European Central Bank Casts Wary Eye Toward Bitcoin

An anonymous reader writes "Erik Voorhees blogs for bitinstant.com: 'On Oct 29, 2012, the European Central Bank (ECB) released an official (and very nicely prepared) report called "Virtual Currency Schemes (PDF)." The 55-page report looks at several facets of what virtual currencies are, how they're being used, and what they can do. As it happens, the term "Bitcoin" appears 183 times. In fact, roughly a quarter of the whole report is specifically dedicated to Bitcoin and it's probably a safe assumption that Bitcoin's growth over the past year was the catalyst for producing this study in the first place. The report from the ECB concludes, in part: Virtual currencies fall within central banks' responsibility due to their characteristics, and Virtual currencies could have a "negative impact on the reputation of central banks."' Could this be the first step toward regulation of the digital currency?"

Comments

Cast in a negative light, obviously

[durrr]

Virtual currencies could have a "negative impact on the reputation of central banks."'

By showing that the legion of morons and regulation and other peripheral bullshit associated with central banks are entirely unecessary and even counterproductive. Thus rendering, among others: the person that wrote the study potentially useless and unemployed.

Re:Cast in a negative light, obviously

[MatthiasF]

"That would save billions or trillions of dollars per year probably."

And put a lot of people out of a job, don't forget that.

Every time you make a system too efficient, you reduce the number of workers but with economies it's important to have as many people working as possible.

So you're stuck trying to balance efficiency with employment.

Re:Cast in a negative light, obviously

[fridaynightsmoke]

"That would save billions or trillions of dollars per year probably." And put a lot of people out of a job, don't forget that. Every time you make a system too efficient, you reduce the number of workers but with economies it's important to have as many people working as possible. So you're stuck trying to balance efficiency with employment.

That must be why we subsidise the manufacture of buggy-whips and break all the windows every year to keep the glaziers in business, right?

Re:Cast in a negative light, obviously

[Twinbee]

And put a lot of people out of a job, don't forget that.

Only in the same way that the number of professional glass makers would be reduced if vandals stopped breaking windows.

Every time you make a system too efficient, you reduce the number of workers but with economies it's important to have as many people working as possible.

I disagree. We need to keep or gain productivity, sure. But that's what counts, not the number of workers doing said work. And no, I'm not some hardcore capitalist, as I think a basic income for everyone would be a good idea (unconditional money on top of any regular work income). Even the rich are happier when the poor have a relatively decent standard of living.

Re:Cast in a negative light, obviously

[jcr]

And put a lot of people out of a job, don't forget that.

That's a good thing. Any job that can be eliminated through technological advancement makes people available for more important work.

-jcr

Re:Cast in a negative light, obviously

[spire3661]

Who gives a fuck if a job is lost? I have no problem replacing men with machines. A competent man will find a new way to sustain himself without relying on holding back progress.

Re:Cast in a negative light, obviously

[Luckyo]

Vast majority of "bank red tape" isn't something you can solve through technical means. That is because it's in place to control the human factor, also known as "opportunity makes a thief". And with rewards size of a bank, there are plenty of those looking for opportunities.

Re:Cast in a negative light, obviously

[ultranova]

I was referring to the Broken window fallacy, which could completely remove unemployment, if vandals decided to cooperate. The amount of time and effort wasted with banks and their red tape is pretty similar to that.

The problem is, Broken Window Fallacy is only a fallacy in the sense that an economy which has to use lots of resources to deal with vandalism is less well of than an otherwise identical economy which instead uses these resource to expand. It says absolutely nothing about whether a statement like "our economy would collapse if vandalism stopped all of a sudden because a lot of glassmakers would be out of work" is true.

