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US Government Embraces Bitcoin in Hearing on Virtual Currency
Daniel_Stuckey writes "Congress held its first-ever hearing on virtual currencies this afternoon, and it may have been the best PR boost bitcoin's had yet. The tone at the hearing held before the Senate Homeland Security and Government Affairs Committee was overwhelmingly positive as the panel weighed the risks of the technology that grew out of the criminal underbelly of the web, with the potential economic value of the now-booming futurist money. The prevailing sentiment over the two-hour deep dive into the pros and cons of the digital coins boils down to this: We need to uphold America's position as center of technical innovation by welcoming the new currency—but that that can't be done without government safeguards and regulations."
SonicSpike wrote in with a link to another report in Bloomberg. The Federal Reserve has no plans to regulate Bitcoin (lacking regulatory authority), but the SEC chair wrote "Regardless of whether an underlying virtual currency is itself a security, interests issued by entities owning virtual currencies or providing returns based on assets such as virtual currencies likely would be securities and therefore subject to our regulation."
...but that that can't be done without government safeguards and regulations
What they really mean: Congress is very excited at having found something new to tax.
Downside though is the extreme volatility of them.
No one is going to convert their millions in a slush fund into bitcoins if it'll mean that the value will spike and dip on daily basis. Financial security means confidence in a currencies value.
The problem with Bitcoin now is that it's being used mostly for speculation, not for trade. You can't price anything in Bitcoins when the price changes 30% in one day. If you accept Bitcoins for anything that doesn't have a huge markup, you can get clobbered by the price fluctuation before you get the payment converted.
Worse, the "exchanges" are very, very flaky. Over half of the Bitcoin exchanges have gone bust. Mt. Gox hasn't paid out US dollars since August, large euro payments seem to be randomly delayed, and some days customers can't get Bitcoins out. Coinbase, which is a dealer, not an exchange (you're buying and selling to and from them) will sometimes drop out of the market because they can't buy or sell Bitcoins (and actually get the funds delivered) on some other exchange. Not one Bitcoin exchange is publicly audited or insured, yet they hold customer funds.
Tradehill was going to be the "legitimate Bitcoin exchange". They went bust. Another exchange in China just disappeared last week, with the customer money. A solid exchange, registered as a broker/dealer in some reasonably legit country, would be a big step forward.
And that will eventually replace everything else.
It really depends on the amount of invested (or converted) money. The ups and downs are a symptom of the poor market depth of bitcoin. My real problem with it is that I don't see the market depth becoming deeper any time soon with the deflationary properties of bitcoin.
But if you're worried about your wife finding out you're frequenting the hookers, the only thing she needs to find is the wallet the 'coin was in immediately before it ended up in the hooker's/brothel's wallet. She just needs to see a (you,hooker) sequence. It doesn't matter where the 'coin goes after that, and the hookers could easily be keeping all the information on which wallets they were paid from before they transfer the 'coins onwards. I'll keep paying for hookers with cash, thank you very much.
currencies don't and can't exist in a vacuum outside the framework of rule of law with zero transparency and accountability
Oh yes they can. Was the case for centuries and centuries during the Roman Republic. Any coin would be traded on the basis of the instantaneous value of its gold, silver or copper part. If you wished to pay in, say, Greek statera or Seleucid Antiochian gold coins, the city-state in Greece or the Seleucid empire had no say in and no overview over the transaction. It was a private deal between a private person ( you ) and some private merchant. Only the Roman emperors began to draw control over currency towards them, e.g. Diocletian managed to force a ( then much-needed ) devaluation of the Roman sestertius, something that would have been impossible under the Republic.
Religous speak to God. Insane are spoken to by God. When all shut up, one can finally hear Shostakovich in peace
You are forgetting another deflationary pressure on bitcoin; increased adoption. As more people want to use bitcoins the demand for them goes up. Demand goes up, so does the price of bitcoins and thus the commodities prices expressed in bitcoins go down. Deflation.
Given how little bitcoins are actually used today this is a very significant hurdle to more widespread use.