Can Bitcoin be regulated? And why it might be a major problem.

[BadGhost]

I gave it some thinking and I am not entirely sure about this. I believe that you can either leave Bitcoin (and other Cryptocurrencies) unregulated or you can ban Bitcoin. I will explain why.

When I am regulating something I need to have a sort of control over it. Say I want set a speed on highways to 50. I will make it a law and subsequently I will dispatch a force to make it happen. In a normal society you will have people doing 50 on that regulated highways.

What if I want to regulate Bitcoins. Bitcoin is associated with money laundering. So if we would want to put a stop on that, but we wouldn't want to declare bitcoin illegal how would we do it? The currencies whom are legal tender - fiat currencies usually have a certain limit to stop you from trading in cash in large amounts. They do background checks on how much money you have on your bank account compare these to taxes report your possible income etc. I am saying that to show that they can do it. They can do it, because trusted 3rd party has all the information regarding your financials.

With Bitcoin it's different. No one is supposed to know who owns which bitcoin address. The whole network is build on anonymity. And If you would know a certain link in the chain from that point you could find another users of bitcoin. Theoretically speaking you could connect a person to a certain bitcoin valet. Would you want me to know who you are and how much money you own? In that case it would be more secure to use a classic banking. Therefore no one can know who is behind what address. As there is no place for a "personal check", it inevitably leads to the check somewhere else. But the authority cannot ask you where did you get those bitcoins, because after all you just don't know. Even if you would follow the blockchain. In the end it all comes down to bitcoin exchanges, which is the only place where the authority can do something. But again the possibilities are very limited. But the authority will always have a reasonable doubt to freeze the whole exchange or its accounts and its possession of goods (which would be other cryptos) under the anti-money laundering law. Is it a big step? No someone will start another exchange. But in the end a normal person does not wants to see dirty money flying around unregulated sponsoring terrorists across the globe. So they will just proclaim cryptocurrencies illegal. That again is very hard but it is not that hard to ban exchanges with cryptocurrencies. It is not that hard to declare possession of cryptocurrencies to be illegal under sanction etc.

What am I saying is that with the necessity of anonymity of bitcoin users and also with its transparency you simply cannot create a regulation. So I fear bitcoin might be proclaimed illegal the same way as drugs are, because after all it is still goods to most of the countries.

Now can the community developing bitcoin do something about it?

[pedrog]

Bitcoin can be regulated the same way cash is regulated.

If you have some amount of cash in your possession you need to know where it came from, the same thing applies to bitcoin, you can say you don't know the name of the person but you need to know why he gave it to you.

This is not rocket science...

[erikalui]

If we have just 1 bitcoin wallet that is officially recognized to send/receive bitcoins and all other wallets are banned/stopped from operating, then it's possible to regulate bitcoins. The wallet may be a bank or an online wallet like PayPal/Payza and would have a user to go through a strict verification to use the wallet. In this case, users would have to first convert their bitcoins into fiat and upload the fiat into this wallet and then start trading or spending their coins. I don't know how would miners earn then as everything would be controlled by the Government who would have the total control over the price and transaction fee.

I have just though over this many times and this is the only solution I could think of.

[aardvark15]

Since the US government auctioned off bitcoins to the public (from Silk Road), I don't really think they can now make them illegal.  That would be very ironic.  They could try to regulate though.

[Wobberdk]

Since the US government auctioned off bitcoins to the public (from Silk Road), I don't really think they can now make them illegal.  That would be very ironic.  They could try to regulate though.

Those attempts would not mess it it's principles, though. There's no reason why it should be controlled, because no one really can do it properly.

[BadGhost]

Bitcoin can be regulated the same way cash is regulated.

If you have some amount of cash in your possession you need to know where it came from, the same thing applies to bitcoin, you can say you don't know the name of the person but you need to know why he gave it to you.

This is not rocket science...

It starts to be a rocket science when that person who sold you 10 BTC had previously got them from selling drugs and you bought that 10 BTC with fiat for further investment. Now go figure. There is a reasonable doubt you are helping to launder them. At this case you actually did and you had no idea. We are of course speaking about sums of money exceeding some amount where it starts to be interesting, but because there is no way of factual control of a specific person who might be in doubt of authorities every small transaction might be interesting to the authorities and thats the problem.

