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By Phillip Yu

Bitcoin is a peer-to-peer network-based electronic currency created in 2009 by an unknown individual under the alias Satoshi Nakamoto. Bitcoin owners store bitcoins on “digital wallets” and can transfer funds to others without the assistance of a central governing agency or a bank. The processes of acquiring, managing and trading bitcoins are largely anonymous. Some people use bitcoins as an alternative currency while others acquire bitcoins as an investment much like stock, hoping for value appreciation in the future. Currently, there are several marketplaces that allow people to buy and sell bitcoins, with Japan’s Mt. Gox being the largest.

Theoretically, bitcoins have tremendous potential positive impacts on international trade. First, international transactions can become cheaper since bitcoins are currently unregulated, thus avoiding many transaction costs. In addition, since bitcoins are not officially tied to any particular state, political risk is relatively low. Further, bitcoins are less susceptible to inflation, since bitcoin protocol demands a finite number of outstanding coins. Lastly, the fact that the bitcoin is a single, consistent currency eliminates the hassle and expense of exchanging currencies.

Despite accounting for a range of positive theoretical benefits, the mysterious anonymity surrounding Bitcoin and its connections to illegal dealings have garnered a great deal of controversy and concern. 

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March 01, 2014

By Sam Obenhaus

The fix was in and now the Financial Stability Board (FSB), an international financial regulator created by the G20, is investigating.

At issue is alleged collusion among traders to set benchmark foreign-exchange rates.  According to initial investigations carried out by dozens of financial regulators across the globe, traders used chat rooms to share market-moving information about their impending foreign-exchange trades.   They then allegedly used this information to organize their trades during “the fix,” which is a one minute span starting at 3:59:30 London time each afternoon.  The trades executed during “the fix” are used to set the foreign exchange benchmark rates.

After independent investigations by regulators including the U.S. Federal Reserve, the Bank of England and the Reserve Bank of Australia, the FSB is launching its own probe. 

The FSB was created to “to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies” across the G20.  Its membership is made up of financial regulators from G20 states.  The United States’ Treasury Department, Federal Reserve Board, and Securities and Exchange Commission are all members.

Bloomberg has more on this story.

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February 21, 2014