Bitcoin Forum

Their main concern, which is mentioned in 3 different chapters, is that if there are more conventional banking fuck-ups, Bitcoin can gain traction fast, if supported by mass media, and be a threat to the trust in established financial institutions.

Wow, reading it as I type...

And it's a valid fear. Fuck up enough times, and people sho'nuff gonna drop you like a hot rock.

we should send this to the press so next time banks fuck up, the press know what to write about, hehehehe.

Virtual currencies resemble money and necessarily come with their own dedicated retail payment
systems; these two aspects are covered by the term “virtual currency scheme”. Virtual currency
schemes are relevant in several areas of the financial system and are therefore of interest to central
banks. Virtual currency schemes have been subject to increased press coverage, even being featured
in respectable media publications. The ECB has been contacted a number of times in recent months
by academics, journalists and concerned citizens, who want to know its view or want to warn the
institution about potential problems with virtual currency schemes. In this context, it was considered
advisable to strive for a common understanding and, thereafter, to formulate a coordinated response.
This explains the ECB’s interest in carrying out a more detailed analysis, especially in view of its
role as a catalyst for payment systems and its oversight role. The present report is the result of this
analysis. It is a first attempt to provide the basis for a discussion on virtual currency schemes.

Money is a social institution: a tool created and marked by society’s evolution, which has exhibited
a great capacity to evolve and adapt to the character of the times. It is not surprising that money has
been affected by recent technological developments and especially by the widespread use of the
internet.

(emphasis mine.)

This sounds pretty prudent and promising to me.

and later:


interesting, no FUD so far or misinformation or misunderstandings, just facts I can agree with... this is weird, I'll keep reading.

We could use this to help define our terms as we continue to refign how we communicate what bitcoin is to a non-users.

I've hear people refer to bitcoin as electronic money, which according to this paper would refer to a unit of account that has a physical counterpart with legal tender status, ie western union.


Virtual currency schemes differ from electronic money schemes insofar as the currency being used as the unit of account has no physical counterpart with legal tender status.

hazek

[snip]This also means that since the only difference between bitcoins and dollars is that bitcoins' physical counterparts aren't legal tender that they admit dollars, euros and the rest of the fiat currencies are essentially virtual currencies.[/snip]

I don't follow.

We could use this to help define our terms as we continue to refign how we communicate what bitcoin is to a non-users.

I've hear people refer to bitcoin as electronic money, which according to this paper would refer to a unit of account that has a physical counterpart with legal tender status, ie western union.


Virtual currency schemes differ from electronic money schemes insofar as the currency being used as the unit of account has no physical counterpart with legal tender status.

In electronic money schemes the link between the electronic money and the traditional money
format is preserved and has a legal foundation, as the stored funds are expressed in the same unit
of account (e.g. US dollars, euro, etc.). In virtual currency schemes the unit of account is changed
into a virtual one (e.g. Linden Dollars, Bitcoins).

Can't agree more, strange...

bitcoins - virtual currency with physical counterparts (Casascius, bitbills, ect..)

euros - "electronic" currency with physical counterparts that are legal tender

Seems to me, there is only one difference between these two currencies and it's not that one is a virtual currency and the other isn't.

As much as it can be frustrating to deal with bureaucracy in the EU, Canada, etc. - it is refreshing to see disinterested, non-corrupted bureaucrats do their jobs well, and provide service to the paying public. This study is a good example.

These schemes can have positive aspects if they
contribute to financial innovation and provide additional payment alternatives to consumers.
However, it is clear that they can also pose risks for their users, especially in view of the current
lack of regulation.
In essence, virtual currencies act as a medium of exchange and as a unit of account within a
particular virtual community. The question then arises as to whether they also fulfil the “store of
value” function in terms of being reliable and safe, or whether they pose a risk not only for their
users but also the wider economy.

bitcoins - virtual currency with physical counterparts (Casascius, bitbills, ect..)

euros - "electronic" currency with physical counterparts that are legal tender

Seems to me, there is only one difference between these two currencies and it's not that one is a virtual currency and the other isn't.

no one is legal tender and the other is not, yes?

In electronic money schemes the link between the electronic money and the traditional money
format is preserved and has a legal foundation,[...]

Yes, this actually is a really good report.


What is the difference between an electronic and a virtual currency...  ???

Yes, this actually is a really good report.


What is the difference between an electronic and a virtual currency...  ???

3.1.4 Security inci dents an d ne gative press
From time to time, Bitcoin is surrounded by controversy. Sometimes it is linked to its potential for
becoming a suitable monetary alternative for drug dealing and money laundering, as a result of the
high degree of anonymity.9 On other occasions, users have claimed to have suffered a substantial
theft of Bitcoins through a Trojan that gained access to their computer.10 The Electronic Frontier
Foundation, which is an organisation that seeks to defend freedom in the digital world, decided not
to accept donations in Bitcoins anymore. Among the reasons given, they considered that “Bitcoin
raises untested legal concerns related to securities law, the Stamp Payment Act, tax evasion,
consumer protection and money laundering, among others”.

