Bitcoin Roundup: Losing Its Edge? Or Selling Its Soul?


Juan Llanos at the Contrarian Compliance blog surveys the past week's Bitcoin news and sees "the end of Bitcoin as we know it:

•Liberty Reserve (LR) was shut down, and its management indicted and arrested, in what is being described as "the largest money laundering case in U.S. history."….

•FinCEN designated LR as entity "of primary money laundering concern," and proposed a rule to order that all large financial institutions freeze any and all of LR's assets……

•OKPay suspended processing for all Bitcoin exchanges, including Mt. Gox.

•FinCEN Director Shasky Calvery spoke out and drew the line even deeper in the sand –"We stand by the guidance."

•Mt. Gox hardened its interface by incorporating customer verification.

This all leads Llanos to decide that "Bitcoin can no longer be anonymous" and that "U.S. regulation can no longer be ignored."

The Silicon Valley-covering website Pando Daily has some scaremongering about whether retailers should accept Bitcoin. They start with the good: low transaction costs:

Bitcoin payments are easier to make and receive than any existing banking or credit card process. Users simply download a wallet application onto a computer or smartphone. The payer enters the payee's address by scanning a QR code, touching two phones together with NFC technology, or by copy and pasting. The payer then enters the amount of the transaction and presses "send." For the payee, accepting BTC is completely free, with no chargebacks or fees. It doesn't matter where in the world the customer is — the method of transaction is the same across all borders, making international payments extremely fast and efficient.

But it can confuse your accountants, its very volatile in value in terms of other currencies, and:

Also, bitcoin is not an official currency. However, most jurisdictions require you to pay income, sales, payroll, and capital gains taxes on anything that has value, including Bitcoin.

Lastly, it can be dangerous to accept this form of payment since bitcoin has recently been associated with money laundering.

And while there is no one institution or person who owns Bitcoin's soul such that he, she, or it could sell it, the Bitcoin channel quotes CNBC writer Matt Twomey who notes with alarm:

Peter Vessenes, chairman and executive director of the Bitcoin Foundation, was unfazed by the Liberty Reserve crackdown.

"The U.S. put out guidance recently through the Financial Crimes Enforcement Network, and we've been following up on that guidance and crushing bad actors," he said in an interview with CNBC Asia. "We're seeing a bit of a sweep right now," he said.

"There's nothing to indicate that good players who are working hard to stay regulated have anything to worry about."

Working hard to stay regulated has hardly been the rallying cry of the Bitcoin enthusiast or user.

I blogged last week on Bitcoin exchange Mt Gox's flight from anonymity and wrote an article the week before that on Bitcoin's possibly losing that quality entirely.