It cannot be regulated the same way as cash. Not even closely. You cannot limit the number of bitcoins, but you can limit the amount of cash in circulation by banks. When a fiat currency gets into the inflation, deflation etc. a central authority might limit the possibility to purchase or sell such currency from/to abroad etc. And for every single law that exist you need to know the owner of the money. Without a knowledge of the owner of the money you cannot regulate. Thats why offshore companies are so invincible. It is really not that easy.

[AgentofCoin]

Can Bitcoin/bitcoin be regulated?

Exchanges are the only way to enforce controls since they deal directly with banks.
Any attempt to create controls that govern open source hardware/software wallets would not be manageable.
Directly, Bitcoin/bitcoin is harder if not almost impossible to regulate.
Declaring that it will be regulated, does not deem it actually possible.
We are all still waiting for the legal mechanics that actually govern and enforce these "future regulations".


Can Bitcoin/bitcoin be declared outright illegal?

I do not believe so.
Governments are always hesitant to prevent outright obstruction to advances in thought and technology.
Now that the "beast" is "out of the box" only backwards or failing governments/economies will attempt to outlaw it.

[BadGhost]

If we have just 1 bitcoin wallet that is officially recognized to send/receive bitcoins and all other wallets are banned/stopped from operating, then it's possible to regulate bitcoins. The wallet may be a bank or an online wallet like PayPal/Payza and would have a user to go through a strict verification to use the wallet. In this case, users would have to first convert their bitcoins into fiat and upload the fiat into this wallet and then start trading or spending their coins. I don't know how would miners earn then as everything would be controlled by the Government who would have the total control over the price and transaction fee.

I have just though over this many times and this is the only solution I could think of.

That would mean a trusted third party. Therefore pretty much end of the bitcoin as it is now.

[pedrog]

Bitcoin can be regulated the same way cash is regulated.

If you have some amount of cash in your possession you need to know where it came from, the same thing applies to bitcoin, you can say you don't know the name of the person but you need to know why he gave it to you.

This is not rocket science...

It starts to be a rocket science when that person who sold you 10 BTC had previously got them from selling drugs and you bought that 10 BTC with fiat for further investment. Now go figure. There is a reasonable doubt you are helping to launder them. At this case you actually did and you had no idea. We are of course speaking about sums of money exceeding some amount where it starts to be interesting, but because there is no way of factual control of a specific person who might be in doubt of authorities every small transaction might be interesting to the authorities and thats the problem.

It cannot be regulated the same way as cash. Not even closely. You cannot limit the number of bitcoins, but you can limit the amount of cash in circulation by banks. When a fiat currency gets into the inflation, deflation etc. a central authority might limit the possibility to purchase or sell such currency from/to abroad etc. And for every single law that exist you need to know the owner of the money. Without a knowledge of the owner of the money you cannot regulate. Thats why offshore companies are so invincible. It is really not that easy.

It's not your problem where the bitcoins came from if you buy them at an exchange, a regulated exchange...

If you buy them from some stranger on a back alley for hard cash, well, how will someone know those bitcoins are yours now, and if you do this you probably know the risks, and this transaction might be illegal if it is above some particular amount.

For the second part the analogy is with gold, gold is heavily regulated and no government can control the amount of gold in circulation, or its inflation.

Again, not rocket science.

[AgentofCoin]

Bitcoin can be regulated the same way cash is regulated.
If you have some amount of cash in your possession you need to know where it came from, the same thing applies to bitcoin, you can say you don't know the name of the person but you need to know why he gave it to you.
This is not rocket science...

It starts to be a rocket science when that person who sold you 10 BTC had previously got them from selling drugs and you bought that 10 BTC with fiat for further investment. Now go figure. There is a reasonable doubt you are helping to launder them. At this case you actually did and you had no idea. We are of course speaking about sums of money exceeding some amount where it starts to be interesting, but because there is no way of factual control of a specific person who might be in doubt of authorities every small transaction might be interesting to the authorities and thats the problem.

It cannot be regulated the same way as cash. Not even closely. You cannot limit the number of bitcoins, but you can limit the amount of cash in circulation by banks. When a fiat currency gets into the inflation, deflation etc. a central authority might limit the possibility to purchase or sell such currency from/to abroad etc. And for every single law that exist you need to know the owner of the money. Without a knowledge of the owner of the money you cannot regulate. Thats why offshore companies are so invincible. It is really not that easy.

