The SEC Shows Why Bitcoin is Doomed.

[johnyj]

The result is: The exchange rate many folded after that article was published  

The first country that give bitcoin green light will receive huge amount of wealth inflow from all over the world in a couple of years. And that country will become the financial center of bitcoin economy

[1715657876]

1715657876

[Bob Derber]

My understanding is that banks need not register with the states.  Dwolla tried the registration route and as I understand it abandoned the effort when association with another was easier, cheaper, etc.  They focus on thier core business while the bank addresses compliance.

Now if I were to guess Milne is after market share at this point, so profit is a longer term proposition and I can't say the association with the bank fits the model, but the idea is pretty solid and money is willing to follow.....

And yes, BCB, I have chatted with Silicon Valley Bank and they are very aware of their position here......

[skivrmt]

The result is: The exchange rate many folded after that article was published  

The first country that give bitcoin green light will receive huge amount of wealth inflow from all over the world in a couple of years. And that country will become the financial center of bitcoin economy

I believe this is true. Think of the poker world. The small islands around the world received a huge influx of money. Isle of Man, Antigua, several Indians reservations in Canada, etc. If a country embraces a much larger entity than online poker, I think it could be very beneficial, especially if it's a smaller country.

[QuestionAuthority]

QuestionAuthority,

Because "Money Transmitters" and therefore bitcoin businesses, have no Federal Regulator, FenCEN and the Department of Treasury has made BANKS the de facto regulator of "money transmitters."  FinCEN has also labeled "money transmitters" "HIGH RISK" so instead of banking money transmitters banks are just closing their accounts and thus putting bitcoin companies out of business.  See tradehill.com

A federally chartered bank that would assume the "risks" associated with virtual currency business would be a game changer.

Silicon Valley Bank (SVB) is banking coinbase.com and they are now a front runner in the new economy where the traditional backs may end up like classified advertising in newpapers after the advent of craigslist.com, potentially non-existent.

Yes, I understand why it would be beneficial for Bitcoin to have the support of a nationwide bank. Hell, I used to work for one of the authors of H.R. 3841 Interstate Banking and Branching Efficiency Act. Banks need to run as profitable businesses and comply with major truckloads of legislation that far outweighs just money transmitter licensure. The public derives some of its trust in banking establishments from the visibility of "brick and mortar" branches. Online only banks like USAA are increasing in popularity but they are themselves a fringe business type that also failed in mass during the 2008 recession. Using a difficult to successfully operate business as the saving grace for Bitcoin seems like a fools errand.

[marcus_of_augustus]

DeathAndTaxes

You bring up a HUGE issue.  There is no Regulator at the Federal Level for "money transmitters" the "Money Service Business" category that FinCEN put the bitcoin industry in with the March 18th Guidance.

This is some thing the National Money Transmitter Assocaition is trying to address with upcoming "Industry Symposium for Legislative Action - (ISLA)" February 18, 2014 9:00 AM to 5:00 PM EST in Washington DC.

I agree to a certain extent.  I generally oppose new regulation but the current situation is just a nightmare of asinine proportions.  They are less than 100 companies in the world which have licenses in all fifty states.  There is some legal opinion that is is easier and cheaper today, to form a new bank (or buy an existing bank or credit union) and thus bypass the entire issue because banks and credit unions are not MSBs and their national charter makes them outside the regulatory scope of most state regulations.  When it is easier to form a bank then issue a prepaid card for example you know something is wrong.

Still this has been a problem for twenty years now.  Decades before Bitcoin was even born there have been attempts to create a single national license because the current system is broken but all attempts to date have been futile.  The states certainly don't want to give up that power and control.   The existing players who have already gone through that nightmare don't want it to go away.  PayPal LOVES the excessive, asinine regulation.  It all but guarantees there will never be a PayPal direct competitor because the burden on any startup is simply too high and without a startup the risk is too much to dump the tens of millions to jump right to the next stage of the game.   The current MSB/MT regulation is a massive economic boom for the GreenDots, PayPals, and Western Unions of the world.  They will move massive sums of money in lobbying to kill any attempt that opens the flood gates for competitors.

Maybe this time will be different, it certainly is needed.

You say all this and you cannot smell the deep stench of CARTEL?!!!

The money business in the USA is a racket from top to bottom, Federal Reserve is the racketeer in chief ...  how else do you think was the whole sector able to extort hundreds of billions from the taxpayer in 2008 and get away with it?

Crawling to the racketeers asking for permission to run you own shop inside their protection network and expecting it to end well is the height of naivete, or just plain insane.

It's a racket, refuse to see that, deny the reality and you get what you deserve.

[CompNsci]

The current MSB/MT regulation is a massive economic boom for the GreenDots, PayPals, and Western Unions of the world.  They will move massive sums of money in lobbying to kill any attempt that opens the flood gates for competitors.

Maybe this time will be different, it certainly is needed.

