Unpopular opinion of the day: bitcoin is real money, and the government will regulate it and control it as such.
In my opinion, the end-game is this: bitcoin addresses are taxable, with occasional tax agents spot-checking large accumulations of bitcoin to determine if said addresses fall within their jurisdiction. Bitcoin has the unusual ability to have a very tight trace on where a given virtual coin goes: that just makes the ability to watch the money easier.
A bitcoin address is just a container for some amount of BTC. Holding an amount of currency isn't taxable, and exchanging currency often isn't taxable either. (I'm generalizing across jurisdictions, but I think what I'm saying is true for most of them.)
If you move money from one pocket to another, or one savings account to another (that you own), that's not taxable. Very many transfers between bitcoin addresses is just like that: the 'change' from a transfer goes to a new address owned by the same person.
Even when the addresses are owned by two different people, the transfer often isn't taxable. You don't pay a tax when you pay a bill, but that's a currency transfer between two parties. Even when you buy something it isn't necessarily taxable; in many jurisdictions many products are sold tax-free based on either the type of product or where the buyer and/or seller are based.
I don't think there's a way to enforce taxation on bitcoin that's not already being used to enforce cash sales taxes and cash income, despite the tracability of the coins, because the address owners may not be identifiable, and the nature of the transfer is definitely not identifiable from the blockchain.
I don't know why this should be unpopular, except among people who see the Internet as a new Wild West. The basic advantage of Bitcoin, that its controlled by an algorithm rather than a central bank, exists whether or not financial regulations apply to Bitcoin. Does it destroy the utility of a crypto currency for exchanges and processors to be required to detect e.g. money laundering?
This is why I don't believe in BTC for the long term. It's not anywhere near anonymous.
Those saying BTC has no inherent value (as opposed to gold, for example) are completely overlooking the fact that BTC is the only kind of exchange that can be used for illicit activities in a relatively untraceable manner (good luck buying stuff on SR using gold).
Unfortunately, BTC is traceable if governments decide to spend the resources monitoring transactions, and I suspect this would be the primary motivator in the demise of BTC and a replacement with a more anonymous currency - the other motivator being that there's a huge financial upside for being an inventor or early adopter of a successful cryptocurrency, as BTC shown us.
In a way, bitcoin itself is not really a currency, or money, it's more like an idea for exchanging messages. Bitcoin is really a decentralized messaging system which relies on cryptography and proof-of-work to maintain integrity. Should exchanging messages in the form of "I owe you x amount" over a p2p network be regulated or be made illegal?
However, The fact that it's used as a form of currency is just an interpretation of what Bitcoin is. There can be other interpretations for what bitcoin-type system can be used for, for example Namecoin is used for name registrations. The judge declared that bitcoin is money by making an interpretation.
If anything, Bitcoin is just software. It will be very difficult to regulate.
2. Bitcoin uses many of the standard principles of cryptography we already use in e-commerce. Banning cryptography would have enormous consequences for the economy of the internet in general.
3. Banning or regulating p2p would cause an uproar.
4. If buying bitcoins in exchange for dollars is really exchanging a string of bits for money, then if this is banned or regulated, would it also ban buying software or other digital goods for money?
5. The regulations can't be too broad, but can't be too narrow. Would the laws restrict only bitcoin as a currency or other applications of bitcoin as well? If too broad, then they will unintentionally restrict other uses of bitcoin too. If too narrow, a new system will pop up again.
I think in the short term at least, this is beneficial for Bitcoin, if it's recognized as money, and businesses and "normal" people start trusting to use it without fearing repercussions from the government, as long as they "follow the rules".
This could lead to more centralized exchanges, which again is good in the short term - the more the merrier, so people can easily get Bitcoin with their dollars.
But I think the end game for Bitcoin is to be a "real currency" that gets used everywhere and people get paid in it, to the point where a lot of people won't need to exchange to dollars necessarily.
