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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."
Good grief.
...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.
This is how it is. Bitcoin has been rising in price massively over the last few weeks. People in the Gov knew this hearing was coming, which would spike the price. The recent increase is due to the corrupt rich and "public servants" buying in for the big explosion in coming days... and then the crash.
Think about it, governments are basically contrarian indicators to any truth or knowledge or insight. That's all I wanted to say about this: BTC can be 1,000,000 USD per coin tomorrow or it could be 10 cents. Nobody knows, there is no intrinsic value whatsoever, more currencies of this type are created all the time, that's how you have inflation in BTC (never mind that every single BTC is actually a stack of 10,000,000 coins in its own right, all of which have exactly the same intrinsic value as the 1BTC, which is to say 0).
BTC may as well be 1,000,000,000 dollars in 2 months, who knows, but without a mechanism to SHORT this coin (except by not owning it), what I mean is without a mechanism to borrow coins to sell them, there is no downward pressure at all, while so many people are enticed into this particular pyramid, feeling like they are missing out on something. The early holders of BTC may all be millionaires right now if they sell. They have everything to gain from higher prices, they won't sell and if you want to buy, you have to pay more and more.
What happens when large holders want to sell without any prior shorting in the market?
You can't handle the truth.
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"
The fact that you think Bitcoin is a Ponzi scheme shows just how little you know about the currency.
And slushfunds ?
It's the only motivator I can think of for congress to do this
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.
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.
Nothing to see here, move along.
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.
Ha. Now the libertarians are going to abandon it wholesale.
No fun when the big bad gubmint likes your freedomcoins.
Because everything else our glorious government tries to control turns to gold.
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.
Bribes, prostitutes, extravagance ... all require anonymous, untraceable forms of money.
If politicians didn't require it, governments would have banned cash long ago.
If the government gives this at least a tacit pass, then I foresee a rise in electricity consumption. Those with non-electric heat should do well while they're crunching.
From a government perspective what is there really not to like about bitcoin? Circulation is self limiting and all transactions might as well be posted on the front page of the New York times.
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.
Well; they can maintain their slush fund in USD; in order to transact in BTC safely, convert only funds required to make a payment into BTC, require a contingent contract, for the time in between agreement and payment; that is, a contract that the buyer (at the buyer's sole option) can cancel, or re-price based on the current exchange rate, if the price of BTC fluctuates too much; between the time the agreement is made, and the time prompt payment can be completed.
... or what a Ponzi scheme is.
No Inflation Taxation without Representation
The hopes underlying Bitcoin rely on the belief that this currency has qualities which other currencies lack, namely anonymity and freedom from government manipulation. This hearing seems to be a bunch of government officials saying that they love Bitcoin, but the government is already getting good at figuring out who is participating in transactions and wants to figure out how to regulate it, which would be a trick to pull off without making it vulnerable to government manipulation. What is left if these are no longer credible advantages?
embrace extend extinguish
And that will eventually replace everything else.
Not only is it mostly speculation, but even the times when people claim it is being used for trade, like the Silk Road, it really isn't, it is being used to launder money. It wasn't actually being used because it is an amazing currency, but rather because people believed it was a way to anonymously buy illicit goods, ie launder money to pay for them.
They only legit trade uses I've seen quoted have been totally worthless: Sites that will exchange bitcoins for gift cards at places like Amazon, with a 10% or more markup (when those same sites sell gift cards with a 0% markup using standard currency).
As you say, the speculation has to go from the market if it is ever to be considered a currency. While currencies do fluctuate, they don't move as much in a year as bitcoin does in a day.
Technically, the current "US dollar" came out of the criminal underbelly of Wall Street.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
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.
It's not a Ponzi scheme... it's a Poncey scheme!
Source: http://www.urbandictionary.com/define.php?term=poncey
I felt bad for the man who had no signature, until I met a man who had no comment.
From the summary: US Government Embraces Bitcoin in Hearing on Virtual Currency
So glad that they are embracing Bitcoin. However, that reminds me of a quotation. From Wikipedia:
I felt bad for the man who had no signature, until I met a man who had no comment.
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
Stability will come from a larger userbase.
they create trillions out of thin air every day lol. the difference is unlike the usd when bitcoin flood the market miners quit mining and walk away normally when the cost is higher then there power bill so bitcoin are common and gotten on the cheap but as the numbers dry up its value climbs then the miners return to mining. we cant just walk away from the usd until its worth something again it just becomes more worthless and the government prints out trillions for new privet jets.
Well its not criminal as they control washington and make the rules up as they go along.
WHY would you bother with bit coin if you're going to store it in USD. What would be the point, other than being trendy?
