Can SecondMarket Institutionalize Bitcoin?

New York trading firm SecondMarket Inc. is accelerating plans to launch a regulated bitcoin exchange for the public.

Bitcoin, a decentralized digital currency, has been widely criticized for facilitating illegal activities because it enables anonymous transactions. The currency received a major blow in February when Mt. Gox—once the world’s biggest bitcoin exchange—abruptly collapsed.

However, SecondMarket could enable bitcoin to withstand intensive controversy. Established in 2004, the firm has a successful track record of facilitating investments in companies before they became publicly traded, including Facebook and Twitter. SecondMarket’s strong relationships with major banks also make it a credible backer of bitcoin.

The company has already established the Bitcoin Investment Trust, which buys and sells Bitcoins for investors with more than $1 million in assets and annual incomes of more than $200,000. Now, SecondMarket wants to open the fund to the broader public as early as the fourth quarter. It is seeking approval from the OTC Markets Group and the Financial Industry Regulatory Authority to list the fund on an electronic marketplace operated by OTC.

SecondMarket CEO Barry Silbert is a strong proponent of bitcoin. He believes the currency can help both consumers and companies, pointing to bank fees that international money transfers incur with banks.

“Money is digital, it shouldn’t take three to five days, and you shouldn’t have to pay $25 to send $50 to your family in the Philippines,” Silbert said.

Other funds are also vying to develop the first regulated bitcoin exchange, including the Winklevoss Investment Trust. Its sponsors, Cameron and Tyler Winklevoss, are famous for their legal battle against Facebook CEO Mark Zuckerberg.

Increasing interest by prominent investors suggests bitcoin’s reputation is gradually improving.

Recent rulings have given financial players large and small, some clarity and guidance regarding bitcoin and digital currencies.

According to Cameron Winklevoss, several exchanges picked up the slack after Mt. Gox’s closing and the market price showed remarkable resistance. In an email to the New York Times, he said, “Mt. Gox is in the past, and the brightest minds in the room are hard at work building a responsible and secure future.”