Regulation where it's necessary (like exchanges) is understandable. Regulation of transactions between individuals and vendors for example is not reasonable. And virtual currency should prevent such regulations by its own design - i.e. there simply should be no technical way to regulate that.
Great idea: "Oh, yes, I totally agree with the need for Bitcoin regulation. In fact, every transaction should be required to be made available to the public ..."
Worth noting there are several projects working on making crytocurrencies much more private. Matthew Green's zerocoin and zerocash are the strongest, providing provable anonymity.
In principle, zerocoin could be added to bitcoin, but the bitcoin devs aren't up for it yet. Zerocash is so different it pretty much has to be an altchain.
Well, if digital currency should be equal to cash, it should not be regulated just because someone left a technical door to do that. I.e. it has to be made equal to cash in practice and be unregulated by design.
As long as there is cash, there will be a way to get bitcoins outside of an exchange and outside of any regulation.
Even if this were not the case, the more regulation added to bitcoins, the more people move to alternative crypto currencies. I don't see people seeking to regulate litecoin, dogecoin, coinye, etc.
I imagine most regulation to bitcoin would be more vague and instead be written to apply to all cryptocurrencies.
People aren't calling for the regulation of other cryptocurrencies mostly because they don't have the same kind of usage and economy surrounding them that bitcoin has. If people start trading coinye in the same way and it reaches similar volumes as bitcoin, you'll see the same sort of talk. It just makes more sense to treat cryptocurrencies the same under the law, unless there is something about a particular one that made it most different than all the other current variations.
When I hear the general media talk about "bitcoin", I assume they actually mean all crypto-coins unless they cleary indicate they're talking about a particular coin.
Like when my parents refer to all videogames as "Nintendo".
I agree. I think every bitcoin transaction should be reviewed by finely trained employees of Finance Security Agency (FSA). Amongst other things they should make sure:
1. Correct amount of bitcoins were withdrawn from source bitcoin wallet.
2. Correct amount of bitcoins were deposited into target wallet.
3. Both target and source wallets are valid.
4. Etc.
AFAIK, bitcoin is currency and FX market is in generally way less regulated compared to securities market. Thus any regulation introduced would be targeting money transfers between individuals, rather than exchanges[1].
[1] We probably should regulate exchanges, as of right now it is super simple for exchanges to make profit on their customers. Consider following strategy, whenever bitcoin order comes in that moves market exchange would execute small order in same direction before customer order, reverse order as soon as larger order moved market. Instant profit.
I really want to believe this comment is a joke...
Everything that you mention that needs to be "regulated" is already regulated by the bitcoin protocol itself. In fact, the whole point is to replace regulation with strong cryptographic proof.
Good sir, surely you jest, how else we will maintain security of this nation if FSA will not monitor and double check every single transaction? What if some bitcoins will go missing in transit from source to target wallet?
First part of the post is indeed a joke, I am pretty sure comments on FX markets and strategy that exchanges could use to game the customers are accurate.
> Bitcoin has fluctuated wildly in value, highlighted by a chart from Coinbase showing that it increased over 400 percent in November and then lost nearly half its value in December. That type of volatility is an invitation to unscrupulous dealers and merchants to overcharge or underpay.
> To protect consumers who want to use Bitcoin for legitimate transactions, the government may adopt reporting requirements on virtual currency exchanges so that there is a public repository of information about prices. Although the government cannot control the value of a virtual currency, it can make the currency more transparent to users so that they are not defrauded.
---
Ehhh, really? In one paragraph they point out the price history of Coinbase, and then in the next paragraph they say "the government outta do it".
And yeah-- the government is technically unable to control the prices of virtual currencies but government also _should not_ be in the business of controlling prices anyway. That leads to a distortion of market prices and a bad deal for one side or the other.
I'm not surprised to see this "threat" angle approached by NYT. Most of their articles on Bitcoin have been negative so far, and about how awful Bitcoin is whether from an economic point of view or from an "enabling crime" point of view.
Normally, you would see "real journalists" try to balance the views, and insert opposite views and quotes in their articles. But not here, it seems.
