Bitcoin’s days of existing beyond the reach of government regulators are numbered (and thankfully so).
Just as any fool cannot open a bank in the United States on a few hundred dollars and a whim, neither should Bitcoin exchanges, which function as ersatz banks, be permitted to operate this way. Regulators are already starting to crack down in the United States. The most prominent example would be the State of New York, where the superintendent of financial services has explicitly stated his intent to seek licensing requirements of exchanges operating in his state. Other states are likely to follow suit, which will inevitably lead to involvement by one or more federal agencies.
Don’t get me wrong- I believe that you should be permitted to hold all of the bitcoins you choose without having to ask permission or submit to state regulation. In spite of my chosen profession, I am no lover of extra government rules. There are always unforeseen costs and consequences, so I do not advocate regulation lightly. Compliance is expensive, no matter how simple or “common sense” proposed regulations appear to be. However, I think it is not unreasonable to require operators who offer wallet and exchange/trading services to the public to meet certain minimum standards.
Among the minimum standards to operate might be the online privacy and security requirements mandated by the Gramm-Leach-Bliley Act and its adjuncts, for starters. Next might be a requirement that exchanges meet minimum capital requirements and post a bond as security against failure. Then, background checks could be required of all board members, senior managers and other key figures, to guard against exchanges being engineered to deliberately “fail” by bad actors. Finally, until the market grows large enough to naturally prevent manipulation, some kind of safeguard should be implemented to prevent exchanges from abusing their status as market makers to corner it.
Taken together, these minimum requirements would likely be enough to shut down the corrupt, and the weakest and most vulnerable exchanges. In addition, these requirements would provide banks, insurers and other service providers to the Bitcoin industry with an excuse to develop customer acceptance standards that would raise further barriers to entry by exchanges that are unlikely to be successful.
Friday, February 21, 2014
Bitcoin Magazine Stabs Libertarian Bitcoin Fanboys in the Back
Jason M. Tyra writes in Bitcoin Magazine:
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It is really a shame that government regulation is going to hem in what has here-to-fore been an interesting real-world laboratory of how wildcat banking could occur in a totally free market system. We have bank runs where the market (not the government) punishes the exchanges thought to be insecure or insincere. It was a real chance to have a peek at how all this could play out under AnCap circumstances. (Well, mostly). RW was right that it was government that forced MtGox into Ponzi-land. But still, it would have been a cool real-world look at how the market would discipline, and how consumers would decide which operators to support without "minimum requirements." Tis a shame, but it was always going to be like this.
ReplyDeleteHaha, it's truly getting pitiful how this is playing out exactly as the people calling for caution predicted. It really is a testament to ... hell, libertarian class analysis, as much as anything I guess.
ReplyDeleteThe majority of humans reside in "a black iron prison". Your warden wasn't about to watch the currency cartel evaporate on his watch. Death by regulation. Lights out.
Yes, Bitcoin is going mainstream. Non-libertarians are starting to use it too. Thankfully, Bitcoin allows the user to choose their own ideology and and level of privacy.
ReplyDeleteThis guy is not alone, Wenzel is also throwing libertarians under the bus by constantly ignoring the ways bitcoin can be used for individual empowerment.
if by "individual empowerment" you mean losing $1000 in value in over a month then I agree with you. shitcoins are not going mainstream, they're going down the drain. stick with gold and silver!
DeleteThanks Chris for showing your profound ignorance about all things related to money and foreign exchange. If you took your head out of your a*&, you would realise there is an opportunity there in providing derivative instruments to hedge your bitcoin exposure. No different from those dollars that you hold and rest indifferent about them losing value every month when the government prints another $85 billion in QE. Wake up!
DeleteAnd oh, those gold and silver coins which you can't hide unless you travel extensively will be confiscated like back in the 1930s when sh*t hits the fan!
DeleteTwo things Jay:
Delete#1 Only gold was confiscated(in the US).
#2 There were around 20 people/corporations prosecuted for "hoarding" gold during the time you mentioned, the population at the time was 125 million people. Do you think those were the only people at the time trying to hide their gold? (most of which didn't try that hard)