Sunday, February 12, 2012

Paxum Exits From Bitcoin Business

By Jon Matonis

Citing "new bank regulations" and "the fact that we are constrained to act in this manner", Canada-based Paxum has exited from the bitcoin business which put them on the map in 2011. On February 10th, Paxum stated that they can no longer accept any accounts related to bitcoin or bitcoin exchanges and that all current bitcoin-related accounts have been closed. Paxum spokesperson, Ruth Blair, posted Paxum's rationale here and here.

Paxum is an e-wallet company that also offers the Paxum Prepaid Mastercard via Choice Bank in Belize. Effective immediately, this action has impacted all customers that rely on Paxum for two-way transfers into and out of the exchanges, but it was first noticed by exchange intermediary BitInstant and the floating-rate exchange TradeHill.

Paxum, Inc. is licensed and registered as an MSB (Money Servce Business) with main offices in Quebec, Canada. Apparently, the MSB regulatory body in Canada, FINTRAC (Financial Transactions and Reports Analysis Centre of Canada), has decided to exert some soft pressure on e-wallet companies and their banks that facilitate bitcoin exchanges.

As no court jurisdiction has ruled on whether bitcoin is actually money, the regulators have decided to issue statements of guidance as to how bitcoin may or not be interpreted by the courts. The result of this has been to exert regulatory influence through warnings because the licensed money service businesses are being 'pre-warned' of potential legal issues ahead. As with PayPal and others, the adjustment that this causes has revolved mostly around modifying the company's terms of service to list 'currencies and currency exchange services' as a restricted class of transactions for the e-wallet or e-money company.

For further reading:
"Paxum Ends Association with Bitcoin Exchanges", Tom Hymes, AVN, February 13, 2012
"For Banks, Digital Currency Poses Threat — and Opportunity", Jeremy Quittner, Bank Technology News, January 13, 2012

11 comments:

  1. More proof that Bitcoin is winning. (Past the "first they ignore you, then they laugh at you" and now at the "then they fight you" phase.)

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  2. This removes the players that Paxum recognizes as being Bitcoin-related such as the exchanges and any intermediaries like BitInstant.

    Paxum can still be used person-to-person, in the same way that people use PayPal, iTunes vouchers, etc for trading bitcoins. The Bitcoin-otc marketplace is one such example of where this occurs.

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  3. It would be interesting to know exactly what was said to Paxum. Maybe it is time to file a complaint requesting an antitrust investigation?

    Related: http://bitcointalk.org/index.php?topic=45825.0

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  4. Personally, I don't think that this was orchestrated by Mastercard. According to Paxum, they were one of the participants at the table (and even that is via Choice Bank in Belize). People are reading too much into this. AurumXchange still has a Mastercard, no problem. This is specific to Canada and the banks that handled Paxum's inbound deposits and outbound wires which is why the auditors were there.

    Reddit has some good related discussion.

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  5. From my paxum account /announcements/: "Bitcoin Termination
    Effective immediately, Paxum Inc can no longer accept any accounts related to Bitcoin or Bitcoin Exchange. All current Bitcoin accounts have been closed and may no longer perform any transaction. Account holders will be able to withdraw their funds via wire transfer."

    Thank you Paxum and goodbye for ever...

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  6. Looks to me like the Powers that be are waging war against bitcoin, shutting down access to it through exchanges, what are the solutions, it is a war and we must find a solution, preferably multiple solutions.

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  7. It'll be like trying to stamp out e-mail. Feeble attempts by goons with guns.

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  8. ArticMine found the bitcoin reference at FINTRAC which was published as a quarterly news watch in June 2011 (see section 1.2, paragraph 7):

    http://www.fintrac-canafe.gc.ca/publications/watch-regard/2011-10-eng.asp

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    Replies
    1. Interesting read. Who are the two senators and on which lobby's payroll are they on? Banking/PCI? I'd be curious to know.

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  9. Seems that Paxum wants to focus mostly on adult affiliate programs for now, and bitcoin is still considered too risky partner. Other similar and bigger services, like e-gold and epassporte have fallen down because of taking too much such risks.

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