Bitcoin services startup Vogogo is closing its cryptocurrency-focused payment processing service next month after it failed to gain traction, a move that comes amid the exits of several executives and reports that at least some bitcoin services will be affected in the near-term.

Announced on 5th July, the move will see Vogogo shutting down its payments service after it completed selling its risk management business. Those two business lines were major elements of Vogogo, which raised $8.5m in venture funding in August 2014 before going public last year.

The closure is notable given the relatively small size of the country's bitcoin industry and Vogogo's position as a visible service provider in Canada.

One bitcoin exchange, Coinbase, which used Vogogo as a payments processor for the Canadian market, has been affected by the shutdown, telling customers in that country that it won't be able to offer support after the end of this month.

Other exchanges that operate in Canada, most notably Kraken and QuadrigaX, say they aren't affected by the closure.

Vogogo has been searching for new directions – and revenue – since April, public statements show, when the company announced that its board of directors was looking for alternatives. At the time, the company said it would downsize as part of a cost-cutting plan.

CFO Tom Wenz said in an interview that other assets, including an Electronic Money Institution license obtained last fall, are being looked at as revenue generators, though he said that the company wasn’t going out of business and that it has “plenty of cash in the bank”.

He said that the payment business wasn’t making enough money to keep it afloat, and that ultimately, the company opted, in a decision he said was made Monday, to close it down.

Wenz told CoinDesk:

“The payment business, there wasn’t a lot of interest in it. There wasn’t a lot of revenue or customers there. So, the simplest way to preserve cash value to the organization was just to shut that piece down.”

Impact on bitcoin services

In an email sent to Canada-based customers and later circulated via social media, exchange service Coinbase said that it wouldn’t be able to provide electronic funds transfers or Interac transfers for those clients, or store funds denominated in Canadian dollars.

Those funds need to be withdrawn by 29th July, the email said.

Coinbase later told CoinDesk that it was working to restore service to Canadian customers in light of the loss of access to Vogogo’s processing service.

“We will adjust to this change as quickly as possible and hope to promptly restore services to our Canadian customers,” the company said.

Bitcoin service Celery said that about 10% of its volume comes from Canada since its integration with Vogogo in 2015, and that it hadn’t yet spoken to customers about alternatives. Founder Ilya Subkhankulov suggested that alternatives within Canada for bitcoin companies might be few and far between given the existing financial climate.

“The Canadian payment processing market is especially hard to obtain access to for digital currency transaction processing because only a handful of banks have a tight grip on the payment networks," he said.

Kraken CEO Jesse Powell said that while Vogogo was the firm’s main processing service for Canadian dollars, he said the exchange had alternatives to turn to following the closure.

“At the moment, we don't expect our clients to be affected,” Powell told CoinDesk.

Multiple factors

Wenz framed the decision to close the processing unit, as well as the company’s broader strategic shift, as an effort to pivot away from a business model that wasn’t working.

The past several months has seen significant change within the company. In May, the board of directors created an internal group to consider new directions. Less than a month later, Vogogo announced that president and CEO Geoff Gordon would resign effective 24th June. He is set to resign from the company’s board on 10th July.

In 16th July, Vogogo announced that chief revenue officer Rodney Thompson resign as chief revenue officer. Wenz himself is set to shift to a part-time basis at the end of this month.

Beyond the revenue and market traction problems, Wenz pointed to the company’s public stock as a factor. Vogogo’s stock price traded at nearly C$2 last July, according to data from Bloomberg, before suffering a 12-month decline of more than 90% that has left it trading at around 12 Canadian cents.

“The current business model wasn’t being supported and that was reflected in the stock price,” he said. “Instead of burning more capital on a business that wasn’t getting support, we’re looking at other options.”

Image via Shutterstock

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The UK government’s Department of Work and Pensions is spearheading an experiment in which a blockchain system is used to distribute welfare payments.

The department has partnered with UK-based banking institution Barclays, the UK arm of German energy firm RWE, fintech startup GovCoin and University College London.

The project was unveiled during a payments conference earlier this month during a talk given by David Freur, state minister for welfare reform. As quoted by regulatory data provider PaymentsCompliance, Freud suggested that the project's success or failure would be determined by the impact on those receiving welfare payments.

Freud reportedly told attendees:

"We started a small trial in the north west, designed to see if we can send welfare payments using this technology, and more importantly, to see if people reliant on welfare payments would benefit from this approach."

The system is said to entail a mobile app and a blockchain system that records payments sent or received by welfare recipients.

