SecondMarket Looks to Launch First NYC Bitcoin Exchange

SecondMarket Bitcoin Exchange

While Mt. Gox may be living its final days, SecondMarket looks to capitalize in the bitcoin exchange system. It looks to conduct bitcoin activities through a new stand-alone exchange in New York.

SecondMarket’s monthly board meeting, which takes place at the start of next month, will approve the final decision to bring the exchange to New York. The go ahead is practically a certainty, as the majority of the pieces are already aligned.

SecondMarket will assist the new company with digital currency asset management, which will include a Bitcoin Investment Trust that will be the first US investment movement exclusive for bitcoin. SecondMarket’s 11-person bitcoin trading team was originally a market-maker, but is now on both sides after Mt. Gox’s collapse.

The exchange looks to invest about $20 million in cash and bitcoin assets to start up the new company. SeconMarket was founded in 2004.

The exchange is perhaps the most important factor, seeing as it may very well reduce price volatility. By implementing spot pricing on bitcoin one to two times a day as done with gold, it will serve as a clearing company where member firms can clear everything by the end of the day’s trade. Enough cash would be kept in bitcoin by members to keep the exchange liquid.

Founder and CEO of SecondMarket Barry Silbert says he is basing it off of the early days of The IntercontinentalExchange. His goal is to have a set group of founding members by the end of March. The members are expected to include Wall Street banks and well-funded bitcoin merchants.

Individuals and firms who are not members would not be allowed to trade, but can probably do business via the member firms.

Silbert is expected to be the CEO of the new company. Shareholders will consist of member firms and current SecondMarket backers such as FirstMark Capitol and Social+Capitol Partnership.

The nameless exchange would launch as a self-regulated organization. However, Silbert realizes that its future is likely to be considered under the New York Department of Financial Services. The NYDFS had bitcoin hearings back on January 28th and 29th, where Silbert testified on the currency’s behalf.

Overshadowing Mt. Gox’s Failures

The CEO refused to comment to Fortune when asked about the Mt. Gox situation, which holds both a challenge and opportunity for Silbert’s new exchange. Mt. Gox’s failures pose as a challenge to the new exchange as it has installed distrust in some bitcoin enthusiasts. One bitcoiner, Ryan Selkis, is among those who have sold all of their bitcoins after the denial of service hack attacks. The blogger wrote:

“I do believe that this is one of the existential threats to bitcoin that many have feared and have personally sold all of my bitcoin holdings through Coinbase. I am a risk tolerant investor, but I believe this will be catastrophic for Bitcoin, both as a currency and as a fledgling industry.”

Those in the same situation as Selkis have given up on bitcoin, but SecondMarket has the opportunity to add brand new consumers into the bitcoin community. The lone failure of Mt. Gox should not hold back bitcoin’s overall potential. It should serve as a reminder that nothing is secure or absolute.

Better security precautions will have to be made by SecondMarket to assure its success. If such a catastrophe were to ever hit the bitcoin community as with Mt. Gox, there’s no telling if bitcoin would survive or not. The attack cost bitcoin enthusiasts more than $400 million. SecondMarket looks to avoid all that and remain a reliable service.

For more news on bitcoin exchanges, stay tuned to Coinreport.net.

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