I forgot to explain the dark conspiracy method in common law systems. I guess this has been done before:

Pre arrange a show trial between cooperating prosecutor and defendant: both believe in a certain system (in our case bitcoin) and express they support it because of certain advantages, the whole precedent is fabricated towards a result (i.e. at first one party defends his stance and towards the end still defends it but not as good and has prearranged gaping holes in reasoning) such that the judge will probably rule in favor of the planned winner. Since it was a precedent it is now codified in the common law.

I would not be surprised if this loophole which stems from giving judges who can not represent a whole society law making power.

I dont think this is a good idea.

To grow the bitcoin community it seems desirable to swiftly and safely convert BitCoins to FiatCurrency.

The average consumer does NOT want to go through the hassle of finding internet cash, then finding somebody who wants to pay bitcoins, to find one of the few bitcoin accepting sites, to buy something they could have bought easier at the price of giving up privacy to more than the internet shop (since the whole payment can be tracked through the classical system).

I have a hunch that a substantial part of bitcoins being traded is not by consumers but by BitCoin fans. This is not a bad thing, but we also want to allow more diverse people who just want to trade with more anonimity but still in a large trade market.

Many here seem to believe that "the system" will never allow that: since it provides anonymity its Us vs The System. I disagree. The system contains a lot of flaws but also provides me with a lot of stability in daily life. Furthermore the system itself uses a largely hard to track currency: cash.

Few of us have the balls to try and set up an entity (whatever the name is in whatever jurisdiction, let me call it Entity for simplicity) that allows you to convert between tracked currency and bitcoins. Fear can be just, but very often it comes from lack of comprehension instead: law is not easy. I believe law is not so much against us, but that it just is not easy to abide by it.

If we find a legal way to do so in a few countries from which transactions are accepted in a large part of the world, then this problem is solved.
Perhaps if we are a little less paranoid, we can crack this nut together. If loopholes in the law were illegal they would not be loopholes!

Law: http://en.wikipedia.org/wiki/Law#Legal_systems
There are 2 important legal systems in the world (please correct me if I'm wrong):
Civil Law:
*practiced by most countries, europe for example, politicians make the law, judges execute it: to change the law the change must be passed by politicians.
*To find out if something is lawful we can ask a lawyer, or ? see below
I see 2 options (that act like a read operation, just finding out the laws) I will discuss in more detail below.

Common Law:
*Anglosax nations, for example UK, USA (both individual states and federal), Canada, India, Nicaragua, Israel, politicians AND JUDGES make the law, judges use the law, and when convinced of a new precedent can decide a ruling that becomes a new part of the law! This is more flexible and adapts to specific cases, but also less representative of the populace!
*To find out if something is lawful we can ask a lawyer, or ? see below
(in theory a grey zone of the law can be programmed by conspiracy see below)
I see 3 options: the same 2 as above which are read tests. And the third conspiracy that can write a bit of the law.

The most obvious case is reading up on the law, or asking a lawyer, possibly one who accepts bitcoin (are there active lawyers prepared to be paid in bitcoin?).

Another case is construing a low stake court case: we put a bitcoin/fiat bounty on 2 parties to perform as a small Entity.
It is up to us to discuss pros and cons of making it clear in court that going to court with a small stake was agreed upon by both parties.
If we put a bitcoin bounty on this, the judicial system itself can be seen as an Entity that converts fiat currency (court costs) to bitcoins! Should the legal system now be analyzed as a fiat->bitcoin converter? are legal costs now illegal?

In the end we want our Entity to pass inspections and survive in court, those are the things we must proactively invest in!
The existing tracking Entities are probably afraid of inspections as hell, what if we find a country where our Entity can invite inspections cheaply? At start it would fail the inspection systematically, but each time it would point us to the specific sections in the law we did not conform to (perhaps cheaper than finding a lawyer who both accepts bitcoins and is knowledgeable in these specific parts of the law) we could crowdsource our brains to find alternative methods every time it fails an inspection or choose to abide by that part of the law we failed to abide by. As this has the potential to become the first legal (not grey zone) Entity that can convert fiat<->bitcoin, once it exists it would probably generate lots of money. The shares could be distributed according to bounty investment! A lab rat who went to court for bitcoins could reinvest part of his bitcoins in this Entity if he chooses to!

Alternatively we could try not to set up a centralized Entity, but design contracts per nation/jurisdiction which non anonymously bind one signer to transfer fiat and another to transfer bitcoins to/from specified bitcoin adresses, which can be checked on B Block Explorer (so that in case of dispute the judge reads the contract and checks BBE, alternatively write a simple application called check transaction which connects to the network and validates the transaction, so that judge just runs the application, and contract would say the fiat is to be transferred if the transaction is verified by the application). Perhaps this is legal in a non-commercial way? This gives legal protection, and since bitcoins must be delivered first, the case that you pay and dont get bitcoins while the other doesnt even have the bitcoins/ refuses to give his private key does not arise...