Bitcoins

brendon

JohnJLewis wrote: »

there are lots of competitors now, but I am waiting for a backed version of crypto.

A backed version of crypto sort of defeats the purpose.

JohnJLewis

brendon wrote: »

A backed version of crypto sort of defeats the purpose.

An unbacked currency of any kind sort of defeats its purpose.

bowlhead99

The draft version of the first regulation of crypto / 'virtual currency' providers, which New York have issued for industry consultation, is going to require the people holding (e.g.) bitcoins for their customers to actually have the bitcoins to support the customers' accounts ; there had been a fear that they might need cold hard cash to support the customers' accounts to prevent another mt Gox, but that would have probably been unworkable.

Ultimately a gold-or-silver-or-unobtanium-backed crypto currency does sound like it would kind of defeat the point; who is going to back it and how and for what reward?

The new developments in terms of government seeking to embrace and regulate are interesting - they obviously can't ignore it. I can see that a large part of the user base of crypto will not want regulation everywhere and the same sort of money-laundering regs and monitoring that they get when they are dealing with 'normal' currency in bank accounts and exchange bureaux. However, if they want to reliably be able to use their cash out in the real world rather than exclusively 'underground' - and by real world I don't just mean be able to make novelty purchases at burger vans which are trying to make sensational headlines - then they will need to accept the cost of regulation to achieve mainstream acceptance.

Some interesting observations on the current draft regulations for virtual currency regulations which are out for comment, in this piece by SRZ. As they say, it's a first-of-its-kind proposal ; will be interesting to see what feedback comes in over the next few weeks and where it goes next.

JohnRo

The odd thing is that a crypto-currency like bitcoin doesn't need regulating in the way traditional banking and fiat money does. There is no requirement whatsoever for any oversight, the democratic free market works, crypto currency isn't fundamentally fraudulent, primarily because the opportunities and incentives to commit fraud with the currency itself simply don't exist. No one has control, no one can manipulate anything, within the context of the protocol and how it works.

I suspect a great deal of this regulatory interest is being driven by organisations and government agencies desperately seeking ways in which they might create some of those opportunities and incentives (that don't exist) in order to at least capture, if not ultimately try and control, what is at this point universally democratic money regulated by the free market.

I'm sure there are already mountains of regulation and red tape that could easily be applied and imposed on those choosing to act as agents and brokers in crypto-currency, which is clearly the area where the incentives and opportunities to act fraudulently do exist, in much the same way the privileged money printing masters of the universe do in the banking industry, using fiat currencies, with government approval.

Everything is about power and control. Bitcoin, as the typical example, is simply saying to these people, as it is to anyone and everyone else, by all means participate but don't expect privileged access.

That's the problem in a nutshell for those who want to "regulate" imho

grifferz

bowlhead99 wrote: »

However, if they want to reliably be able to use their cash out in the real world rather than exclusively 'underground' - and by real world I don't just mean be able to make novelty purchases at burger vans which are trying to make sensational headlines - then they will need to accept the cost of regulation to achieve mainstream acceptance.

Dell seem to have managed to take an order in bitcoins worth $50k without accepting government regulation.

https://twitter.com/MichaelDell/statuses/498172968124432384

Overstock seem to have managed to put 4 cents onto their stock price through accepting Bitcoin, without also accepting government regulation.

http://www.paymenteye.com/2014/08/14/overstock-com-averaging-15000-a-day-in-bitcoin-sales/

Are these not real enough for you?

I think a distinction has to be made between the simple use of cryptocurrency (i.e. buying things), and the speculative trade in them, including currency exchange.

The majority of problems to date stem from organisations that are ill-equipped to hold customer funds playing at being banks, lenders and currency exchanges.

That doesn't really apply to when a business simply sells products and services paid for in cryptocurrency, and there is a parallel split in the fiat currency world between simple suppliers and the financial sector.

I would support the idea of companies that are trying to be banks, lenders and currency exchanges for cryptocurrency being regulated in the same way that similar fiat institutions are, but at the same time we need to recognise that development of cryptocurrency financial instruments is still taking place and further advancements may actually make these concepts obsolete.

For example, you can use a blockchain to prove you own a specific amount of something, without having to give that something to another entity. You can also use a blockchain to execute a conditional contract: where you agree to pay something to someone as long some other contract executes. In theory this means that it should be possible to exchange one amount of currency for another without any party having to put any of their funds out of their control at any time.