At that point you could start living entirely with Bitcoins, and you won't need centralized services anymore either. You can just use your own local wallet, whether it's on your PC, smartphone, or NFC ring.
Tracking the transactions through services like Coinbase or Mtgox is obviously going to be trivial for the authorities, since they can just request the data tied to people's names.
But it's going to be a lot harder to see them when you're using local wallets, unless the IRS is still receiving help from the NSA at that point, because you'll probably need something like the mass surveillance system of NSA tracking every transaction from the whole Internet, and using Big Data to identify who's buying what. But hopefully by then we'll fix the NSA "problem".
Of course it is. If at any point where you think you have created a technology that will be tax free, it will only remain so until it becomes economically viable for the governments to tax it. We only have to look to Mass. software tax to realize this is the case, even when the implementation doesn't make a lick of sense.
I doubt they'd bother trying to tax transactions from one Bitcoin address to another. It'd be incredibly infeasible.
They will probably start requiring that all vendors who exchange real world currency or commodities for Bitcoin pay taxes on all such trades, however. Which isn't all that unreasonable.
Real money is a government IOU that can be redeemed to fulfill your tax obligation. Bitcoin fulfills neither of these. It's simply a receipt for wasted electricity.
Finally - New York is going after financial criminals! Oh wait a minute...
In related news last Friday the Justice Department had to admit that the success numbers Eric Holder trumpeted on mortgage fraud were massive overstated - by 80 percent. The government restated the statistics because it got caught red-handed by a couple of nosy reporters. Priorities...
Well, my own submission just got [dead]ed --no indication as to why-- but I'll paste my comment here as well:
I know very little about Bitcoin or money transmission laws. Unlike other currencies it does not seem to have fundamental dependence on any centralized arbiter, though the practicalities of large exchanges like Mt. Gox seem apparent to me. That lack of dependence on a Fed-like body appears to me like its biggest advantage, above any other potential for anonymous payment and laundering. I'd like to know what exactly is entailed in becoming compliant with money transmitting and laundering regulations and whether Bitcoin in its current form could become effectively compliant. Is that even a meaningful concept, or does the structure of Bitcoin fundamentally preclude coming into effective compliance?
Financial regulations have little do to with the Fed. They apply to transactions in money, not money itself. It doesn't matter whether the transactions are denominated in USD or Euros, and now apparently Bitcoin.
It's not meaningful to ask whether Bitcoin could become compliant. Bitcoin exchanges and processors could become compliant. This means having in place systems to detect money laundering, etc. it might be even easier in Bitcoin, given how much transaction state is stored in a distributed fashion forever.
> whether Bitcoin in its current form could become effectively compliant
Why couldn't it be? The entire transaction history of a wallet is preserved into the future. As soon as you correlate a BitCoin wallet with a person, you have their entire history with that wallet. It seems more like a government's wet dream than anything else.
The government doesn't want anything with the currency. It couldn't care less. The government is concerned with the businesses that transmit or transact the currency.
Money transmittal laws vary from state to state and country to country. The exact requirements thus depend on the very specific circumstances of the business at issue.
"I'd like to know what exactly is entailed in becoming compliant with money transmitting and laundering regulations."
This. Someone with more understanding of financial regulation, please step in and explain what it is the government would actually want from the currency. This sounds scary to some extent but there's no real reason that it needs to be. I assume it is to enforce real-world identities at the USD/BTC exchange point.
This is just the tip of the iceberg. Of course the government cares about money, and of course it wants to control the money supply. And, as a consequence, the USA will never allow any major currency inside its borders other than the US dollar.
