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."

Comments

Two things glossed over in the summary

[Derec01]

From watching a bit of the C-SPAN coverage, I found it interesting to note that several of the witnesses from law enforcement effectively stated that:

1.) Current regulations had not hampered their ability to pursue criminals
2.) They saw more danger from centralized currency systems based in fringe countries than from "decentralized currencies such as Bitcoin"

That explains the spike

[gman003]

So that's why BTC jumped up to $900 today, after opening around $500. I bet some speculators made a ton of cash that way.

Re:That explains the spike

[jd]

Have to say you make excellent points. It's why I avoided even looking at bitcoin for the longest time. (Early on, the value was less than the cost of the electricity and as the computations were only going to get harder, the likelihood of benefits was nil. It didn't help that something for nothing often ends badly for the people who think they're paying nothing.)

Really, for a good virtual currency, you need it pre-generated and beyond the ability of computers in the next 30-40 years to potentially break. 150-200 years would be ideal. That isn't bitcoin. Don't get me wrong, bitcoin looks less vulnerable to counterfeiting than regular currencies, but I remain unconvinced that it will prove strong over the lifetime of currencies. When currency lifetimes are measured in centuries, knowing something was strong last week isn't really good enough.

(I can't say the US decision thrills me, knowing that the same people applauding bitcoin have interfered with crypto development.)

What we have right now is hyperinflation due to rampant speculation. A few will get rich quick, a lot will get poor even quicker when the bubble bursts. We've seen, what, 800%, 900% inflation this year? Competing with Zimbabwe? This isn't remotely sustainable, especially as everyone and their pet dog can run a bitcoin miner and cash out via one of the ATMs or an exchange service.

We've also now seen cases of virtual bank robberies, with owners of online wallet services cutting and running. Yes, that happens with physical banks too, but all that tells me is that a lot of old problems remain, a lot of new problems are added, and still no sign of actual benefits.

I want a virtual currency that works. Mondo experimented with electronic cash in the late 80s, early 90s, where you had smart cards you could actually use in real stores to make payments without going via any bank. It was an interesting system, it used a real currency rather than a virtual one but that's immaterial as it could have used anything. The fact is, they had a working system for utilizing electronic money without involving central systems. It should be very easy to do better today and have more places adopt it.

Combine that with a currency that isn't scattered at random on some mathematical version of a sidewalk (pavement in the UK), and you'll have something that really does impress for all the right reasons.

Re:Oh look!

[aaronb1138]

A few really simple reasons the government would be in favor of Bitcoin:
1) Gain control early.
2) Every transaction leaves a trace. The idea that Bitcoin is anonymous is a bit of bullshit. Yes, right now the exchanges keep one hand from knowing the other. This is easily changed.
3) In aggregate, it's impossible to trace for a non-government entity. This means slush fund spending woohoo time.
4) Politicians have figured out that the extreme anti-social end of the internet from which Bitcoin has gained its popularity are a bunch of socially inept jack offs. They know these people have poor impulse control and too much intellect, but are easily swayed by marginal amounts of lip service.

Huh

[umdesch4]

I guess I missed the happy, joyous part then. I watched the first hour and 20-some-odd minutes of this hearing, and if I had taken a drink every time they said "child pornography", I would be in the hospital now.

Re:Kiss of death.

[Jane Q. Public]

"Ha. Now the libertarians are going to abandon it wholesale.
No fun when the big bad gubmint likes your freedomcoins."

Nonsense. It has nothing to do with what the government likes. It has everything to do with whether, and how, government "regulates" it.

Just watch. Somebody in government will attempt to regulate it in a way that is fundamentally at odds with the mathematics of how Bitcoin works. It's almost inevitable.

Like, just for example: trying to legislate a fixed exchange rate for dollars. (Just an example. I doubt they'd be stupid enough to do that exact thing. But you never know.)