E-gold founder backs new Bitcoin rival
By Stephen Foley in New York
The founder of one of the earliest virtual currencies has re-emerged with a rival to Bitcoin, more than five years after his first venture, e-gold, was shut down by the US Department of Justice.
Douglas Jackson is consulting for a membership organisation called Coeptis that hopes to launch a new version of his gold-backed currency, which attracted millions of users at its height.
The aim is to lure many of the people who have been attracted to Bitcoin and other virtual currencies this year, including businesses that are looking for a cheap way to process payments outside the traditional banking system.
Coeptis’s “global standard currency” would be fully backed by reserves of gold, held in a trust, in effect turning the precious metal into a medium of exchange.
Mr Jackson and two others pleaded guilty in July 2008 to running an illegal money transmitting business and to aiding money laundering, after federal investigators charged that “criminals of every stripe gravitated to e-gold as a place to move their money with impunity”.
Bill Cunningham, chief executive of CMO, the Florida company behind Coeptis, said the technology behind e-gold has been updated and expanded to ensure it complies with the emerging regulations covering virtual currencies. Unlike e-gold, it would verify members’ identities before allowing them to trade.
“We believe we will have better anti-money laundering procedures than any other virtual currency business and that we will compare well with the banking industry,” Mr Cunningham said.
“One of the advantages of seeing what happened to the e-gold system is we understand where we fell down before.”
CMO is planning to buy its currency system from Mr Jackson, but because of his conviction, he will not have an operational role in the company.
For several years, Mr Jackson had hoped to resurrect e-gold himself, but it became clear he would not be able to obtain the money transmitter licences required in most US states.
Mr Cunningham said CMO had begun approaching state regulators about obtaining licences itself and hopes to launch before the middle of next year.
The membership organisation’s name comes from the phrase annuit coeptis, meaning “he has favoured our undertakings”, which appears on US banknotes.
The emergence of Bitcoin has sparked a wave of experimentation in currencies and in online payments. Regulators and monetary authorities have so far been content to allow such currencies, but have pressured exchanges and brokers to introduce the same money-laundering checks as traditional financial institutions.
A European Central Bank study last year concluded virtual currencies were too small to worry about yet, but their growth should be monitored lest they start to threaten financial stability.