Persistent Volume manager for Kubernetes - https://github.com/dwimsey/openshift-pvmanager
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.
0) They want to be able to accept anonymous, untrackable 'donations' to themselves using bitcoins.
blindly antisocialist = antisocial
This isn't a work of art or something... it's designed, from the ground up, to be a currency. Trying to argue to the IRS that a mined BitCoin isn't a cash-equivalent is not going to end well.
Would 500 bitcoins look as ugly as this? I never thought I'd see a production vehicle uglier than an AMC Gremlin, but then I never thought I'd see a president worse than Reagan either.
"Think about how stupid the average person is. Now, realise that half of them are dumber than that." - George Carlin
"The Federal Reserve has no plans to regulate Bitcoin (lacking regulatory authority)." It lacks regulatory authority because it is private and has the same authority as Bank of America, CitiBank, or American Express to try to regulate BitCoin.
Lewis was injured by a Federal Reserve vehicle and tried to sue under the Federal Tort Claims Act. It was thrown out.
Search this in your favorite search engine:
Lewis v. United States, 680 F.2d 1239 (1982)
Plaintiff, who was injured by vehicle owned and operated by a federal reserve bank, brought action alleging jurisdiction under the Federal Tort Claims Act. The United States District Court for the Central District of California, David W. Williams, J., dismissed holding that federal reserve bank was not a federal agency within meaning of Act and that the court therefore lacked subject-matter jurisdiction. Appeal was taken. The Court of Appeals, Poole, Circuit Judge, held that federal reserve banks are not federal instrumentalities for purposes of the Act, but are independent, privately owned and locally controlled corporations.
Federal reserve banks are not federal instrumentalities for purposes of a Federal Tort Claims Act, but are independent, privately owned and locally controlled corporations in light of fact that direct supervision and control of each bank is exercised by board of directors, federal reserve banks, though heavily regulated, are locally controlled by their member banks, banks are listed neither as "wholly owned" government corporations nor as "mixed ownership" corporations; federal reserve banks receive no appropriated funds from Congress and the banks are empowered to sue and be sued in their own names. . . .
Organization: alphabetical, sometimes numerical or messy
BTC has everything BUT unusually consistent returns. It fluctuates widely.
This is a big point. They could take bribes internationally without having to handle suitcases full of cash, it will revolutionize the business of political corruption.
"When information is power, privacy is freedom" - Jah-Wren Ryel
We rented the low-end 500 on a trip last year. Such bad visibility that it has convex mirrors like an RV. Lousy acceleration (the higher end models are likely spunkier, but still, this car weighs nothing). Bizarre layout for all of the instruments. It was like driving a little tiny garbage truck.
An interesting anagram of "BANACH TARSKI" is "BANACH TARSKI BANACH TARSKI"
I see the complaint about Bitcoin transaction history all the time in these stories. From what I can gather, there are two downsides: theoretical loss of anonymity and data storage.
So, is it impossible for Bitcoin to eventually support some form of transaction truncation, where a chunk of transactions are authenticated and then replaced with a detail-losing marker?
See! If the US embraces a Ponzi scheme, it MUST be okay!
Actually this is very much true. Social Security actually meets all of the definitions of a Ponzi scheme, and likewise it is the only Ponzi scheme that is not illegal.
Careful with names containing L slashdot.org/~AiphaWolf_HK slashdot.org/~AlphaWoif_HK slashdot.org/~AiphaWoif_HK
A) They didn't embrace it.
B) It was about the concept of electronic currency, not just bitcoin.
C) They talked about the problems with Bitcoin specifically.
The Kruger Dunning explains most post on
"Any coin would be traded on the basis of the instantaneous value of its gold, silver or copper part."
nope.
Different coins from different area would be worth different values, even for the same weight, based on who minted the coin.
Not all gold had the same purity level. So even then a framework of trust was a factor
The Kruger Dunning explains most post on
Because it's backed by the general revenues as taxing authority if the United States. Big difference when your a government and can arbitrarily adjust all the externalities to suit your needs.
It doesn't remotely level the playing field, they have half the money, and unlike us, they can spend almost all of it with no ill effects.
"When information is power, privacy is freedom" - Jah-Wren Ryel
And be thrown in jail for violating sanctions rules. Brilliant.
Moving money between places that allow it is easy, moving money to places that don't allow it isn't challenging for the fun of it, it's hard because there are laws in place about moving money in and out of countries. If you're moving money out of somewhere that doesn't allow it, or money into somewhere under sanctions you're going to find yourself in a world of trouble.
When I read the news of its latest spike the first place my thoughts ran to was that it was being deliberately manipulated.