The history of the United States is littered with the fights over who gets to determine what is money and how much of it there is: Hamilton's fight with Jefferson and Madison over the need for a central bank, Jackson during his run for the Presidency denouncing the central bank--and this becoming the main issue in the campaign, the popularity of Williams Jenning Bryan (cf. the famous "Cross of Gold" speech), etc. etc. all the way up to the horrible stagflation of the 1970s ("Whip Inflation Now!") and the recession caused by the ultimately successful efforts by Fed Chairman Paul Volcker's to end it. It is reasonable to believe--and certainly most people in the US government believe--that control of The Money is control of the economy.
Why would any successful government ever voluntarily give up that control?
I pretty much agree with what you are saying : Governments (and central banks) would never voluntarily give up the control they have now, especially when a currency is being exchanged for one they have control over.
It is also interesting because bitcoin may be influenced by governments, but not issued by them nor central banks, which is already a fundamental difference in the battles that have come before.
The amount of time/resources that will be spent to try to control something that was never in their control (like kind of along the same lines as government measures in Argentina), nor under the control of any single entity for that matter, will be extremely telling. As far as I'm concerned the writing is on the wall… what is going on now is just the ongoing manifestation of what is to come next.
Not to mention that as more bitcoins are used/accepted by people in exchange for goods/services between individuals, governments will be and are increasingly being side stepped. It will be interesting to see this dynamic unfold more in places where (local) governments are becoming insolvent.
Bitcoin is in no position to supplant the USD, EUR, JPY, GBP, RNB etc, because bitcoin operates in between them now. And as more people loose faith in their respective currencies but still want ways to exchange between other individuals for goods/services, bitcoin will increasingly operate as well in a realm of its own.
> Why would any successful government ever voluntarily give up that control?
They really can't give it up. It's the foundation of government: the ability to issue debt and place an obligation on citizens to offer their goods and services to acquire that debt to fulfill that obligation. Unless the U.S. decides to adopt debt note convertibility to bitcoins, there's really no way for bitcoins to supplant the dollar.
Looks like this might be the least of BitCoin's government problems. Check out this appropriations bill currently before congress; http://beta.congress.gov/congressional-report/113th-congress... Search for BitCoin in the text and you get the following gem...
"Money laundering.--The Committee understands that Bitcoins
and other forms of peer-to-peer digital currency are a
potential means for criminal, terrorist or other illegal
organizations and individuals to illegally launder and transfer
money. News reports indicate that Bitcoins may have been used
to help finance the flight and activity of fugitives. The
Committee directs the FBI, in consultation with the Department
and other Federal partners, to provide a briefing no later 120
days after the enactment of this Act on the nature and scale of
the risk posed by such ersatz currency, both in financing
illegal enterprises and in undermining financial institutions.
The briefing should describe the FBI efforts in the context of
a coordinated Federal response to this challenge, and identify
staffing and other resources devoted to this effort."
Talk about a prejudiced statement. Time to call your congress person.
This worries me more about other virtual currencies (eg. "game" money) than it does about Bitcoin. The last time something like this happened because of Bitcoin (FinCEN), Linden Lab forced the closure of all third-party Linden$ exchanges [1] to cover itself legally. Those were very scary times for everyone involved in Second Life.
As someone who does business in Linden$ et al, I (selfishly) wish the media hype around Bitcoin would simmer down, lest my own life become a lot more complicated. The way these government announcements always refer to cracking down on "virtual currencies" in general is very disconcerting, especially when the term is so hazily defined.
"the department says it wants to make sure Bitcoin company customers’ funds are “safe and sound,” expressing concern about consumer complaints “about how quickly virtual currency transactions are processed.”"
So, are they saying there are complaints that the transactions are processed too quickly? Because I've never had a BitCoin transaction take more than an hour or so to complete where as my regular bank routinely takes about 3 business days. Makes you wonder what their motivations are.
Explain why not a single banker has gone to prison from both the fraudulent foreclosure crisis and the 2008 wider banking crisis yet these fools all of a sudden want to regulate BTC?
