Surviving government crackdown

[jaimedimon]

They won't outlaw Mt gox. That makesn o sense. They woll outlaw trade and possession of bitcoin because of money laundry and being an alternative currency. US citizens are required to use the USD. It is illegal right now.

Could you cite your sources please?

Regarding required use, I could not find it quickly but I am pretty sure no second currency is allowed.
Regarding laundry, look at http://bitcoinlaundry.com/. I steal money from a bank, buy bitcoins, launder them and cash out to USD. Easy.

US dollars are legal currency.    What this means is that if someone wants to repay a debt and they offer you US dollars to do it, you are legally required to accept them.  However, if it is not a debt, but just an actual transaction (buying groceries for example), they are not legally required to accept USD.

Second currencies are allowed, but no one uses them for many reasons, Greshams law being one of them, but also because it is just impractical as so few people are generally willing to accept them.

As for laundering money, you are misunderstanding how money laundering works.

Using your example of a bank robber who wanted to launder his funds, what he would have to do is funnel them into a cash business as extra revenue.  They would then come out on the income statement as ordinary income, which he could then pay taxes on, and viola, laundered money.

If someone robs a bank, then buys bitcoins and launders then, then turns them back into USD, he has accomplished nothing except wasting transaction fees, as he still has a pile of cash.

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[skysurfer808]

Interesting points brought up in this thread.  

As far as alternative currencies in the USA, in may of this year the state of Utah passed a bill in their legislature allowing gold and silver to be used as currency.  Utah also abolished state capital gains taxes on sales of gold and silver, though the Federal tax still applies.  This is an interesting development, the question is whether Utah will be marginalized or become the trendsetter for the rest of the nation.  Greshem's law does apply, and few people will end up paying their taxes with gold and silver, but this does open up interesting options.

What I find interesting is that Bitcoin and Gold/Silver based money are both beginning to come online at the same time as hedges against the dollar.  I believe that a mix of both is a good way to survive inflation of fiat currency.  It is a classic mix of the old and the new.  Of course governments could and may ban the possession of both, as they banned Gold in 1933.  

A p2p decentralized system appears to be the only way for bitcoin to survive a crackdown on current exchanges.  Mainstream media is specifically mentioning Mt. Gox.  This could get ugly.  We live in interesting times.

Skysurfer808

[em3rgentOrdr]

Let the battle begin.  And yes, they (The US govt's stooge Schulmer) fired the first shot, whether that matters or not.

[Hans0]

jaimedimon, that was helpful. Especially your statements about money laundering. If you pay half the price of a house in bitcoin, _that_ would be money laundering, right?

skysurfer808, I strongly believe bitcoin will become illegal for various reasons, but it still might be an alternative to gold because of its anonymity and uninterruptability features. I intend to hold any bitcoins I have when that happens for 5-10 years until an opportunity comes along that allows me to put them to use.

[imanikin]

Interesting points brought up in this thread.  

As far as alternative currencies in the USA, in may of this year the state of Utah passed a bill in their legislature allowing gold and silver to be used as currency.  Utah also abolished state capital gains taxes on sales of gold and silver, though the Federal tax still applies.  This is an interesting development, the question is whether Utah will be marginalized or become the trendsetter for the rest of the nation.  

In the current issue of Digital Gold Currency Magazine, on page 40, there is the South Carolina senate bill to allow gold/silver as legal tender. I read before that it's in the works in other states also...
 

[jaimedimon]

jaimedimon, that was helpful. Especially your statements about money laundering. If you pay half the price of a house in bitcoin, _that_ would be money laundering, right?

skysurfer808, I strongly believe bitcoin will become illegal for various reasons, but it still might be an alternative to gold because of its anonymity and uninterruptability features. I intend to hold any bitcoins I have when that happens for 5-10 years until an opportunity comes along that allows me to put them to use.

To launder money, you take cash, and convert it somehow into regular money in the banking system, called "settled funds".  Usually to do this, you have to pay a fee to someone to launder it (someone who owns a cash business for example, like a laundromat), and also you have to pay taxes on the money.  Essentially enough of the people running the world need to get their cut, before illegal money can become legal. 