Any business opportunity, currency, financial instrument, etc. that makes enough money is absolutely 100% going to be regulated for two reasons:
1. Consumer Behavior Requires It
2. Large Companies Thrive On Regulation
To point one, if you have anything that is making people a lot of money one way or another, there will be scams and fraud. Once there are scams and fraud, the government gets involved and has to clean up the mess. Then laws are made to stop the problems from happening in the first place. Eventually you need business licenses, certification, etc. to transact business because too many people got ripped off.
To point two, regulation and rules actually end up favoring the entrenched companies. Usually regulation creates barriers that reduce competition. For example, to trade securities, sell insurance, or sell real estate you need to get a license. To get a license you need to take exams and pay money to be certified. Most people won't go through that effort and so the larger companies make a lot of money from the lack of competition.
Rules and regulations might be annoying, but they are a sign of maturity and growth in many cases so it's not all bad.
That's an interesting way to put it. You're basically saying that Bitcoin will be regulated, either because the regulations will be good for society (in which case society will advocate for them) or bad for society (in which case society may not advocate for them, but those with political power will).
I think the (2) has an unnecessarily biased phrasing. The capacity to deal with regulation, whether that regulation is good, bad, or otherwise at the macro level, is just one of the many economics of scale that can be harnessed by large companies. Because of (1), regulation is inevitable, and once you have almost any regulation at all, a competitive benefit accrues to larger companies, who can consolidate the regulatory compliance function in a way smaller companies cannot.
This is a perspective that is often overlooked on HN, understandably, but the fact is that startups are in many ways extremely inefficient businesses. Most business functions, from accounting to training to regulatory compliance, simply don't scale down very well, for reasons that have nothing to do with politics.
It is not just that large companies are more efficient at dealing with regulation; Large companies actively lobby for regulation as a way of protecting themselves from (smaller) potential competitors.
It may be that regulation for the public good is inevitable and desirable, but one cannot assume a priori than any particular regulation exists for that reason.
"the pressure on the legislature to license an occupation rarely comes from the members of the public . . . On the contrary, the pressure invariably comes from the occupation itself."
Milton Friedman
"…as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefits."
In my opinion, the synthesis of the two points is that society shouldn't advocate for regulation (no. 1) precisely because of the inevitability of regulatory capture (no. 2). Of course, people can disagree over which point is really more inevitable. I think no. 2 is more inevitable, so it would be wiser to resist no. 1.
Bitcoin will be regulated because the power of the state demands it, and aside from the state's vast power, the regulators actually have the reasonable argument that while they may corrupt, venal and malicious at times, giving their power to completely random-ass anonymous people wouldn't be an improvement.
IE, The power of unregulated bitcoin is not "power to the people" but power to Silkroad founder and from there one would guess the Zetas and so-forth.
During the housing bubble, common sense (or at least the conventional wisdom) was that "real estate prices only go up" and "buy now or be priced out forever"
These are real sentiments that I heard from real people who while they were wrong (and I felt they were wrong at the time) aren't completely stupid.
For example, to trade securities, sell insurance, or sell real estate you need to get a license. To get a license you need to take exams and pay money to be certified. Most people won't go through that effort and so the larger companies make a lot of money from the lack of competition.
My favorite example of mandatory entrenchment are the Series 6/7 exams for finance. I think the exams make perfect sense for licensure - but you aren't allowed to take the exam unless you are currently employed by a licensed broker. It's a legally enforced old boy's club.
Are you saying it should be easier to start your own broker/dealer business? Or just that people ought to be able to take the series 7 without being sponsored in order to make themselves more hireable?
Yeah, I'm just complaining about sponsorship. I don't remember there being much else in the way of what I consider to be superfluous barriers to entry.
I agree that the sponsorship requirement to sit for the test is backwards, but if you are talking about barriers to entry for creating a new broker/dealer, the series 7 is a small inconvenience compared to everything else†. You have all the FinCEN stuff plus capital requirements as well as various recordkeeping, auditing and reporting requirements. It's a huge pain in the ass.
