Can anyone post the text to show us what this great plan is to tame bitcoin with? I'm inclined to believe marcus when he says there's an understanding deficit, and I'm always keen to get a good belly laugh out of the fingerpainting that passes for journalistic comprehension here in the early 21st century. I half wonder whether the half-wit hacks don't sometimes register an account on the forum to defend their Homer Simpson cryptocurrency daydreams in print.
Bitcoin: governments should tame it, not ban it
Central banks are afraid that a Bitcoin collapse would send shockwaves through the “real world” economy, and that they could do absolutely nothing about it
A mockup of a bitcoin, a virtual currency traded worldwide, is held in this photo illustration in Sandy, Utah
A growing number of retailers now accept bitcoins as payment, especially for online transactions, for anything from pizza to flights.
As far as Bitcoin’s detractors are concerned, it is nothing more than a bubble: an imaginary currency, without any central bank to govern it, which is used to fuel illegal trade in drugs and weapons. It is vulnerable to hackers, terrorists and money launderers, and will almost certainly collapse.
Numerous governments around the world have expressed their lack of faith in the virtual currency, which has soared from around $10 at the start of 2013 to $818 on Monday. China has gone so far as to ban Bitcoin transactions altogether.
They have a vested interest of course. Bitcoin, which is created by “mining” complex computer source code, threatens to undermine the power the world’s central banks currently wield over the global economy. They are afraid that a Bitcoin collapse would send shockwaves through the “real world” economy, and that they could do absolutely nothing about it. But they are also afraid of losing their status.
Now others are joining in. Rupert Murdoch’s US tabloid, the New York Post, was the latest to declare war on Bitcoin this week, with a thundering editorial damning the currency as “a computerised chit with… all the makings of a hi-tech Ponzi scheme”.
Even Hal Varian, Google’s chief economist (yes, it has such a thing), has raised concern over Bitcoin’s longevity. “Something like this technology will take hold in the future but I am not particularly optimistic about Bitcoin because it suffers from being the first in the area…you can always tell pioneers that they are the ones with errors in their bags,” he told a conference.
The currency also suffered a blow in October, when Silk Road, an online marketplace that acted like an eBay for illegal drugs, where Bitcoin was the major currency, was closed down by the Federal Bureau of Investigation. The agency damned Silk Road as “the most sophisticated and extensive criminal marketplace on the internet”, casting a shadow over Bitcoin’s own reputation.
But despite widespread doubts about Bitcoin, the currency is gaining traction.
Tyler and Cameron Winklevoss, the twins best known for their bitter wrangling over Facebook, have poured a substantial portion of their wealth into Bitcoins and led the first major attempt to drag it into the mainstream. Earlier this year, they filed papers for a $20m initial public offering of their stash, which would make the currency easily available to ordinary investors, with no need for technical savvy.
US authorities are dragging their feet over the IPO, but the twins are undeterred. On Sunday, Cameron Winklevoss told the website Reddit that his conservative estimate was that Bitcoin would surge past $40,000 in value. “I believe it could be much larger,” he said. “It will probably happen much faster than anyone imagines.”
They are not the only people attempting to make Bitcoin more accessible. Alderney, one of the Channel Islands, is talking to the Royal Mint about plans to mint physical Bitcoins, dragging the so-called “cryptocurrency” firmly into physical reality.
Elsewhere, JP Morgan, the world’s largest investment bank, has taken a step towards creating a Bitcoin-style currency of its own. Last week, it filed a lengthy patent for an electronic currency that experts hailed as a potential “Bitcoin killer”. The document does not make any explicit references to Bitcoin, the similarities are apparent. JP Morgan’s currency proposal would be “a new paradigm for effectuating electronic payments”, the bank said. Although JP Morgan’s plan would be a threat to Bitcoin, the fact that the bank is engaging in this battle at all is a hat tip to Bitcoin’s increasing momentum.
Meanwhile, Bitcoins have crept further and further into daily life. A growing number of retailers now accept them as payment, especially for online transactions, for anything from pizza to flights. In America, newlyweds Austin and Beccy Craig ran an experiment to see if they could last more than 100 days using Bitcoin as their only currency, including in many bricks and mortar stores. They managed it.
It is still easy to see why critics are concerned about Bitcoin’s legitimacy, however. Its beginnings are admittedly a little murky.
The currency was launched in 2009 by Satoshi Nakamoto, a reclusive mathematician who left the project the following year, and has done his best to remain anonymous since. One of the cornerstones of the system he developed was that there is a limited number of Bitcoins. However, there is no single authority to police that agreements. Instead, the currency is effectively controlled by all of its users around the world, who are all incentivised to play by a single set of rules in order to protect their own investments.
Regulators fear that it is vulnerable to rebels, who could break the rules and throw the financial system into turmoil. Their fears may be well placed. But it feels naïve to slap a ban on electronic currency, per se, just because it might be risky. The horse has already bolted. It is too late to lock the stable door, so governments need to try to tame the beast instead.
