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.

Comments

[Barry Zuckerkorn]

Juan asks good questions. If USD increase in value between the time you receive them and the time you spend them, the IRS doesn't count that increase as income. But if someone pays you in Bitcoin and it increases in value before you spend it, the IRS could very well treat that as a capital gain.

[setTHEline]

Barry's very good.

[Barry Zuckerkorn]

I could kiss you on the nuts!

[Sevo]

"Juan asks good questions."
Yes, and the answer is the US gov't wants no competition whatsoever and will use any of its coercive forces to make sure it has none.

[CE]

See "Liberty Reserve"... if you give people a reasonable degree of anonymity in their financial dealings, you will be smeared as a "shady money laundering site", linked to all sorts of nefarious activities.

[np]

And you also cannot deduct the loss of purchasing power of the dollar from your income either.

[Acosmist]

A gain not realized before you spend it, though.

[Juice]

It would only be counted as a capital gain if you bought them for US dollars and then later exchanged them for US dollars and made a profit in US dollars. Even then, how will the IRS ever know?

[CE]

A virtual currency dreamed up by libertarian hackers.... what could possibly go wrong?

[bit cromwell]

the biggest risk to bitcoin is lack of understanding - what they are, how to buy them, and how to use them. i'd recommend a bitcoin starter kit to anyone interested in btc.
http://littlebiggy.org/4755888

[neonvirus]

Peter Vessenes is my favorite kapo.

[Warren]

BitCoins are still, and always will be more anonymous than cash. If that's what you want.

[TDL]

How exactly? Bitcoin record the entire transaction chain (including the owners information.) Cash is cash, it remains the most anonymous monetary mechanism. It is tremendously difficult to trace a dollar bill. A Bitcoin is traced in order to guarantee it's authenticity.

Cash is and always will be more anonymous than a transaction of bits across a wire. Bitcoin aren't centrally controlled, but they aren't anonymous.

[np]

http://www.ft.com/intl/cms/s/2.....z2UoaUTBgd

Quoting Erik Voorhees of SatoshiDice (who unfortunately blocked US players about two weeks ago)

"People are way too US-centric when discussing Bitcoin," says Erik Voorhees, an early evangelist for the currency, who moved from the US to Panama to pursue his business ventures.

"Bitcoin's early successes will not be in the US. They will be in the developing world where a banking system is practically non-existent, or where currencies are being destroyed, such as in Argentina. US Bitcoin businesses absolutely need to follow the US regulations or they'll be shut down, and that doesn't help anyone, but US regulations do not apply to, for example, a Kenyan company doing business with Kenyans."

In addition, I have noticed in some other countries, people do not suffer from an authority-felating consciousness as we do here, so therein lies greater potential in other places. Bitcoin is accelerating rapidly in Argentina and this was apparently evident at the Bitcoin 2013 conference. There are already heavy currency controls and capital controls. There is the official exchange rate, then there is the black market rate aka the "blue dollar" phenomenon.

[np]

Argentine perspective:
http://www.caseyresearch.com/cdd/lessons-argentine

Enter the money changers. While they are supposedly illegal, just a couple of days ago in Salta City, I was taken by a friend to a street where the money changers operate in the open, with police visibly walking by unconcerned in the slightest by the guys standing around loudly offering to exchange pesos for dollars or vice versa.

In my case, my friend's contact, a cheerful and rotund fellow who operates out of a coffee shop, invited me to squeeze in behind the tight counter where two cashiers, between ringing up cups of coffee for customers, were thumbing through thick stacks of US$100 bills. I have no idea how much money was stacked up behind that counter, but my exchange of $500 was a fly speck by comparison.

Within just a couple of minutes, with a warm handshake and a muy amable, I was on my way with an exchange rate closing in on twice the official rate.

"Why aren't these places a target for robbers?" I asked my friend as we walked away.

"Nah, things just don't work like that around here. And if you tried, you probably wouldn't make it ten feet down the street. These guys are all protected."

[np]

Stepping back from the perspective we North Americans have had drilled into our heads starting in kindergarten, here in the Argentine people recognize government for what it is ? an active threat ? and have no moral or ethical compunction about devising workarounds.

Are the police patrolling the street of the money changers getting some sort of bribe to act as private security? Sure, why not?

Does anyone care? Not that I could tell. In fact, if you ask the Argentines if they are uncomfortable breaking the latest nonsense law, they look at you as if you were crazy.

But it's still a burden to obtain dollars, cash or electronic, and harder to transact and deposit them, hence the increasing attention on Bitcoin

[np]

another example is Africa, with it's recently burgeoning IT sector in some places. Most are not aware how Africa as a whole skipped land lines almost completely to cellular and several countries adopted mobile payments system M-Pesa

http://blog.nyaruka.com/bitcoi.....-customers

Bitcoin's Bottom Billion - Why the Developing World May Be Bitcoin's Biggest Customer

See also:
http://www.thegenesisblock.com.....rspective/

For how it BTC is diversifying elsewhere. I think the trend will on accelerate. Very recently, due to a recent news story, the amount of nodes in China exploded to nearly match the US.