Yeah, they are a pain in the ass and could be improved greatly I'm sure. I'm just saying capital, record-keeping and AML requirements are not completely without a public-serving point, unlike the sponsorship requirement.
mmmm barriers to entry. Collect that market power! I submit that anymore, about the only barriers to entry left in any industry are regulatory barriers to entry. Do you know how scarce cabby badges are in NYC?
Just to clarify: you obviously don't need to be licensed to trade securities on your own behalf. Anyone can open up a retail account and trade. You do need a license to trade on behalf of other people (brokering), but I don't think that's unreasonable.
I have to say that the situation here is much more specific.
SAP consultants make a lot of money but they aren't necessarily regulated by the Federal Government.
What makes finance something that "needs regulation" and an important target for regulation, is that it doesn't just make money but literally defines "what money is". From tulips to penny stocks and Madoff, the dangers of "unbounded finance" are clear.
But one should note the state, by its control what we believe is currency, plays in many ways the same game as the Ponzi-schemers, with the relative limit that it's trying to keep things going a bit longer.
Either way, it's reasonable to say that this magic will be wrested back (if they ever lose it), by those already maintaining an existing monopoly on force and violence (in where you say this monopoly is Hobsian or La-Fimilia-Zeta-ian).
There's an important distinction between the "regulation of bitcoin" and "regulation of businesses's or people's use of bitcoin".
You could, for instance, say "use of an unregistered wallet is a crime", but it would be very difficult within the protocol to prevent bitcoins from flowing to unregistered wallets.
> The idea that Bitcoin could be an alternative to traditional money that would allow users to conduct transactions anonymously beyond the pale of intrusive government regulators has proved to be little more than a pipe dream
That statement is incredibly ignorant. Regardless of what any government decides to do, people will always be able to conduct unregulated transactions. The subject at hand is the regulation of money transmitters, such as exchanges.
"FinCen went a step further in its guidance by including any person who puts into circulation a virtual currency, which means that the so-called Bitcoin miners are also subject to the regulations."
This is out of date. FinCen issued vague guidance months ago suggesting miners might be regulated, but recently clarified that they are not.
46 comments
[ 2.8 ms ] story [ 84.4 ms ] threadIn principle, zerocoin could be added to bitcoin, but the bitcoin devs aren't up for it yet. Zerocash is so different it pretty much has to be an altchain.
I'm not so sure. I think some regulation to catch tax cheats is inevitable. Whether that's desirable or not depends on one's political point of view.
Even if this were not the case, the more regulation added to bitcoins, the more people move to alternative crypto currencies. I don't see people seeking to regulate litecoin, dogecoin, coinye, etc.
People aren't calling for the regulation of other cryptocurrencies mostly because they don't have the same kind of usage and economy surrounding them that bitcoin has. If people start trading coinye in the same way and it reaches similar volumes as bitcoin, you'll see the same sort of talk. It just makes more sense to treat cryptocurrencies the same under the law, unless there is something about a particular one that made it most different than all the other current variations.
Like when my parents refer to all videogames as "Nintendo".
1. Correct amount of bitcoins were withdrawn from source bitcoin wallet.
2. Correct amount of bitcoins were deposited into target wallet.
3. Both target and source wallets are valid.
4. Etc.
AFAIK, bitcoin is currency and FX market is in generally way less regulated compared to securities market. Thus any regulation introduced would be targeting money transfers between individuals, rather than exchanges[1].
[1] We probably should regulate exchanges, as of right now it is super simple for exchanges to make profit on their customers. Consider following strategy, whenever bitcoin order comes in that moves market exchange would execute small order in same direction before customer order, reverse order as soon as larger order moved market. Instant profit.
Everything that you mention that needs to be "regulated" is already regulated by the bitcoin protocol itself. In fact, the whole point is to replace regulation with strong cryptographic proof.
First part of the post is indeed a joke, I am pretty sure comments on FX markets and strategy that exchanges could use to game the customers are accurate.