Crypto-currency for NSA leaker: Snowden fund accepts Bitcoin
Published time: August 12, 2013 14:51
US fugitive Edward Snowden’s defense fund, launched recently by WikiLeaks to raise money for the legal protection of the NSA leaker, has announced it now accepts donations in virtual currency Bitcoin.
Looks like the price of Bitcoins just made a good jump at https://www.mtgox.com/ . Are speculants thinking that if the us government are geting involved it validates Bitcoin further?
possibly also something more along the lines of 'anything that keeps bitcoin in the news is good news', keeping up the influx of new people wanting to try bitcoin.
mtgox isn't an accurate measure of the real price of BitCoin right now. Since all USD withdrawals are effectively shut down the USD price on Mt. Gox is artificially high right now.
[+] [-] pnathan|12 years ago|reply
In my opinion, the end-game is this: bitcoin addresses are taxable, with occasional tax agents spot-checking large accumulations of bitcoin to determine if said addresses fall within their jurisdiction. Bitcoin has the unusual ability to have a very tight trace on where a given virtual coin goes: that just makes the ability to watch the money easier.
[+] [-] DougWebb|12 years ago|reply
If you move money from one pocket to another, or one savings account to another (that you own), that's not taxable. Very many transfers between bitcoin addresses is just like that: the 'change' from a transfer goes to a new address owned by the same person.
Even when the addresses are owned by two different people, the transfer often isn't taxable. You don't pay a tax when you pay a bill, but that's a currency transfer between two parties. Even when you buy something it isn't necessarily taxable; in many jurisdictions many products are sold tax-free based on either the type of product or where the buyer and/or seller are based.
I don't think there's a way to enforce taxation on bitcoin that's not already being used to enforce cash sales taxes and cash income, despite the tracability of the coins, because the address owners may not be identifiable, and the nature of the transfer is definitely not identifiable from the blockchain.
[+] [-] rayiner|12 years ago|reply
[+] [-] flyinglizard|12 years ago|reply
Those saying BTC has no inherent value (as opposed to gold, for example) are completely overlooking the fact that BTC is the only kind of exchange that can be used for illicit activities in a relatively untraceable manner (good luck buying stuff on SR using gold).
Unfortunately, BTC is traceable if governments decide to spend the resources monitoring transactions, and I suspect this would be the primary motivator in the demise of BTC and a replacement with a more anonymous currency - the other motivator being that there's a huge financial upside for being an inventor or early adopter of a successful cryptocurrency, as BTC shown us.
[+] [-] coinman|12 years ago|reply
However, The fact that it's used as a form of currency is just an interpretation of what Bitcoin is. There can be other interpretations for what bitcoin-type system can be used for, for example Namecoin is used for name registrations. The judge declared that bitcoin is money by making an interpretation.
If anything, Bitcoin is just software. It will be very difficult to regulate.
1. Software using encryption is protected speech (http://en.wikipedia.org/wiki/Bernstein_v._United_States). Regulating bitcoin as in bitcoin the software would be a form of censorship.
2. Bitcoin uses many of the standard principles of cryptography we already use in e-commerce. Banning cryptography would have enormous consequences for the economy of the internet in general.
3. Banning or regulating p2p would cause an uproar.
4. If buying bitcoins in exchange for dollars is really exchanging a string of bits for money, then if this is banned or regulated, would it also ban buying software or other digital goods for money?
5. The regulations can't be too broad, but can't be too narrow. Would the laws restrict only bitcoin as a currency or other applications of bitcoin as well? If too broad, then they will unintentionally restrict other uses of bitcoin too. If too narrow, a new system will pop up again.
[+] [-] nilved|12 years ago|reply
Which government?
[+] [-] mtgx|12 years ago|reply
This could lead to more centralized exchanges, which again is good in the short term - the more the merrier, so people can easily get Bitcoin with their dollars.
But I think the end game for Bitcoin is to be a "real currency" that gets used everywhere and people get paid in it, to the point where a lot of people won't need to exchange to dollars necessarily.