[Some call me Tim?]

Uhhh, I can't eat a bitcoin.

[Archduke Pantsfan]

Try harder

[Michael B.]

This is why don't keep your Bitcoins housed in the US.

[WomSom]

Look back at E-Gold, then recently Liberty Reserve, both shut down by the US Government. Its jsut a matter of time.

http://www.WorldPrivacy.tk

[Juice]

Bitcoin cannot be shut down unless you shut down the internet.

[Cytotoxic]

This Juan character needs to dry up. This is not the death of BTC if he even thinks that he doesn't understand BTC. The comment about all this being far too US-centric is very true.

[np]

http://www.guardian.co.uk/tech.....-in-berlin

Bitcoin: the Berlin streets where you can shop with virtual money

The digital currency is rising in popularity among traders in the rebellious Kreuzberg area of Germany's capital

"It's an easier way of digital payment than credit cards, which cost me a lot of money as a business and to which I'm forced to sign up for years," she says.

Heidi Leyton, a British tour guide who takes business people around Berlin, said she was first drawn to the currency when two Spanish friends demonstrated their trust in it by deciding to use their entire inheritance to purchase Bitcoins. "They were very worried about the way the economy was going in Spain and so decided to invest their ?30,000 inheritance in Bitcoins. I was really shocked, thinking what a gamble it was," Leyton admits. "But that was about three and a half years ago and their 30,000 has grown to 600,000, so they did very well. On the back of her friends' experience, she too decided to buy into the currency and to accept fees for her tours in Bitcoins.

"Looking at the way the economy is going and the way we're dealing with it, particularly after what's just happened in Cyprus, I don't really trust having my money in the banks," she said.

not having your money in banks, using it without government tracking, not allowing it to be confiscated... money laundering!!!

[Suthenboy]

OT and very uplifting:

Christopher Swindle, the journalism prof who wrote the OpEd advocating that the military kill the members of the NRA has had a turn about.

From his Facebook page 11hrs ago: "Very important change of tune. When someone shared Mexico bans guns, I realized I was wrong. NRA members (I still disagree with leadership) are DEFENDING freedom. Not threatening it. Would you accept a recent convert's apology?"

I am stunned.

[Some call me Tim?]

...that's really bizarre. Who changes their mind like that in a handful of days?

[Irish]

People who are getting heavily criticized and want the criticism to stop. I hope I'm wrong, but I think he's just trying to save face.

[Irish]

That's unbelievable. Of course, the cynic in me says that he did this because he was getting such an incredible amount of criticism and just wanted to stop the firestorm that his article created.

I hope he actually had a change of hard, and it would be amazing if someone who seems to be a relatively doctrinaire prog came to realize the value of the second amendment, but it seems a little too convenient that he'd have such a change of opinion in two days.

[Suthenboy]

I am optimistically imagining that he has been debating heavily since that article was published and doing so with someone who knows the subject. If they examined mexico heavily, it is hard to come away from that and still be a gun grabber. maybe he really is converted.

[General Butt Naked]

I am optimistically imagining that he has been debating heavily since that article was published and doing so with someone who knows the subject.

Maybe he ran up against this guy.

This is an awesome dismantling.

[Francisco d Anconia]

I never get sick of that video. Made em his bitch, he did.

[General Butt Naked]

I think the anchor pooped in his pants a bit when he told him he was armed.

[Some call me Tim?]

It would take a thoroughly detailed and rousing defense of the Second Amendment for me to believe it.

Actually, I'm guessing he's actually being sarcastic.

"oh I just heard Mexico bans guns. Well, THAT changes everything!"

[Suthenboy]

A detailed study of how mexico bans them, who gets them and who doesnt, and who has them outside of the system and how all those guns are used is a pretty persuasive argument for keeping the second amendment alive here.

I hope you are wrong.

[Irish]

A detailed study of how mexico bans them, who gets them and who doesnt, and who has them outside of the system and how all those guns are used is a pretty persuasive argument for keeping the second amendment alive here.

Yes, but every progressive I've ever known has written that off by claiming that those guns come from America.

They apparently believe that Mexican cartels would never even dream of changing some of those big meth super labs that they have into gun smiths.

One of the major aspects of progressive gun control arguments is that they don't know enough about guns to realize how easy most of them are to make. Sure the M16 and other advanced guns are hard to make, but the AK-47 exists entirely because of how easy it is to make. I guarantee you that cartels could build AKs if they so chose.

That's one of the reasons why Kalashnikov came up with the design. They're so easy to build.

[Suthenboy]

"I guarantee you that cartels could build AKs if they so chose."