If that came to pass, would it be correct to legislate that the same way as you would a company that must hold vast sums of client money in order to facilitate trades between clients?

Marazan

grifferz wrote: »

Dell seem to have managed to take an order in bitcoins worth $50k without accepting government regulation.

https://twitter.com/MichaelDell/statuses/498172968124432384

Overstock seem to have managed to put 4 cents onto their stock price through accepting Bitcoin, without also accepting government regulation.

http://www.paymenteye.com/2014/08/14/overstock-com-averaging-15000-a-day-in-bitcoin-sales/

Are these not real enough

Neither Dell nor Overstock accepted any Bitcoin. They were paid in dollars.

Nanpy

I find BitCoin endlessly fascinating.

I was listening to a Planet Money podcast about the $100 bill. The Fed suspected that most hundred dollar bills were in circulation outside of the US. They eventually estimated that about 80% of them were outside the country and while some were used as a hedge against bankrupt local currencies, much the same way BTC has become relatively popular in default-ridden Argentina, the vast majority are hoarded by criminals.

So stopping printing the $100 bill would make life harder for organised crime while having little to no effect upon ordinary people who rarely handle them, but the Fed is unlikely to stop printing them because they profit by it, regardless of where the profit comes from.

So if anyone at the US Fed or wider Government ever feels threatened by BTC don't expect any philosophical or practical or, indeed, moral, judgement on its merits, they'll criminalise it, or regulate it to its knees or, or simply supplant it with their own crypto-currency.

Similarly if there's ever an issue with the world running out of gold or silver, which there won't be, then Government will make private ownership of physical gold and silver beyond a certain point illegal, as it has done in the past, and they'll seize it. And it won't even create a ripple. By the time it happens the public would be clamouring to know why it wasn't done earlier.

Ironically BTC was created to prove the validity of a system of currency that wasn't backed by a bank, and by extension a Government, but if it ever achieves anything approaching mainstream acceptance it'll be destroyed by those same monolithic institutions.

None of which is to say that BTC isn't potentially a great "investment", it just might not be a legal one forever. And, obviously, if you're calling a currency an investment it's probably already failing as a currency.

JohnRo

You make some fair points nanpy, however...

Consider this, Bitcoin is a currency without an owner, a border or a state, what the US emperor says doesn't necessarily affect the rest of the world even if the MSM would have you think otherwise, it certainly doesn't affect the bitcoin protocol or those individuals who freely choose to use it.

Germany has already ruled bitcoin cryto currency as legal private money, others will follow.

By contrast Thailand was being trumpeted by the hysterical MSM for banning it, which turned out in the end to be no such thing. The central bank there was merely warning people against using it as a currency, not that it would stop people there using it. Similar stories were splashed across headlines about China.

The bottom line is Governments, acting for the interests of the citizens they represent (in theory), need to extract their cut from transactions and profits within an economy to maintain a nation.

Unfortunately they also need to keep themselves in the manner to which they're comfortably accustomed. To protect the fraudulent banking system that feeds them and in too many cases prosecute wars no one but the psychotic want, alongside wasting truly vast sums on various make work schemes.

It will be very interesting to see how the "democratic" governments of the "free" world manage to frame a coherent argument outlawing truly democratic free market money.

grifferz

Marazan wrote: »

Neither Dell nor Overstock accepted any Bitcoin. They were paid in dollars.

Can you elaborate? Is this because they use a payment processor? If so then I do not feel it's a useful distinction.

Lansdowne

Marazan wrote: »

Neither Dell nor Overstock accepted any Bitcoin. They were paid in dollars.

This point is absolutely at the heart of defining what Bitcoin is. For a company to announce "we now accept Bitcoin" is no different from their saying "we now accept Paypal". Or for a corner shop 25 years ago announcing they will now take credit cards. Both systems cope invisibly with currency conversion so the payer and payee each get the transaction recorded in their own money.

It just means Dell is prepared to take payment via a trendy new payment method, to marginally increase their business and at the same time increase their street cred. But the amount they agreed to accept was still defined in USD because that is the way they value their products.

So in this context at least, Bitcoin is acting as a payment intermediary not as a currency. And, by the way, there is nothing in either the Dell or Overstock links to say the transactions were unregulated. They will be regulated in the same way (presumably by US and state authorities) whatever payment method is used.