It's not your problem where the bitcoins came from if you buy them at an exchange, a regulated exchange...
If you buy them from some stranger on a back alley for hard cash, well, how will someone know those bitcoins are yours now, and if you do this you probably know the risks, and this transaction might be illegal if it is above some particular amount.
For the second part the analogy is with gold, gold is heavily regulated and no government can control the amount of gold in circulation, or its inflation.
Again, not rocket science.

What you are both basically getting on about is "blacklisting" coins not purchased through an exchange.

What happens if in the future, all miners by mutual agreement, mix their newly "created" coins with
coins that are in "mixing pools", which would solely exist for future open source wallets when mixing is the standard?

How would the exchanges or governments be able to "blacklist" then?

[pedrog]

Bitcoin can be regulated the same way cash is regulated.
If you have some amount of cash in your possession you need to know where it came from, the same thing applies to bitcoin, you can say you don't know the name of the person but you need to know why he gave it to you.
This is not rocket science...

It starts to be a rocket science when that person who sold you 10 BTC had previously got them from selling drugs and you bought that 10 BTC with fiat for further investment. Now go figure. There is a reasonable doubt you are helping to launder them. At this case you actually did and you had no idea. We are of course speaking about sums of money exceeding some amount where it starts to be interesting, but because there is no way of factual control of a specific person who might be in doubt of authorities every small transaction might be interesting to the authorities and thats the problem.

It cannot be regulated the same way as cash. Not even closely. You cannot limit the number of bitcoins, but you can limit the amount of cash in circulation by banks. When a fiat currency gets into the inflation, deflation etc. a central authority might limit the possibility to purchase or sell such currency from/to abroad etc. And for every single law that exist you need to know the owner of the money. Without a knowledge of the owner of the money you cannot regulate. Thats why offshore companies are so invincible. It is really not that easy.

It's not your problem where the bitcoins came from if you buy them at an exchange, a regulated exchange...
If you buy them from some stranger on a back alley for hard cash, well, how will someone know those bitcoins are yours now, and if you do this you probably know the risks, and this transaction might be illegal if it is above some particular amount.
For the second part the analogy is with gold, gold is heavily regulated and no government can control the amount of gold in circulation, or its inflation.
Again, not rocket science.

You are talking about is "blacklisting".

What happens if in the future, all miners by mutual agreement, mix their newly "created" coins with
coins that are in "mixing pools", which would solely exist for future open source wallets when mixing is the standard?

How would the exchanges or governments be able to "blacklist" then?

I don't think blacklisting can be made, at least in any meaningful way.

[Patatas]

Doesn't make quite sense to me if you think

Bitcoin is associated with money laundering

.That's wrong on so many levels.The only possible reason they want to regulate bitcoin is to kill the anonymity and control the service prices.All these new start up big names will definitely be a part of it for their profits sakes no one actually cares what it would do to the community.

[AgentofCoin]

Bitcoin can be regulated the same way cash is regulated.
If you have some amount of cash in your possession you need to know where it came from, the same thing applies to bitcoin, you can say you don't know the name of the person but you need to know why he gave it to you.
This is not rocket science...

It starts to be a rocket science when that person who sold you 10 BTC had previously got them from selling drugs and you bought that 10 BTC with fiat for further investment. Now go figure. There is a reasonable doubt you are helping to launder them. At this case you actually did and you had no idea. We are of course speaking about sums of money exceeding some amount where it starts to be interesting, but because there is no way of factual control of a specific person who might be in doubt of authorities every small transaction might be interesting to the authorities and thats the problem.

It cannot be regulated the same way as cash. Not even closely. You cannot limit the number of bitcoins, but you can limit the amount of cash in circulation by banks. When a fiat currency gets into the inflation, deflation etc. a central authority might limit the possibility to purchase or sell such currency from/to abroad etc. And for every single law that exist you need to know the owner of the money. Without a knowledge of the owner of the money you cannot regulate. Thats why offshore companies are so invincible. It is really not that easy.

It's not your problem where the bitcoins came from if you buy them at an exchange, a regulated exchange...
If you buy them from some stranger on a back alley for hard cash, well, how will someone know those bitcoins are yours now, and if you do this you probably know the risks, and this transaction might be illegal if it is above some particular amount.
For the second part the analogy is with gold, gold is heavily regulated and no government can control the amount of gold in circulation, or its inflation.
Again, not rocket science.

You are talking about is "blacklisting".

What happens if in the future, all miners by mutual agreement, mix their newly "created" coins with
coins that are in "mixing pools", which would solely exist for future open source wallets when mixing is the standard?

How would the exchanges or governments be able to "blacklist" then?