Classic regulatory capture. This does suggest why Bitcoin businesses should try and fight the regulators and exempt themselves whenever possible.

The whole notion that placing a transaction on the blockchain is somehow the equivalent of transmitting sovereign currencies from one place or time to another on behalf of another party seems rather a stretch legally.

[BCB]

The current MSB/MT regulation is a massive economic boom for the GreenDots, PayPals, and Western Unions of the world.  They will move massive sums of money in lobbying to kill any attempt that opens the flood gates for competitors.

Maybe this time will be different, it certainly is needed.

Classic regulatory capture. This does suggest why Bitcoin businesses should try and fight the regulators and exempt themselves whenever possible.

The whole notion that placing a transaction on the blockchain is somehow the equivalent of transmitting sovereign currencies from one place or time to another on behalf of another party seems rather a stretch legally.

Exactly.

And that is exactly what must be challenged.

[franky1]

can we all quit worrying about government..  writing on a piece of paper in a law book cannot make bitcoin self destruct. people talking in government conference rooms/offices cannot make bitcoin self distruct.

so the government cannot make a law or argue in parliament / washington /etc to make bitcoin useless or broken.

the last time the government went about and made something so common and accessible to average joe illegal, it caused 'issues', but never completely eradicated it.

want some proof.. the prohibition era meant to have wiped out the alcohol industry. yet there were many underground bars, moonshine distillery's and special members only clubs that still got people drunk every night of the year.

infact without government acceptance, the workers and customers had a great time, the alcohol was cheaper and no red tape or paperwork to obide by, no licences, no declarations of tax.

if governments ban bitcoins, then no one would make tax declarations, due to having to question how they received their FIAT income. thus it would drive bitcoins underground, withot paying tax and making it easier for people to do cash for coin transactions totally free from the rules

[TheButterZone]

We need someone to sell a pound of bread flour for btc and have the flour mill pay it's workers in btc.

http://www.bitcoinclassifieds.net/ad/5233_Bobs_Red_Mill_bread_mix_220oz_bags/

[smoothrunnings]

I just read this Timothy Lavin Bloomberg story and wondered if it's been discussed yet. I can't seem to find anything on it. If it has please direct me to the thread. The comments at the bottom are as interesting as the article. He raises some interesting points considering all the recent action from government agencies lately (like Mike Caldwell's recent letter forcing him to close up shop). Will governments simply regulate Bitcoin to death like so many good ideas of the past? Will business competition cease to make Bitcoin a worthwhile alternative? Is this just another naysayer that is missing the "point" of Bitcoin? Is the "point" to provide an outlet for crime or does Bitcoin have a place alongside other payment systems and is simply waiting to claim its market share?

http://www.bloomberg.com/news/2013-08-08/did-the-sec-just-validate-bitcoin-no-.html

Wow a news article from August 8, of 2013 last year. I think you need to find something more up-to-date to entertain everyone. It's clear that in October/November of last year the price of bitcoin going up by more than 40% puts an end to the August 8th speculation story!

[marcus_of_augustus]

The current MSB/MT regulation is a massive economic boom for the GreenDots, PayPals, and Western Unions of the world.  They will move massive sums of money in lobbying to kill any attempt that opens the flood gates for competitors.

Maybe this time will be different, it certainly is needed.

Classic regulatory capture. This does suggest why Bitcoin businesses should try and fight the regulators and exempt themselves whenever possible.

The whole notion that placing a transaction on the blockchain is somehow the equivalent of transmitting sovereign currencies from one place or time to another on behalf of another party seems rather a stretch legally.

Exactly.

And that is exactly what must be challenged.

Yes, I agree, the racket needs to be challenged ... but for that to happen you will need to put a strongman in the Whitehouse, one with a single passport and a brain.

[QuestionAuthority]

We need someone to sell a pound of bread flour for btc and have the flour mill pay it's workers in btc.

http://www.bitcoinclassifieds.net/ad/5233_Bobs_Red_Mill_bread_mix_220oz_bags/

That's a start.

[QuestionAuthority]

I just read this Timothy Lavin Bloomberg story and wondered if it's been discussed yet. I can't seem to find anything on it. If it has please direct me to the thread. The comments at the bottom are as interesting as the article. He raises some interesting points considering all the recent action from government agencies lately (like Mike Caldwell's recent letter forcing him to close up shop). Will governments simply regulate Bitcoin to death like so many good ideas of the past? Will business competition cease to make Bitcoin a worthwhile alternative? Is this just another naysayer that is missing the "point" of Bitcoin? Is the "point" to provide an outlet for crime or does Bitcoin have a place alongside other payment systems and is simply waiting to claim its market share?

http://www.bloomberg.com/news/2013-08-08/did-the-sec-just-validate-bitcoin-no-.html

Wow a news article from August 8, of 2013 last year. I think you need to find something more up-to-date to entertain everyone. It's clear that in October/November of last year the price of bitcoin going up by more than 40% puts an end to the August 8th speculation story!

https://bitcointalk.org/index.php?topic=394890.msg4259124#msg4259124

[BCB]

Bitcoin price will stabilize and adoption will grow to the same degree that we see businesses accepting bitcoin as payment.