Destruction or busywork may not create prosperity, but they can be used to spread it around; and while a more rational way might be to simply pay the unemployed glassmakers social security benefits and retrain them, that solution seems to strike those better off as unfair, so that leaves either letting them starve - which will lead to a revolution eventually - or making enough busywork through bureaucracy or breaking windows to ensure near-full employment and simply accept the resulting waste as a price to pay for people's irrationality.

first step to regulation of digital currency?

[nurb432]

No, its the first step toward eradication of it. The freedom of being able to buy something anonymously is soon coming to an end. Not only does it threaten banks and their empire, but governments too.

Re:first step to regulation of digital currency?

[nurb432]

A private sale of a used product should not be a tax event ( which is what is mostly happening today with anonymous currency ). It doesn't matter what i bought or sold, I dont want my transactions 'officially recorded' its no ones business other than mine and the seller/buyer.

If you want to talk about businesses not collecting tax on a new item, then that is not a problem of the currency, but of fraud and will be caught evenutally due to 'missing' inventory reports and such. ( and it should still be anonymous, no one needs to know i bought a candy bar.. )

Good luck with that

[stevegee58]

I'm not sure how a decentralized, electronic currency can be "regulated" at all.

Re:Good luck with that

[betterunixthanunix]

Well, if you think the government is not going to protect you, I hope you live in a tactically advantageous location, have a stockpile of ammunition and guns, and a magic source of food. If not, then tell me this: what stops me and a group of my friends from coming to your home, killing you, and claiming your property as our own?

See, if we have a dispute like this -- one in which I claim that I am actually the rightful owner of your things -- we can either ask the court (i.e. government) to settle the dispute, or we can let strength settle the dispute. In some places, where the courts are not respected, that is how disputes are settled, and people kill each other all the time (which actually leads to more disputes, and more killing). That is why we have courts, laws, and governments: so that we do not kill each other over disputes.

Bitcoin is doomed because of programmed deflation

[MatthiasF]

Not many people realize why central banks exist, but their primary role to to assure a consistent monetary policy, specifically one encouraging minor inflation (1-4%). Why is that important and necessary? Because economies run best at a steady, expected pace. When inflation grows out of control, habits change with spending and investing (people buy less long term investments and more short-term riskier ones, or consumers horde goods) and we know from history that when an economy goes from inflation to deflation there is massive chaos not only in the markets but with consumer spending (as people sell off short-term investments for long term or consumers decide to hold off buying things knowing the cost will go down).

So, economic systems need a slow upward progression for currency to assure the economy to be healthy and Bitcoin offers that with the algorithmic generation but if the coins are generated too quickly (by some advance in computer processing), horded by a few people or other circumstances that reduce the liquidity of the currency (like the massive exchange thefts we've seen), the currency itself will begin to shift from the programmed inflation to deflation.

What's more is the fact that Bitcoin has a limit to the number of coins, which means when it hits that limit and the price of an apple goes from 1 coin to 0.1 coin, you just created programmed deflation and the behaviors of the users of the currency will change causing chaos against other world currencies that are targeting gradual inflation.

Re:Einen moment, bitte.

[durrr]

People legally dodging large amounts of tax?
You mean like the entire range of Fortune 500 companies and the associated persons?

Re:Bitcoin is doomed because of programmed deflati

[Anonymous Coward]

I hear this tirade over deflation over and over again... but I see no actual evidence for it, and there is a spectacular counter-example: technology. The tech industry has been in constant deflation since its inception. You get more and more computer (memory, storage, processing, bandwidth, what-have-you) for less and less money every year (if not every month). Yet the tech industry has not come falling down because of rampant deflation. Where's the proof that deflation is bad?

Re:Wonderful

[arose]

All bitcoin transactions are publicly recorded, it's a cornerstone of the protocol. The only secrecy is that you are pseudonymous as a function of being identified by a public key.

Re:Rare Metals?

[pmontra]

They have no intrinsic value. Iron could be more valuable than gold as anybody would discover going to a fight with a golden sword against an iron one. People have been trained to believe that gold is precious. It will be as long as this belief lasts.