I don't think blacklisting can be made, at least in any meaningful way.

I don't believe either.
Having "dirty coins" and "exchange/regulated coins" goes against what was originally intended with Bitcoin.
If Satoshi wanted a controlled crypto-currency, he wouldn't have tried so hard to create a system without trusted parties.

[BadGhost]

It's not your problem where the bitcoins came from if you buy them at an exchange, a regulated exchange...

If you buy them from some stranger on a back alley for hard cash, well, how will someone know those bitcoins are yours now, and if you do this you probably know the risks, and this transaction might be illegal if it is above some particular amount.

For the second part the analogy is with gold, gold is heavily regulated and no government can control the amount of gold in circulation, or its inflation.

Again, not rocket science.

Look I don't mean to be offensive according to your post count you have spent some time around bitcoin, but you don't see the bigger picture here. What you saying is true - partly.

1. It is not your problem if you buy them at exchange. It's the exchange's problem that they bought them at the first place. That means an exchange did not do the background check, which it cannot do. It is therefore again subject to a reasonable doubt that it was laundering money. If such exchange falls, because of that the price of bitcoin will go down and it will influence you because you are losing money. If this become a habit there wont be much exchanges and it will be hard to obtain bitcoins or to sell them. So it is actually your problem, if you own some BTC and you care whether it has any value.

2. Hard cash purchase - you are completely right. You laundered money, it's illegal you might be prosecuted if found and it is something every government will try to stop, but most probably fail.

3. Gold is not so heavily regulated as fiat currencies, because it work differently. Also to obtain gold you will be identified the other party will have a recipe that you bought it and again it is impossible or illegal to buy for example a $1.000.000,00 worth of gold in cash therefore anonymously. Try selling a 1000 oz of gold without proving where you got them. Its not about the amount in circulation or its inflation but about the title of ownership tied to a person or a company. The bitcoin is build on the ownership being transparent but anonymous.

4. You are right it is not a rocket science its law.  

[thejaytiesto]

Bitcoin will be impossible to fully regulate, as in have every transaction every traced back to as deep as you need, and this is the wet dream of the regulators, thats why they will get rid of cash in the future and make everything digital (and closed source). This is why its very important Bitcoin nodes remains decentralized. As long as we have decentralized nodes they can't do nothing, that's why they try with political attacks like Bitcoin XT and Classic. Also in the future when confidential transactions is implemented it will be even harder to track, let alone when they make coinjoin easy for noobs too.

[AgentofCoin]

...

Look I don't mean to be offensive according to your post count you have spent some time around bitcoin, but you don't see the bigger picture here. What you saying is true - partly.

1. It is not your problem if you buy them at exchange. It's the exchange's problem that they bought them at the first place. That means an exchange did not do the background check, which it cannot do. It is therefore again subject to a reasonable doubt that it was laundering money. If such exchange falls, because of that the price of bitcoin will go down and it will influence you because you are losing money. If this become a habit there wont be much exchanges and it will be hard to obtain bitcoins or to sell them. So it is actually your problem, if you own some BTC and you care whether it has any value.

2. Hard cash purchase - you are completely right. You laundered money, it's illegal you might be prosecuted if found and it is something every government will try to stop, but most probably fail.

3. Gold is not so heavily regulated as fiat currencies, because it work differently. Also to obtain gold you will be identified the other party will have a recipe that you bought it and again it is impossible or illegal to buy for example a $1.000.000,00 worth of gold in cash therefore anonymously. Try selling a 1000 oz of gold without proving where you got them. Its not about the amount in circulation or its inflation but about the title of ownership tied to a person or a company. The bitcoin is build on the ownership being transparent but anonymous.

4. You are right it is not a rocket science its law.  

So what you are actually concerned about is bitcoin's future price growth,
 contingent on exchanges blacklisting coins in accordance with gov regulations?

[BadGhost]

Doesn't make quite sense to me if you think

Bitcoin is associated with money laundering

.That's wrong on so many levels.The only possible reason they want to regulate bitcoin is to kill the anonymity and control the service prices.All these new start up big names will definitely be a part of it for their profits sakes no one actually cares what it would do to the community.

I probably wrote my assumption badly. I personally think more of bitcoin than just a vehicle for money laundering. I just gave it like an example that came across my mind. There might be more reasons. It might be necessary in the future just to buy bitcoins. As of now its a trust dependable system. There is always someone who goes first and you never know who you can trust. Obtaining through mining is subjected to high costs.