Bitcoin as a payment protocol currently holds more value for merchants then for users, as the merchants are the one who are hit with the high charges (which they then pass on to the consumer)

Merchants also need to understand that if they use a company like bitpay.com they assume NO currency volatility risk.  That is the biggest fear and the biggest misunderstanding right now.  

EDIT: I have no association with bitpay.com

[Peter R]

Bitcoin price will stabilize and adoption will grow to the same degree that we see businesses accepting bitcoin as payment.

Bitcoin as a payment protocol currently holds more value for merchants then for users, as the merchants are the one who are hit with the high charges (which they then pass on to the consumer)

Merchants also need to understand that if they use a company like bitpay.com they assume NO currency volatility risk.  That is the biggest fear and the biggest misunderstanding right now.  

EDIT: I have no association with bitpay.com

Thank you for all your intelligent and knowledgable posts today, BCB. 

You just mentioned BitPay.  May I ask how much (if any) legal/regulatory risk you see with their present business model?

[BCB]

It is my understanding that bitpay is a "third party payment processor" which is EXEMPT from "money transmitter licensing"

Essentially Bitpay has a contract with their clients, the merchant and when a consumer sends bitcoin to bitpay and bitcoin converts that to cash and sends it to the merchant, the consumer is "legally" sending "other value that substitutes for currency" directly to the merchant. There for bitpay is not a "money transmitter."

EDIT: Bitpay does perform extensive Know Your Customer(KYC) vetting on it's merchants to prevent being caught up in any fraudulent or illicit activity.  This is a MUST for any legitimate virtual currency business.  See e-gold ltd.

[QuestionAuthority]

Bitcoin price will stabilize and adoption will grow to the same degree that we see businesses accepting bitcoin as payment.

Bitcoin as a payment protocol currently holds more value for merchants then for users, as the merchants are the one who are hit with the high charges (which they then pass on to the consumer)

Merchants also need to understand that if they use a company like bitpay.com they assume NO currency volatility risk.  That is the biggest fear and the biggest misunderstanding right now.  

EDIT: I have no association with bitpay.com

Thank you for all your intelligent and knowledgable posts today, BCB. 

You just mentioned BitPay.  May I ask how much (if any) legal/regulatory risk you see with their present business model?

I was just going to ask that. Are they in compliance and if so what actions did they take to become fully compliant?

[DeathAndTaxes]

If I'm reading this right, you are predicting the inevitable failure of Bitcoin as a mainstream financial tool. Start-ups can't afford the cost of entry and power-brokers with deep pockets will crush new legislation, yes?

Well the US isn't the entire world, the rest of the world doesn't really care how dysfunctional the US regulatory structure is.  So I see two potential outcomes (and I should state this is my personal opinon doesn't reflect the views or intentions of my employer).  One potential outcome is that startups abandon the US market.  They operate when regulation while not non-existent is at least not an impossible burden.  The ones which are successful gain the resources to handle the large fixed overhead that MT licenses creates.

The other scenario is startups in the US comply with federal requirements, and are able to grow faster than the response from states; in essence grow to survive.

It certainly is an obstacle to growth, and innovation but progress already routes around the damaged parts of the system.  Bitcoin will survive, however the US may simple lose its status as the "tech capital" when it comes to Bitcoin related enterprises. I am not saying that is a forgone conclusion but the regulatory risk and uncertainty doesn't help.

[QuestionAuthority]

It is my understanding that bitpay is a "third party payment processor" which is EXEMPT from "money transmitter licensing"

Essentially Bitpay has a contract with their clients, the merchant and when a consumer sends bitcoin to bitpay and bitcoin converts that to cash and sends it to the merchant, the consumer is "legally" sending "other value that substitutes for currency" directly to the merchant. There for bitpay is not a "money transmitter."

But is it not possible for a drug dealer to sell drugs for btc then buy a couple of lamborghinis at a dealership for btc and sell them for dollars. In that scenario isn't BitPay enabling money laundering?

[BCB]

It is my understanding that bitpay is a "third party payment processor" which is EXEMPT from "money transmitter licensing"

Essentially Bitpay has a contract with their clients, the merchant and when a consumer sends bitcoin to bitpay and bitcoin converts that to cash and sends it to the merchant, the consumer is "legally" sending "other value that substitutes for currency" directly to the merchant. There for bitpay is not a "money transmitter."

But is it not possible for a drug dealer to sell drugs for btc then buy a couple of lamborghinis at a dealership for btc and sell them for dollars. In that scenario isn't BitPay enabling money laundering?

A drug dealer would not be able to open an account with bitpay. (If that is what you are asking???)