When you try to buy a house, you better already have your downpayment in the bank, because if it is under your mattress, the bank doesn't know whether you earned that money legally, or from selling drugs, or whatever.  They sort of freak out about that.  It's a pretty recent change because of 9/11 and the PATRIOT act.  The banks have to do a lot of stuff now that they never had to do regarding verifying source of funds, identities, etc.

[clickbangdone]

You don't need to worry about governments destroying bitcoins. You need to worry about the users of bitcoins. The users of bitcoins will destroy the bitcoin system.

[swusc2]

To all US citizens that support Bitcoins. Although Senator Schumer and Friends are helping the publicity of Bitcoins we still need to take action. Some of you just say "Whatever I doesn't matter they can't hurt Bitcoin exchanges will always be replaced" but the core issue is that it SHOULDN'T have to be replaced. MtGox is a perfectly legal institution, Schumer is just fear mongering people and blowing things out of proportion by trying associate "Bitcoins directly with Drugs" even though Bitcoin is used for a lot more things. Although some of you don't agree with the illegality of drugs at least bare with me. Bitcoin =/= Illegal Drugs. Don't let them push some baloney bill to ban/limit the use of Bitcoins in the US. It is just a regrettable side effect of money; if PayPal just happened to be used to buy drugs and the government didn't bother to work with them to stop it, but instead just decided to stomp PayPal out we would think that is ridiculous. I don't know what lobbyist pay Schumer and Friends but this is obviously just some strong arming against Bitcoin.

Send emails to your local Senators and Representatives to Schumer and to the Attorney General explaining to them the ridiculousness of what they are doing right now. It violates the fundamental values of capitalism and democracy.

[tymothy]

To all US citizens that support Bitcoins. Although Senator Schumer and Friends are helping the publicity of Bitcoins we still need to take action. Some of you just say "Whatever I doesn't matter they can't hurt Bitcoin exchanges will always be replaced" but the core issue is that it SHOULDN'T have to be replaced. MtGox is a perfectly legal institution, Schumer is just fear mongering people and blowing things out of proportion by trying associate "Bitcoins directly with Drugs" even though Bitcoin is used for a lot more things. Although some of you don't agree with the illegality of drugs at least bare with me. Bitcoin =/= Illegal Drugs. Don't let them push some baloney bill to ban/limit the use of Bitcoins in the US. It is just a regrettable side effect of money; if PayPal just happened to be used to buy drugs and the government didn't bother to work with them to stop it, but instead just decided to stomp PayPal out we would think that is ridiculous. I don't know what lobbyist pay Schumer and Friends but this is obviously just some strong arming against Bitcoin.

Send emails to your local Senators and Representatives to Schumer and to the Attorney General explaining to them the ridiculousness of what they are doing right now. It violates the fundamental values of capitalism and democracy.

A nice preliminary step, but again I'd be very surprised if any sort of anti-bitcoin bill gets drafted, let alone gets out of committee. You can bet Ron Paul will be yammering about it forever.

[em3rgentOrdr]

You don't need to worry about governments destroying bitcoins. You need to worry about the users of bitcoins. The users of bitcoins will destroy the bitcoin system.

Lol. I guess the proof is left to the reader. 

To all US citizens that support Bitcoins. Although Senator Schumer and Friends are helping the publicity of Bitcoins we still need to take action. Some of you just say "Whatever I doesn't matter they can't hurt Bitcoin exchanges will always be replaced" but the core issue is that it SHOULDN'T have to be replaced. MtGox is a perfectly legal institution, Schumer is just fear mongering people and blowing things out of proportion by trying associate "Bitcoins directly with Drugs" even though Bitcoin is used for a lot more things. Although some of you don't agree with the illegality of drugs at least bare with me. Bitcoin =/= Illegal Drugs. Don't let them push some baloney bill to ban/limit the use of Bitcoins in the US. It is just a regrettable side effect of money; if PayPal just happened to be used to buy drugs and the government didn't bother to work with them to stop it, but instead just decided to stomp PayPal out we would think that is ridiculous. I don't know what lobbyist pay Schumer and Friends but this is obviously just some strong arming against Bitcoin.