Can Bitcoin/bitcoin be regulated?

Exchanges are the only way to enforce controls since they deal directly with banks.
Any attempt to create controls that govern open source hardware/software wallets would not be manageable.
Directly, Bitcoin/bitcoin is harder if not almost impossible to regulate.
Declaring that it will be regulated, does not deem it actually possible.
We are all still waiting for the legal mechanics that actually govern and enforce these "future regulations".


Can Bitcoin/bitcoin be declared outright illegal?

I do not believe so.
Governments are always hesitant to prevent outright obstruction to advances in thought and technology.
Now that the "beast" is "out of the box" only backwards or failing governments/economies will attempt to outlaw it.

This post had made some excellent points. However the possibility that some government will try to outlaw bitcoin is not a unimaginable. What I am scared of is that if there is no way how to regulate bitcoin and there is potential thread e.g. money laundering then the easiest way is to proclaim ownership of bitcoin illegal.

Bitcoin will be impossible to fully regulate, as in have every transaction every traced back to as deep as you need, and this is the wet dream of the regulators, thats why they will get rid of cash in the future and make everything digital (and closed source). This is why its very important Bitcoin nodes remains decentralized. As long as we have decentralized nodes they can't do nothing, that's why they try with political attacks like Bitcoin XT and Classic. Also in the future when confidential transactions is implemented it will be even harder to track, let alone when they make coinjoin easy for noobs too.

I so far have the same opinion regarding the regulation but as I have said above that is not necessarily a good thing. Could you maybe develop your point a little in connection with confidential transaction and Bitcoin XT, Classic. I have never heard of those.

So what you are actually concerned about is bitcoin's future price growth,
 contingent on exchanges blacklisting coins in accordance with gov regulations?

 

I must admit I do not fully understand the coin blacklisting but I guess I got the main point of it. What I am concerned about is the future of bitcoin. The price is not an issue for me as I own a very little of BTC. The root of concern is that without regulation the bitcoin might be just a price to a dollar - something that does not stand alone. At the moment it is not like the price of something is in BTC its in dollars but its paid by the corresponding amount in BTC. I have no idea what would have to change for bitcoin to stand alone to have its own strength, but I believe that some kind of regulation might be in place. Also think of my questions from this point of view. You have a dog. That dog is aggressive, it bites people. You cannot train that dog. You tried but it does not work dog still bites. What do you do with such dog? Now obviously the owner of the dog would be government and the dog is a bitcoin protocol.

[AgentofCoin]

So what you are actually concerned about is bitcoin's future price growth,
 contingent on exchanges blacklisting coins in accordance with gov regulations?

 
I must admit I do not fully understand the coin blacklisting but I guess I got the main point of it. What I am concerned about is the future of bitcoin. The price is not an issue for me as I own a very little of BTC. The root of concern is that without regulation the bitcoin might be just a price to a dollar - something that does not stand alone. At the moment it is not like the price of something is in BTC its in dollars but its paid by the corresponding amount in BTC. I have no idea what would have to change for bitcoin to stand alone to have its own strength, but I believe that some kind of regulation might be in place. Also think of my questions from this point of view. You have a dog. That dog is aggressive, it bites people. You cannot train that dog. You tried but it does not work dog still bites. What do you do with such dog? Now obviously the owner of the dog would be government and the dog is a bitcoin protocol.

A problem with your example is that each individual may have a different valid answer.

Personally, to answer based on your above example,
I would keep the dog locked up in the house majority of the time and away from other people.
I would not "put the dog down". Just let the dog live in the house until it passes away from old age.

[cluit]

Since the US government auctioned off bitcoins to the public (from Silk Road), I don't really think they can now make them illegal.  That would be very ironic.  They could try to regulate though.

Those attempts would not mess it it's principles, though. There's no reason why it should be controlled, because no one really can do it properly.

If bitcoins are not controlled or cannot be controlled, the banks would create their own crypto currency in future as people now want to make use of crypto currencies as they are easier and feasible just like online payment wallets that exist today. If we take into consideration of having just 1 recognized wallet, there may be so many issues with regards to bitcoins but a bank's own crypto currency would have no such issues then.

[Supercrypt]

Bitcoins can be regulated by banks that exist today.
It would be similar to owning shares in a demat account and the same case of egold. There is nothing today that can be left unregulated as then the only solution would be a ban or trading them illegally.
There is always a way out but with the regulation, the bitcoin users today would stop using it in future.