localbitcoins vs exchange

[gsingh]

Could someone please explain me why trading on localbitcoins is considered legal but exchanges are illegal?

Exchanges are just automating the orders. I'm missing something obvious here?

[phazon307]

Because the feds run the exchanges and they see BTC as a threat not something they want to allow? I am sure all governments are scared of a currency they can't control and make the people suffer.

[gsingh]

Why do they allow person to person trading then?

[franky1]

Could someone please explain me why trading on localbitcoins is considered legal but exchanges are illegal?

Exchanges are just automating the orders. I'm missing something obvious here?

simply put:
exchanges have bank accoutns where people deposit FIAT. this bank account is owned by the exchange owner. this requires regulation and licencing to act as a middleman (  in relation to FIAT swapping between different accounts)

localbitcoins only holds the bitcoin as escrow. the FIAT never touches a bank account of localbitcoins.com owner. thus its not in the regulatories remit.

government regulators deem localbitcoins as private/ domestic transactions. where as an exchange is a business, which requires certain standards to ensure individuals FIAT deposits are looked after properly, and that no fraud, laundering is taking place

[justusranvier]

Why do they allow person to person trading then?

Wrong question.

"What could they do to stop P2P trading if they wanted to?"

[TippingPoint]

Governments can regulate exchanges using bureaucratic methods.  Reporting requirements, etc.

P2P is P2P.

Exchanges are to P2P as battleships are to submarines.  Big targets.

[Soros Shorts]

In most of the free world, it would be difficult for governments to shutdown P2P trading without passing draconian laws that the general population would find hard to accept. I am sure that some people in government are thinking of ways to do this at this very moment.

[iluvpie60]

Could someone please explain me why trading on localbitcoins is considered legal but exchanges are illegal?

Exchanges are just automating the orders. I'm missing something obvious here?

Because there would have to be an infinite number of laws enacted to always make it illegal to trade P2P for newly created items. Say you create a new pair of glasses with awesome attachments, there goes a new law to ban those. You create something from pipecleaners and rubberbands, new law bans it and is illegal. See how pointless it is to keep creating these laws on a person by person basis?

Now when you get to a general sweeping law, like something that shuts down Silk Road or Sheep Market Place or whatever, those  take out tons of people in one law or in one policy or whatever.

Government doesn't go after the individuals at the low levels, usually at the higher levels get taken down.

[qualia8]

My reading of the regulations says that it is already illegal to buy and sell bitcoins on localbitcoins.com if you are not a licensed money transmitter.

The problem is only enforcement.  Supposing your identity were pinned to a localbitcoins.com account, you could be fined/jailed for those transactions if you are unlicensed.  It could be like filesharing, where the industry "makes an example" of a few offenders. 

You would also think that jail time for filming a movie in a theater on your phone cam would be draconian and generate protests, but there it is.

This is a desperate move on the part of banks, but it is possible.

[beetcoin]

localbitcoins is a peer to peer exchange; no 3rd party that holds the coins, though there is escrow and there is a 3rd party to ensure that transactions follow through. but it's not localbitcoin that is selling the coins to you.