No.  Bitcoin is different from paypal and other currencies in that it is untraceable (if done right), thus it facilitates illegal activities such as money laundering, drug trade, tax evasion, assassination markets, etc.  The politicians are right now trying to get rid of cash transactions as it is, so you can bet that they will not be welcoming to bitcoin.  They are broke, and they need their tax revenue from any way possible, from any transaction between two humans.  And MtGox is not a perfectly legal institution, if you look at all the relevant laws and regulations regarding currency transactions.  PayPal is different, since it is centralized and, after being taken over by ebay, has had to succumb to all the tax reporting and other nonsense of the US govt.  PayPal has been captured.  But the great thing about bitcoin, is that it can't be captured.

Send emails to your local Senators and Representatives to Schumer and to the Attorney General explaining to them the ridiculousness of what they are doing right now. It violates the fundamental values of capitalism and democracy.

Facepalm.  Yeah, sure...

A nice preliminary step, but again I'd be very surprised if any sort of anti-bitcoin bill gets drafted, let alone gets out of committee. You can bet Ron Paul will be yammering about it forever.

I doubt that Ron Paul will have the intellectual capacity to understand bitcoin (no insult to his political career), and when his aids discovers that it is not back by silver or gold, he will ignore it.

[kseistrup]

I think the closure of MtGox will depress the price to $0 for a while and then it will skyrocket up again.

If Mt. Gox are shutdown, there's the new TradeHill exchange, and others are on their way…

Cheers,

[TheVirus]

Sorry, but a few hundred people writing to their representatives will do nothing. The US is run by people with money and if the big banks fear that they are being challenged, then they will use their deep pockets to lobby against Bitcoins. Unless you are someone with deep pockets or political power, you can do nothing. The only way to protect Bitcoins in the US is to bring more positive attention to it and get more people on board. Sadly, Bitcoins are not for the average user and probably never will be and that is one of the biggest downsides to it.

Furthermore, the US holds a lot of power across the globe. All it will take is for the US to tell the UK/Canada 'Shutdown "Joe's Bitcoin Exchange" or we will not export/import to/from you.' The majority of people in power are not technologically savvy and therefore have no real grasp of Bitcoins or their potential. People in power fear losing their power. People with money fear losing their money. The government doesn't give a crap about the constitution or your personal property. They've already shat all over us with the TSA and unconstitutional searches.

I'm in the US and I'll continue to mine Bitcoins because while they may not have value outside of the net, they can still be used to buy goods privately. The public exchanges will get shut down, it's only a matter of time. People that think the prices will skyrocket to >$100 are dreaming. We'll be lucky if the price hits $50 before the shit hits the fan.

[dacoinminster]

Here's an article I saw today about the upcoming government crackdown:

http://economicsandliberty.wordpress.com/2011/06/07/the-coming-attack-on-bitcoin-and-how-to-survive-it/

His logic seems sound to me.

[em3rgentOrdr]

Here's an article I saw today about the upcoming government crackdown:

http://economicsandliberty.wordpress.com/2011/06/07/the-coming-attack-on-bitcoin-and-how-to-survive-it/

His logic seems sound to me.

A. Freeman is spot on here:

The safest way to acquire bitcoin is to let people know that you will accept it as payment for your products and services. Do not ever exchange it for national currencies. The point that people miss here is that national currencies are the very problem that freedom-lovers are trying to get away from. Instead, use bitcoin to trade with merchants and individuals who accept it as payment. Offer it as payment to those who are unaware of it and explain the benefits to them. This will help develop the market and create a solid economy outside of national currencies. After the initial attack, bitcoin will likely be one of the most powerful and revolutionary tools to bring about more freedom and liberty to humankind.
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I myself have never ever exchanged bitcoin for any other currency.  The exchanges are not terribly important to the bitcoin economy.  Bitcoin is antithetical to the whole concept of national currencies.

[TheVirus]

Here's an article I saw today about the upcoming government crackdown:

http://economicsandliberty.wordpress.com/2011/06/07/the-coming-attack-on-bitcoin-and-how-to-survive-it/

His logic seems sound to me.

A. Freeman is spot on here:

The safest way to acquire bitcoin is to let people know that you will accept it as payment for your products and services. Do not ever exchange it for national currencies. The point that people miss here is that national currencies are the very problem that freedom-lovers are trying to get away from. Instead, use bitcoin to trade with merchants and individuals who accept it as payment. Offer it as payment to those who are unaware of it and explain the benefits to them. This will help develop the market and create a solid economy outside of national currencies. After the initial attack, bitcoin will likely be one of the most powerful and revolutionary tools to bring about more freedom and liberty to humankind.
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I myself have never ever exchanged bitcoin for any other currency.  The exchanges are not terribly important to the bitcoin economy.  Bitcoin is antithetical to the whole concept of national currencies.