However, practically identical problems can also occur when using cash, thus Bitcoin can be
considered to be another variety of cash, i.e. digital cash. Cash can be used for drug dealing and
money laundering too; cash can also be stolen, not from a digital wallet, but from a physical one; and
cash can also be used for tax evasion purposes. The question is not so much related to the format of
money as such (physical or digital), but rather to the use people make of it. Nevertheless, if the use of
digital money in itself complicates investigations and law enforcement, special requirements may be
needed. Therefore, the real dimension of all these controversies still needs to be further analysed.

hazek

I still don't think you point, while an important one, is clear....

NONE. That's my point, there is no difference. Their precious euros and dollars are just as virtual as our bitcoins, the only difference being that the physical counterparts to their virtual currency are legal tender.  :D

 I think that is the salient point here.

Economic foundations of Bitcoin
The theoretical roots of Bitcoin can be found in the Austrian school of economics and its
criticism of the current fiat money system and interventions undertaken by governments and
other agencies, which, in their view, result in exacerbated business cycles and massive inflation.

It's not, it's that both, functionally, are a virtual currency.

wow!

Ok.  Define virtual currency then make your point again.  I think you are clouding the issue.  Hopefully your explanation will help clear that up.

Thanks.

Virtual currency schemes differ from electronic money schemes insofar as the currency being used as the unit of account has no physical counterpart with legal tender status.

 Dollars and Euro's have some physical counterpart with legal tenter status. 

You are defining "Virtual"

I'm defining "Virtual Currency"

While 97% of fiat may be "virtual" ie is does not exist in the real world, it is not a "virtual currency" as is has legal tender status.

Bitcoin is a true virtual currency.

Well then I disagree with your definition of "virtual", I don't think having a physical counterpart that has a legal tender status vs having a physical counterpart that does not makes the later a virtual but not the former.

I wonder who raised it? Visa & Mastercard most probably.

The Commission is the highest authority in the EU. They make the rules, that all member states are required to implement. They tend to be lobbied very hard by mega corporations, like Visa.

An interesting and mostly surprisingly objective paper. Almost unbelievable, this, coming from banksters.

In these schemes, the settlement asset is the virtual currency, and therefore the finality and
irrevocability of payments cannot be ensured. Only central bank money can do so, because central
banks present no default risk and act as lender of last resort to the member of the system in order to
stop any possible chain reaction resulting from payment incidents or unforeseeable liquidity
shortages.10 Virtual currencies cannot therefore be considered to be safe money, since the likelihood
of the asset retaining its value for the holder, and hence its acceptability to others as a means of
payment cannot be ensured. It simply relies on the creditworthiness of the issuer of the
settlement asset. The level of safety is clearly below that of commercial bank money, as commercial
banks are subject to prudential requirements and are supervised in order to reduce the likelihood of
default, thereby improving the safety of claims on these institutions.

An interesting and mostly surprisingly objective paper. Almost unbelievable, this, coming from banksters.

Perhaps, those banksters are not so evil you thought?

What I got from this paper is that bicoin is money, currency, and therefore I can setup shop and sell it without charging 23% VAT to my customers.

What I got from this paper is that bicoin is money, currency, and therefore I can setup shop and sell it without charging 23% VAT to my customers.

is this the same as saying: electronic money has a fixed exchange rate to fiat currency while virtual currency floats?

"–– could have a negative impact on the reputation of central banks, assuming the use of such systems
grows considerably and in the event that an incident attracts press coverage, since the public may
perceive the incident as being caused, in part, by a central bank not doing its job properly"

 ;D ;D

So they do wonder if they are doing a good job ...

virtual currency schemes:
...
do indeed fall within central banks’ responsibility as a result of characteristics shared with payment systems, which give rise to the need for at least an examination of developments and the provision of an initial assessment.

Although in practical terms virtual currency schemes are only an evolution, from a conceptual
point of view they do present substantial changes when compared to real currencies and payment
systems. Firstly, conventional actors like financial institutions, clearing houses and central banks
are absent from these schemes.

What I got from this paper is that bicoin is money, currency, and therefore I can setup shop and sell it without charging 23% VAT to my customers.

The paper says very little about how virtual currencies should be treated legally, it only describes how they work and relate to the real world economy.

Yes, it does say the markets are unregulated, but it calls it currency and cash throughout the paper...
Draw your own conclusions.

No thanks, that is too risky when we're talking about legal issues.

What are you doing here, then?
I wouldn't touch Bitcoin with a ten foot pole if I was you... ::)