Notably, the trial was foreshadowed in a major report released by the UK Government Office for Science in January, which called for the government to conduct experiments using the technology.

The report directly refers to a hypothetical "system to manage welfare support payments for the Department for Work and Pensions", going on to highlight its potential security needs should it be built.

Image via Shutterstock

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Software development firm Infoteria has revealed it is working with Myanmar microfinance firm BC Finance to streamline its financial transactions using blockchain technology.

The Japan-based company conducted the tests on BC’s computer system to see if a low-cost alternative to the traditional financial infrastructure could also be more reliable, according to a report today in Nikkei Asian Review.

From the report:

"The successful results proved that Myanmar's cloud-computing environment could handle the blockchain technology."

According to the report, Myanmar’s nascent financial infrastructure could make it an ideal location for companies to begin building and using blockchain systems.

As that system scales, Infoteria president Yoichiro Hiroan told the Review that blockchain can be implemented at less than one-tenth the cost of a traditional database, and that the company plans to have a commercial implementation of the tech in less than two years.

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Bitcoin remittance startup Freemit is officially closing its doors, two years after it first began an effort to build a remittance service.

CEO John Biggs, a former editor for TechCrunch, said that the decision to shutter the operation came after a "perfect storm" of a lack of a viable product to show investors and, consequently, the inability to raise funds.

Though Biggs said he’s not disillusioned with the technology as a result of the experience, he warned that he believes bitcoin entrepreneurs are giving up control of a technology meant to empower consumers to large banks.

Biggs told CoinDesk:

"You don’t want to start a bitcoin company right now. There’s a short window between when banks are going to start taking over and when guys with new functionality are going to be able to contribute."

Founded in December 2014, Freemit was originally designed to be an optimized exchange, but after raising $150,000 from angel investors, the startup pivoted to peer-to-peer payments.

Freemit, Biggs said, employed as many as 10 people and went through two development teams, however, with over 8,000 beta users, it was still unable to deliver functioning tech.

Biggs went into additional detail about the company's difficulties in a blog post published earlier today.

In a series of articles published over the past few months, Biggs had taken aim at what he describes as bitcoin entrepreneurs ceding control of the technology's future to existing financial intuitions.

According to Biggs, banks and financial institutions are making more progress than bitcoin entrepreneurs because of "a lack of telling a sane and understandable story".

Going forward, Biggs says he plans to continue contributing to TechCrunch, but hasn’t made any concrete plans for the future. While he says he hasn't given up on his desire to help develop technologies around bitcoin, he’s also reluctant to start another company.

Biggs explained:

"What’s going to happen is they’re going to get eaten up. The small players are going to fall by the wayside and the big players are going to be assimilated."

Freemit image via Facebook

FreemitRemittances

Bitcoin exchange provider Coinbase has raised $10.5m in new funding from investors including Bank of Tokyo Mitsubishi UFJ, Mitsubishi UFJ Capital and Silicon Valley VC firm Sozo Ventures.

The investment coincides with the announcement that MUFG subsidiary Bank of Tokyo Mitsubishi UFJ has entered into a strategic partnership with Coinbase, and follows rumors the San Francisco startup had been working on a proof-of-concept with an unknown Asian bank.

In statements, Coinbase said that the partnership will help it bridge the gap between blockchains and the traditional financial industry.

Coinbase said:

"Partnering with leading global financial institutions is a key part of our strategy and we are thrilled to be working with BTMU."

With the news, Coinbase said it would seek to launch services in Japan, a move that would make it the second Asian market served by the firm.

Coinbase’s all-time funding total now stands at $116.7m, a figure that puts it behind bitcoin payment services provider Circle, which has raised $136m in four public funding rounds.

Investors in previous Coinbase rounds include the New York Stock Exchange (NYSE), BBVA Ventures and QueensBridge Venture Partners.

Disclaimer: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase.

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2016 has become a year of revival for the bitcoin price.

At a press time total of $640, the price of bitcoin is up nearly 50% from its opening on 1st January. While macroeconomic factors including uncertainty in China and Europe have arguably played a role, there may be no bigger influence than the upcoming halving, a rare network event that will occur this weekend.

While nobody knows for certain how the long-awaited reduction in rewards to miners will affect the network, market experts offered a range of predictions when speaking with CoinDesk on how it may impact the price of bitcoin.

Some forecasted the event would push prices higher, while others expected it to have a depressing effect or no impact at all on bitcoin prices. Market experts also offered a range of predictions for how the halving will affect bitcoin volatility.