How are you, as a company, going to pay the bills with BTC if you cannot convert them to a national currency? I don't think utility companies will be accepting BTC anytime soon. His logic is flawed.

[digdugg67]

So let's say the US gov't successfully outlaws bitcoin. What are they outlawing? An idea.
A thought and a believe that this 'coin' represents value.
Well hell, they might as well outlaw Jesus because to some he is real others just an idea.

so let them outlaw bitcoins. It will be just like the laws agains holding gold, or production of alcohol. Not going to work.

So what says i have to use it here in the states? If as I suspect, BitCoin is going to grow in acceptance, would this make a nice way for me to fund a European Vacation for the family?  I just have to use dollars or what ever fiat they declare as legal to buy tickets out of the states and use my bitcoins stored out of the US for the rest of the vacation.

just my .00066BTC

[em3rgentOrdr]

So let's say the US gov't successfully outlaws bitcoin. What are they outlawing? An idea.
A thought and a believe that this 'coin' represents value.
Well hell, they might as well outlaw Jesus because to some he is real others just an idea.

Awesome FTW association of bitcoin with Jesus!

[TheVirus]

So let's say the US gov't successfully outlaws bitcoin. What are they outlawing? An idea.
A thought and a believe that this 'coin' represents value.
Well hell, they might as well outlaw Jesus because to some he is real others just an idea.

so let them outlaw bitcoins. It will be just like the laws agains holding gold, or production of alcohol. Not going to work.

So what says i have to use it here in the states? If as I suspect, BitCoin is going to grow in acceptance, would this make a nice way for me to fund a European Vacation for the family?  I just have to use dollars or what ever fiat they declare as legal to buy tickets out of the states and use my bitcoins stored out of the US for the rest of the vacation.

just my .00066BTC

If the government outlaws Bitcoins, how are you going to buy goods? You can't go grocery shopping with them. You can't buy a house or car. You can't pay the bills as utility companies won't accept them. The only thing you can buy is whatever is sold on a personal/private level. If Bitcoins are outlawed then their only use would be for the black market of the Internet. It's true that you can't stop people from trading them or accepting them on a private level, but you can stop/prevent companies from accepting them or turning them into a national currency.

You guys need to remember that Bitcoins haven't replaced the dollar, pound, dinar, yen, etc yet. Just because there's a market value for them today does not mean there will be a value tomorrow if the exchanges are shut down. If I had thousands of coins, I'd be selling the majority of them as fast as possible, but I only have 2, so I'm just bidding my time and keeping my eyes on the news. I'm not trying to cause a panic, I just want to enlighten people on what can, and possibly will, happen.

The comparison to Jesus is absurd at best. People aren't buying/selling goods for religion. The difference between outlawing Bitcoins and outlawing gold, alcohol or another good is that those goods are tangible and are already accepted as goods. They have value in the real world. You want to use your Bitcoins for a vacation? Sure, go ahead. What travel company is going to accept Bitcoins if they can't turn around and sell them for a national currency or gold. All they are left with is a bunch of virtual data that they can't use. It's like trying to buy a car with money from your World of Warcraft account after the government has made WoW illegal.

Good luck with that.

[morpheus]

... Maybe instead of a new centralised exchange some clever nut will develop a p2p one.

Funny you should say that, I've been working on one for about a month: https://github.com/macourtney/Dark-Exchange

I'm pretty close to a beta.

It's fully open source and no fees. It uses the I2P network to connect p2p, which means all connections are encrypted end to end.

[em3rgentOrdr]

... Maybe instead of a new centralised exchange some clever nut will develop a p2p one.

Funny you should say that, I've been working on one for about a month: https://github.com/macourtney/Dark-Exchange

I'm pretty close to a beta.

It's fully open source and no fees. It uses the I2P network to connect p2p, which means all connections are encrypted end to end.

Awesome!!!  I can't wait for it to be ready.  I'll donate then.