Why would they bother? They can bring shiploads of full autos from guatemala at $20 a piece. Which is what they are already doing. The 'guns from america' bit is bullshit. If you go down there you would be hard put to find a gun from here.

[SIV]

I bet Mexico is full of pistols from the US. Who's buying all those high polish stainless 1911s w/ imitation mother-of-pearl grips in .38 Super?

[Tejicano]

Do you know why they are in 38 Super? Because that particular gun was legally exported to Mexico and at least originally legally sold on the limited civilian market.

One of the requirements for a handgun to be legal in Mexico is for it to be in a non-military caliber.

[Anonymous Coward]

Yes, but every progressive I've ever known has written that off by claiming that those guns come from America.

Many of them do, but those guns aren't coming from FFLs, they coming straight from the federal government. We arm the government, then the crooks in the police and the military smuggle those guns to the cartels.

[Irish]

Progressive anti-gun arguments are identical to conservative anti-drug arguments. When somewhere bans guns and still has gun problems, they just claim that the guns are coming from somewhere else, and if we just stopped the gun trade there, then all of the guns would be gone.

If we banned guns and all the gangs still managed to get them, then the progressives would start claiming that the guns were coming from cartels in Central America.

[Anonymous Coward]

Progressive anti-gun arguments are identical to conservative anti-drug arguments. When somewhere bans guns and still has gun problems, they just claim that the guns are coming from somewhere else, and if we just stopped the gun trade there, then all of the guns would be gone.

They don't want to ban guns entirely. The progs want the guns for themselves, in the hands of a small group completely loyal to their vision of the world, in case any of us peasants gets uppity and needs to be put back in his place.

[Suthenboy]

Of course there is still this, a post from last year.

"just learned the demographic that could lead to a Romney win. White men. Romney leads by a greater percentage in that category than any modern president. Even though I am a member, I want no part of that demographic. Here's to the rise of women, Latinos, outsiders, African Americans, and Native Americans. Power to ANYBODY but more white men. I've seen nothing since the rise of Europe good come out of the dominance of that group. I guess that makes me a traitor."

Wow Chris, really? Nothing? Indoor plumbing, antibiotics, electricity, airplanes, architecture, art, telephones, modern medicine, automobiles, equality before the law (stop laughing shitheads), ending slavery, whiskey, bourbon, ...I could go on all night. Hell, if my crawfish bisque were thee only thing that came out of white male dominance it would be worth it. Really nothing good has come from male dominated, white european culture?

Perhaps there is hope. If he saw the light on guns, perhaps he will see the light on this as well.

[Irish]

Power to ANYBODY but more white men. I've seen nothing since the rise of Europe good come out of the dominance of that group. I guess that makes me a traitor."

This is amazing. Virtually every modern convenience is the result of economic growth that occurred due to renaissance and enlightenment era European thinking.

Obviously white people are not naturally superior to nonwhites. It's just that certain cultural norms developed in Europe which were superior to the cultural norms that they replaced. It's absurd that this idiot basically is writing off freedom of the press, freedom of religion, the end of slavery, modern democracy, capitalism and every other fruit of the enlightenment out of some bizarre anti-white feeling.

[Acosmist]

Morally, not superior.

But wow, culture? So the IQ difference isn't important? That's implausible on its face.

[Irish]

But wow, culture? So the IQ difference isn't important?

The same IQ difference that occurs with every generation of immigrants and dissipates within three generations? The same IQ difference that convinced people the Irish were savages until a few generations after they moved here they were just as successful as the natives?

IQ is an atrocious indicator of actual intelligence because the poorly educated show up as having a bad IQ. That doesn't mean they're naturally dumber.

I'm beginning to see why you always agree with American when he shows his racist ass around here.

[jesse.in.mb]

The same IQ difference that convinced people the Irish were savages until a few generations after they moved here they were just as successful as the natives?

That's just silly talk, Irish, everyone still knows the Irish are savages. How could y'all not be on a diet of shamrocks and potatoes?

[Francisco d Anconia]

Eye, ta bee shoor!

[Rhywun]

Here's to the rise of women, Latinos, outsiders, African Americans, and Native Americans.

That's not racist. Or sexist. It is extremely tiresome, though.

[John Galt]

"...Would you accept a recent convert's apology?"

No.

[Archduke Pantsfan]

I'm not saying it's time to panic, Penguins fans.
But it might be.

[John Galt]

As long as statists are allowed to exist they will always win.

[Apatheist ?_??]

On to Super Regionals!

[Some call me Tim?]

RIP Deacon Jones

[Tman]

The Boston Globe is arguing that affirmative action is unhelpful?

Be still my beating heart.

[Tman]

Also, I think if Balko posted this on a Friday it would break the space time continuum.

Police dog bids farewell to slain cop

[PS]

I don't get it.