For background, bitcoin miners use high-power computers to compete to add blocks of transaction data to the bitcoin blockchain. Every time a miner successfully completes a new block and provides a proof of work, that miner receives a reward. This reward, which was originally 50 BTC, is expected to drop to 12.5 BTC on or around 9th July.

Over time, this reward will continue to "halve", until the network creates 21 million bitcoins, the current cap on how many will be issued.

Market observers have been aware of the upcoming halving for years, a development recognized by Petar Zivkovski, director of operations for bitcoin trading platform Whaleclub.

In his words, anticipation for the event has been "building up over the past few months", which means investors betting on certain expectations will soon meet reality, and readjust positions accordingly.

Price rally predictions

Some market experts have predicted the digital currency will keep rising after the halving.

Among those is Joe Lee, founder of derivatives trading platform Magnr, who told CoinDesk he expects prices to move higher in the days following this event. However, he added that "in the short term", the halving will not impact price significantly.

Investor and entrepreneur Vinny Lingham also expects a price rally should the number of bitcoin owners willing to sell decline. Under these conditions, bitcoin prices should enjoy "slow but steady increases," he said.

In addition, a short squeeze could materialize as a result of some miners coming under pressure, forcing the price to move up rapidly.

Lee told CoinDesk he foresees some "short-term volatility led by speculative trading activity", but emphasized that this development will have "a limited effect on price".

Lingham, however, stressed that "bitcoin is always volatile", adding:

"The biggest mistake we can all make it is to believe that the price will always rise even when confronted with changes in the macro, political and technology landscapes."

Potential price declines

Lingham noted that while everything might be fine after the halving, the event could trigger a number of unforeseen possibilities, the impact of which is impossible to know in advance.

The event has "technical and economic repercussions" that market analysts have not incorporated into bitcoin’s price, he contends.

Depending on how things turn out following the halving, Lingham projects bitcoin could enter a "longer term (3-6 month) consolidation phase" following halving day where it seeks "a new price floor with high volatility" that he guesses could be "in the $400-$500 range".

While Lingham identified unforeseen events as potentially driving bitcoin prices lower, Zivkovski noted that the excitement the market has built up for the halving won’t last forever.

"We expect this buy pressure to subside in the weeks following the halving, culminating in large profit-taking events for early accumulators ($200-$300 buyers)," he said.

This profit taking will push bitcoin prices "down to historical support levels," he predicted. Though, he cautioned he lacks the data for this belief.

Rik Willard, founder and managing director of Agentic Group LLC, revealed that he also foresaw a decline in bitcoin prices, although he expected this drop to be temporary.

"I think that, like a stock split, we will see a natural initial devaluation per bitcoin,” he told CoinDesk, adding:

"That said, I expect the price to rise almost to current levels rather more quickly than if it were an actual stock, based on extreme bullishness from the sector."

Based around this expectation, Willard indicated he did not anticipate significant volatility resulting from the halving event. Zivkovski provided a similar point of view, emphasizing that volatility "was not substantial" the last time a halving took place.

"We expect volatility to be relatively normal this time around as well, at and around the halving, because the event is already well-priced in," he said.

Maintaining the status quo

While the aforementioned experts spoke to rallies and declines, Arthur Hayes, co-founder and CEO of bitcoin leverage trading platform BitMEX, asserted that the halving will have no impact on the market.

"My baseline projection is that the halving will have zero effect on the bitcoin price," he told CoinDesk. "The reduction of bitcoin inflation is such a small amount compared with averaged daily trading volume that is a well hyped distraction."

He elaborated by stating that if bitcoin’s price were still between $300 and $400, the “halving might have a significant impact on whether miners continued operations", but that at $600 to $700, he doesn't believe it will be a factor.

Daniel Masters, who runs the Global Advisors Bitcoin Investment Fund, told CoinDesk that he believes the halving won’t have much impact on bitcoin prices, at least initially.

While some might look to halving events with anxiety, speculating that it may make it economically unfeasible for some miners to stay in business, Lee asserted that many in the bitcoin community take a different tack.

"The community views halving events as a sign of network maturity," he told CoinDesk, adding:

"The halving represents a huge milestone for the field of computer science as it represents the world’s largest and most powerful (cryptographically secure) distributed computing project."

Charles L. Bovaird II is a financial writer and consultant with strong knowledge of securities markets and investing concepts.

Follow Charles Bovaird on Twitter here.

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