Bitcoins: history and future

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Bbitcoinsitcoin is a virtual currency ‘minted’ in 2009 by a computer programmer known as Satoshi Nakamoto. It is a cryptocurrency, so-called because it uses cryptography to control the creation and transfer of money. Bitcoins can be used to buy merchandise anonymously. In addition, international payments are easy and cheap because bitcoins are not tied to any country or subject to regulation. Small businesses may like them because there are no credit card fees. Some people just buy bitcoins as an investment, hoping that they’ll go up in value. Several marketplaces called ‘bitcoin exchanges’ allow people to buy or sell bitcoins using different currencies. Mt. Gox is the largest bitcoin exchange. Bitcoins are stored in a ‘digital wallet,’ which exists either in the cloud or on a user’s computer. The wallet is a kind of virtual bank account that allows users to send or receive bitcoins, pay for goods or save their money. Though each bitcoin transaction is recorded in a public log, names of buyers and sellers are never revealed – only their wallet IDs. While that keeps bitcoin users’ transactions private, it also lets them buy or sell anything without easily tracing it back to them. That’s why it has become the currency of choice for people online buying drugs or other illicit activities. There are 12.2 million bitcoins in circulation and, according to how the program is written, a maximum of 21 million bitcoins will be created. Regular consumers may buy bitcoins online through exchanges or directly from other owners of the virtual currency. At the moment, 1 BTC (bitcoin) is selling for around US$670. Owners of bitcoins can trade them to make profits on the wild value fluctuations. When it was created in 2009, 1 BTC was worth less than 10 US cents. At the end of 2011, it was worth almost US$5. The price crossed the US$1,000 mark in November 2013, largely due to demand in China. At the same time, owning bitcoins is risky as the currency is not guaranteed by any central bank. So 10 BTC today may be worth nothing tomorrow if online exchanges suddenly shut down, or buyers and businesses stop accepting them. No one knows what will become of bitcoin. It is mostly unregulated, but that could change. Governments are concerned about taxation and their lack of control over the currency. Eltoma offers comprehensive solutions for the creation of EU-regulated Cyprus-domiciled financial services companies (Cypriot Investment Firms, also referred to as ‘CIF’). CIFs are licensed to provide brokerage and portfolio management services in the EU and third countries. The major benefit of creation of a CIF is that income derived from the transactions in financial instruments is not taxed, since there is no capital gains tax in Cyprus. Another advantage of CIFs is low corporate tax (12,5%).