Nullius in verba
Being manipulated is very different from offering consistent returns. All markets and currencies are manipulated. Bitcoin is just more volatile than most currently, and as such an easier target for manipulation.
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation.
That's the definition of a ponzi scheme and the current way cash equivalency for BTC is attained.
Tell me I'm wrong.
You're wrong. Bitcoin is not a Ponzi scheme.
1) Bitcoin is not an investment. You're not paying for a stake in an operation, you're buying a commodity.
2) Consistent with the first point, Bitcoin doesn't promise or pay returns. You don't get anything "from Bitcoin". You may be able to sell your bitcoins later for a higher (or lower) price than you paid, but there are no guarantees.
3) There is no individual or organization "running" Bitcoin. That's the whole point—it's decentralized, with no one in charge. There is no one to run your hypothetical Ponzi scheme.
The primary identifying factor of a Ponzi scheme is promises of high returns for little risk, with actual returns being paid out of investor's own funds. Bitcoin cannot qualify because no one qualified to speak for Bitcoin (and there really isn't anyone qualified to speak for Bitcoin) has made any such promises.
Don't take my word for it, however. The SEC has its own document describing Ponzi Schemes Using Virtual Currencies. Note carefully that while they discuss some Ponzi schemes that involved Bitcoin, they never try to claim that Bitcoin itself is a Ponzi scheme.
"The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
I'd suggest you reword this statement for internal consistency. As commodities can also be investments.
Fine. Bitcoin is not an investment operation. It's as much or as little an investment as you want it to be, like anything else, but that's hardly relevant here.
Again, nowhere does it state that the promise of a return comes from Bitcoin itself. This is not required to classify as a Ponzi scheme.
It's required if you want to call Bitcoin a Ponzi scheme. Otherwise you only have a Ponzi scheme which happens to involve bitcoins, much like many other Ponzi schemes involve the U.S. dollar.
There's groups of people, each hoping that the next person in is an even bigger sucker than they are.
While I'm sure such groups exist, that isn't sufficient to make Bitcoin a Ponzi scheme.
Which is more or less what's happening here.
No, it isn't, because no one is making promises of high returns—the most important part, which you seem to have conveniently skipped over. Bitcoin may well be in the middle of a bubble at the moment, though just how much of a bubble and where the price will end up are open questions. That doesn't make it a Ponzi scheme.
If you find someone who is promising that buying Bitcoins will provide you with high returns at low risk, then I would agree that that person is running a Ponzi scheme. It would be their Ponzi scheme, however, not Bitcoin's. Calling Bitcoin a Ponzi scheme is as misguided as calling gold, or oil, or tech stocks Ponzi schemes—they've all experienced similar bubbles in recent history.
For that matter, even calling the Bitcoin market a bubble doesn't really characterize the situation. It's a new thing, with a lot of potential, but also a lot of enemies and technical, social, and legal hurdles to overcome. No one really knows what to make of it. If it fails, the current price is obviously way too high. If it succeeds, however, then it's hard to argue that the current price is anywhere near high enough. To achieve its ultimate goal and replace all other currencies, the price would have to be about $3,000,000/BTC in today's dollars, based on the world GDP and the 21 million BTC limit. Thus the large price swings—they reflect the underlying uncertainty about Bitcoin's future. It's not really a bubble because you can't really argue that it's being priced above its rational worth. It all depends on how you expect this experiment to turn out.
"The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
Quoting myself:
To achieve its ultimate goal and replace all other currencies, the price would have to be about $3,000,000/BTC in today's dollars, based on the world GDP and the 21 million BTC limit.
In retrospect, it doesn't make sense to simply divide the global GDP by the number of currency units, since that ignores the velocity of money, clearing, etc. For a more apples-to-apples comparison, the sum of the USD and Euro M2 figures (after converting euros to dollars) is about $22 trillion. This represents all the dollars and euros presently in circulation. To replace just dollars and euros, ignoring the rest of the world for the moment, would require a price above $1 million per bitcoin. That's the wildly-optimistic view, of course; even if Bitcoin is successful, which remains a big "if", it may not fully replace conventional currencies.
"The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
By "ill effects" I didn't mean getting caught by the law. I meant not being able to pay your bills and survive.
"When information is power, privacy is freedom" - Jah-Wren Ryel
"...risks of the technology that grew out of the criminal underbelly of the web..." The "technology" wasn't created with a "criminal intent" but with a PRIVACY intent. It is unfortunate that that same characteristic made it very convenient for illegal trading. The same "quality" of anonymity that cash has. Valuing privacy doesn't make you a criminal. Also, I don't think the fleecing of their costumers by some e-paying services should go on unchallenged.