> To protect consumers who want to use Bitcoin for legitimate transactions, the government may adopt reporting requirements on virtual currency exchanges so that there is a public repository of information about prices. Although the government cannot control the value of a virtual currency, it can make the currency more transparent to users so that they are not defrauded.
---
Ehhh, really? In one paragraph they point out the price history of Coinbase, and then in the next paragraph they say "the government outta do it".
And yeah-- the government is technically unable to control the prices of virtual currencies but government also _should not_ be in the business of controlling prices anyway. That leads to a distortion of market prices and a bad deal for one side or the other.
Normally, you would see "real journalists" try to balance the views, and insert opposite views and quotes in their articles. But not here, it seems.
1. Consumer Behavior Requires It
2. Large Companies Thrive On Regulation
To point one, if you have anything that is making people a lot of money one way or another, there will be scams and fraud. Once there are scams and fraud, the government gets involved and has to clean up the mess. Then laws are made to stop the problems from happening in the first place. Eventually you need business licenses, certification, etc. to transact business because too many people got ripped off.
To point two, regulation and rules actually end up favoring the entrenched companies. Usually regulation creates barriers that reduce competition. For example, to trade securities, sell insurance, or sell real estate you need to get a license. To get a license you need to take exams and pay money to be certified. Most people won't go through that effort and so the larger companies make a lot of money from the lack of competition.
Rules and regulations might be annoying, but they are a sign of maturity and growth in many cases so it's not all bad.
This is a perspective that is often overlooked on HN, understandably, but the fact is that startups are in many ways extremely inefficient businesses. Most business functions, from accounting to training to regulatory compliance, simply don't scale down very well, for reasons that have nothing to do with politics.
that's what "Large Companies Thrive On Regulation" hints at.
It may be that regulation for the public good is inevitable and desirable, but one cannot assume a priori than any particular regulation exists for that reason.
"the pressure on the legislature to license an occupation rarely comes from the members of the public . . . On the contrary, the pressure invariably comes from the occupation itself."
Milton Friedman
"…as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefits."
George Stigler
IE, The power of unregulated bitcoin is not "power to the people" but power to Silkroad founder and from there one would guess the Zetas and so-forth.
In the end it's about choice. Would you rather trust the Zetas or Uncle Sam?
I don't think scams are going away any time soon and there's dear little you can do other than to protect yourself with common sense.
Deregulation starting in the Clinton era?
These are real sentiments that I heard from real people who while they were wrong (and I felt they were wrong at the time) aren't completely stupid.
My favorite example of mandatory entrenchment are the Series 6/7 exams for finance. I think the exams make perfect sense for licensure - but you aren't allowed to take the exam unless you are currently employed by a licensed broker. It's a legally enforced old boy's club.
†http://www.sec.gov/divisions/marketreg/bdguide.htm
That's like saying we will never achieve flight, because all we have is cars, and anything car-like can't fly.
SAP consultants make a lot of money but they aren't necessarily regulated by the Federal Government.
What makes finance something that "needs regulation" and an important target for regulation, is that it doesn't just make money but literally defines "what money is". From tulips to penny stocks and Madoff, the dangers of "unbounded finance" are clear.
But one should note the state, by its control what we believe is currency, plays in many ways the same game as the Ponzi-schemers, with the relative limit that it's trying to keep things going a bit longer.
Either way, it's reasonable to say that this magic will be wrested back (if they ever lose it), by those already maintaining an existing monopoly on force and violence (in where you say this monopoly is Hobsian or La-Fimilia-Zeta-ian).
You could, for instance, say "use of an unregistered wallet is a crime", but it would be very difficult within the protocol to prevent bitcoins from flowing to unregistered wallets.
That statement is incredibly ignorant. Regardless of what any government decides to do, people will always be able to conduct unregulated transactions. The subject at hand is the regulation of money transmitters, such as exchanges.
This is out of date. FinCen issued vague guidance months ago suggesting miners might be regulated, but recently clarified that they are not.
http://www.coindesk.com/fincen-bitcoin-miners-investors-mone...