move sent bitcoin markets into decline in the hours that followed, and caused uncertainty to spread throughout the bitcoin community.

Silbert did not mention the big-picture implications of the new service in his Twitter post, but did indicate that SecondMarket is now open to both buyers and sellers.

Expanding activities

Screen Shot 2014-02-07 at 11.48.35 AMFounded in 2004, SecondMarket offers a number services in addition to its most high-profile offering, the Bitcoin Investment Trust launched last September. To date, the private trust has raised approximately 80,000 BTC  in holdings for its target investors, which primarily include high-earning Wall Street professionals and tech entrepreneurs.

“Expanding these activities is a pilot intended to determine what buyer and seller demand exists beyond our current activities in support of the Bitcoin Investment Trust,” Silbert said.

If Silbert’s own estimates are accurate, the company is growing fast. Speaking at the Disruptive Technologies Speaker Series earlier this week, Silbert indicated that the Bitcoin Investment Trust had raised just 70,000 BTC.

As for the transaction minimum of 25 BTC (roughly $18,000 at press time), Silbert said that the decision was a practical matter.

“Our market making, in its current form [and] structure, is high touch, and facilitating a large number of small transactions would not be feasible,” he noted.

Timing the decision

While Silbert did suggest that the news from Mt. Gox provided additional value to his company’s newest offering, the move to begin openly working with sellers did not happen overnight. Silbert noted that his team has been sourcing bitcoin on and off exchanges since last year, but that additional services like this might be needed to meet demand.

Silbert, who spoke on day one of last week’s NYDFS hearings and recently made Forbes’ 40 Under Forty class of 2013, has been vocal about his belief that “2014 will be the year of bitcoin on Wall Street”.

The investor says that this new pilot service is meant to help SecondMarket grow as it furthers its base of Wall Street and institutional investors, who he expects will soon be moving into the asset class with more frequency.

How SecondMarket selling works

To begin selling bitcoins to SecondMarket, sellers will need to first fill out a New Account Profile (NAP) form. This NAP form asks basic questions such as the name and address of the individual, and source of the funds.

Screen Shot 2014-02-07 at 11.28.49 AM

Those representing entities will need to complete a separate, lengthier NAP form. From there, the transaction takes an additional five steps to complete.

  1. SecondMarket notifies the seller of the trade approval
  2. The seller engages in an offline, privately held negotiation to determine the sale price
  3. The seller sends the bitcoins to SecondMarket
  4. After six confirmations via the block chain, funds are sent to the seller
  5. The seller is provided a FED reference number for tracking.

To learn more about SecondMarket’s latest offering, read the full announcement here.

Disclaimer: CoinDesk founder Shakil Khan is an investor in SecondMarket.

Image credit: Buying and selling dice via Shutterstock

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