At that point you could start living entirely with Bitcoins, and you won't need centralized services anymore either. You can just use your own local wallet, whether it's on your PC, smartphone, or NFC ring.
Tracking the transactions through services like Coinbase or Mtgox is obviously going to be trivial for the authorities, since they can just request the data tied to people's names.
But it's going to be a lot harder to see them when you're using local wallets, unless the IRS is still receiving help from the NSA at that point, because you'll probably need something like the mass surveillance system of NSA tracking every transaction from the whole Internet, and using Big Data to identify who's buying what. But hopefully by then we'll fix the NSA "problem".
[+] [-] darkchasma|12 years ago|reply
[+] [-] meowface|12 years ago|reply
They will probably start requiring that all vendors who exchange real world currency or commodities for Bitcoin pay taxes on all such trades, however. Which isn't all that unreasonable.
[+] [-] kaonashi|12 years ago|reply
[+] [-] tudorw|12 years ago|reply
[+] [-] stfu|12 years ago|reply
In related news last Friday the Justice Department had to admit that the success numbers Eric Holder trumpeted on mortgage fraud were massive overstated - by 80 percent. The government restated the statistics because it got caught red-handed by a couple of nosy reporters. Priorities...
[1] http://www.bloomberg.com/news/2013-08-11/eric-holder-owes-th...
[+] [-] aspensmonster|12 years ago|reply
I know very little about Bitcoin or money transmission laws. Unlike other currencies it does not seem to have fundamental dependence on any centralized arbiter, though the practicalities of large exchanges like Mt. Gox seem apparent to me. That lack of dependence on a Fed-like body appears to me like its biggest advantage, above any other potential for anonymous payment and laundering. I'd like to know what exactly is entailed in becoming compliant with money transmitting and laundering regulations and whether Bitcoin in its current form could become effectively compliant. Is that even a meaningful concept, or does the structure of Bitcoin fundamentally preclude coming into effective compliance?
[dead]ed submission: https://news.ycombinator.com/item?id=6201643
[+] [-] rayiner|12 years ago|reply
It's not meaningful to ask whether Bitcoin could become compliant. Bitcoin exchanges and processors could become compliant. This means having in place systems to detect money laundering, etc. it might be even easier in Bitcoin, given how much transaction state is stored in a distributed fashion forever.
[+] [-] pyre|12 years ago|reply
Why couldn't it be? The entire transaction history of a wallet is preserved into the future. As soon as you correlate a BitCoin wallet with a person, you have their entire history with that wallet. It seems more like a government's wet dream than anything else.
[+] [-] gamblor956|12 years ago|reply
Money transmittal laws vary from state to state and country to country. The exact requirements thus depend on the very specific circumstances of the business at issue.
[+] [-] hyperplane|12 years ago|reply
This. Someone with more understanding of financial regulation, please step in and explain what it is the government would actually want from the currency. This sounds scary to some extent but there's no real reason that it needs to be. I assume it is to enforce real-world identities at the USD/BTC exchange point.
[+] [-] ganeumann|12 years ago|reply
The history of the United States is littered with the fights over who gets to determine what is money and how much of it there is: Hamilton's fight with Jefferson and Madison over the need for a central bank, Jackson during his run for the Presidency denouncing the central bank--and this becoming the main issue in the campaign, the popularity of Williams Jenning Bryan (cf. the famous "Cross of Gold" speech), etc. etc. all the way up to the horrible stagflation of the 1970s ("Whip Inflation Now!") and the recession caused by the ultimately successful efforts by Fed Chairman Paul Volcker's to end it. It is reasonable to believe--and certainly most people in the US government believe--that control of The Money is control of the economy.
Why would any successful government ever voluntarily give up that control?
[+] [-] cinquemb|12 years ago|reply
It is also interesting because bitcoin may be influenced by governments, but not issued by them nor central banks, which is already a fundamental difference in the battles that have come before.
