Bitcoin exchange to trade other currencies

Coinfloor, the London-based bitcoin exchange, is planning to raise money from investors to expand its operations to trade a wider range of currencies and launch a bitcoin fund.

Since its founding two years ago, the company has become the biggest exchange for bitcoin-to-sterling transactions by volume of currency traded. On Tuesday, it will open up to new currencies, accepting deposits in US dollars, euros and Polish zloty.

The decision to accept deposits in zloty is a sign of the difficulties that bitcoin enterprises face operating in the UK. Coinfloor banks with PKO, Poland’s largest bank, claiming that no British institution will accept its business due, in part, to fears over the legality of the digital currency.

Mark Lamb, chief executive, said the stance of British banks was hurting the country’s chances of becoming a leading player in the growth of virtual currency.

“The Polish bitcoin market has taken off significantly and is now more than double the size of the sterling market,” he said. “The [British] banks are very conservative and are not very interested . . . in something that could be very innovative and disruptive to what they do.”

According to people familiar with the matter, Coinfloor will also close a funding round of about £1m in the next month, which will value the company at up to £8m.

The funding is expected to include current investors such as venture group Passion Capital and Taavet Hinrikus, chief executive and co-founder of TransferWise, a money transfer company. Coinfloor declined to comment on the investment.

There has been a surge of interest from tech investors in bitcoin start-ups. According to Coindesk, a news website about digital currencies, bitcoin businesses have raised raised $113.2m from venture capital groups in 2014 so far, compared with $88m the year before.

These numbers are small relative to the sums invested in tech groups, but reflect the nascent nature of the overall bitcoin market. According to blockchain.info, a website that tracks the price of the digital currency, the current worth of all bitcoins currently traded is around $5bn.

Mr Lamb said that companies such as his were creating the financial infrastructure required to allow the bitcoin market to grow further. He said Coinfloor users traded £1.3m bitcoins in the past 30 days and the group has had 65 per cent growth of trading every month.

Coinfloor also said it was planning to launch a bitcoin exchange traded fund – a security traditionally linked to a commodity like gold, but which is bought and traded like stock on an exchange.

According to people familiar with the matter, the plans will have Coinfloor putting bitcoins on to physical keys that are held within a secure underground vault. It would require multiple signatories to authorise the movement of these coins. In this way, investors could trade shares in the fund, without worrying about the risk that the bitcoins could be stolen by hackers – a concern that has hampered companies dealing in the virtual currency.

Others, such as Cameron and Tyler Winklevoss, the twins best known for their dispute with Mark Zuckerberg over the creation of Facebook, are among those attempting to create a bitcoin ETF in the US.

Coinfloor said: “We believe there is significant untapped bitcoin demand that is waiting for a regulated and listed investment product before buying bitcoin. We are exploring how and where to launch a physical bitcoin-backed exchange traded product to provide customers with another route to bitcoin.”