The amount of time/resources that will be spent to try to control something that was never in their control (like kind of along the same lines as government measures in Argentina), nor under the control of any single entity for that matter, will be extremely telling. As far as I'm concerned the writing is on the wall… what is going on now is just the ongoing manifestation of what is to come next.
Not to mention that as more bitcoins are used/accepted by people in exchange for goods/services between individuals, governments will be and are increasingly being side stepped. It will be interesting to see this dynamic unfold more in places where (local) governments are becoming insolvent.
Bitcoin is in no position to supplant the USD, EUR, JPY, GBP, RNB etc, because bitcoin operates in between them now. And as more people loose faith in their respective currencies but still want ways to exchange between other individuals for goods/services, bitcoin will increasingly operate as well in a realm of its own.
[+] [-] kaonashi|12 years ago|reply
They really can't give it up. It's the foundation of government: the ability to issue debt and place an obligation on citizens to offer their goods and services to acquire that debt to fulfill that obligation. Unless the U.S. decides to adopt debt note convertibility to bitcoins, there's really no way for bitcoins to supplant the dollar.
[+] [-] pmorici|12 years ago|reply
"Money laundering.--The Committee understands that Bitcoins and other forms of peer-to-peer digital currency are a potential means for criminal, terrorist or other illegal organizations and individuals to illegally launder and transfer money. News reports indicate that Bitcoins may have been used to help finance the flight and activity of fugitives. The Committee directs the FBI, in consultation with the Department and other Federal partners, to provide a briefing no later 120 days after the enactment of this Act on the nature and scale of the risk posed by such ersatz currency, both in financing illegal enterprises and in undermining financial institutions. The briefing should describe the FBI efforts in the context of a coordinated Federal response to this challenge, and identify staffing and other resources devoted to this effort."
Talk about a prejudiced statement. Time to call your congress person.
[+] [-] mintplant|12 years ago|reply
As someone who does business in Linden$ et al, I (selfishly) wish the media hype around Bitcoin would simmer down, lest my own life become a lot more complicated. The way these government announcements always refer to cracking down on "virtual currencies" in general is very disconcerting, especially when the term is so hazily defined.
[1] http://blog.nalates.net/2013/05/08/end-of-linden-exchanges/
[+] [-] pmorici|12 years ago|reply
So, are they saying there are complaints that the transactions are processed too quickly? Because I've never had a BitCoin transaction take more than an hour or so to complete where as my regular bank routinely takes about 3 business days. Makes you wonder what their motivations are.
[+] [-] samstave|12 years ago|reply
They can't even regulate the US dollar.
[+] [-] e3pi|12 years ago|reply
Crypto-currency for NSA leaker: Snowden fund accepts Bitcoin
Published time: August 12, 2013 14:51
US fugitive Edward Snowden’s defense fund, launched recently by WikiLeaks to raise money for the legal protection of the NSA leaker, has announced it now accepts donations in virtual currency Bitcoin.
http://rt.com/news/bitcoin-snowden-fund-wikileaks-384/
[+] [-] saltyknuckles|12 years ago|reply
[+] [-] nullc|12 years ago|reply
[+] [-] runarb|12 years ago|reply
Edit: Screenshot of the jump: http://i.imgur.com/G5Dk7Nh.png
[+] [-] phreeza|12 years ago|reply
[+] [-] pmorici|12 years ago|reply
[+] [-] drcode|12 years ago|reply
[+] [-] marshallford|12 years ago|reply
[+] [-] cperciva|12 years ago|reply
[+] [-] wmf|12 years ago|reply
[+] [-] ducklamp|12 years ago|reply
[+] [-] bpd1069|12 years ago|reply
Is this not a real and probably outcome?
[+] [-] waterlesscloud|12 years ago|reply
[+] [-] eddywebs|12 years ago|reply
[+] [-] JasonTodd|12 years ago|reply
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