Monday, March 3, 2014

This Is What Is Going to Put the Nail in the Coffin of Bitcoin

Despite the focus on Mt Gox and the damage that it has done to the image of Bitcoin, and it has done real damage, overtime, if that was the only problem Bitcoin faced, it could be overcome, as trusted exchanges developed, which  also provided regular outside audits from trusted independent auditing firms. The real problem for Bitcoin is the regulatory problem. At some point, regulators, pushed by lobbyists from the $100 billion in annual fees credit card industry, will see to it that regulations will be imposed on Bitcoin to "insure safeguarding the public."

This morning, WSJ quotes Lois C. Greisman, associate director of the Federal Trade Commission's division of marketing practices. It provides a hint at the angle regulations will take:
"Consumer protections with virtual currencies, to the extent they exist at all, are in no way comparable to the protections" for credit cards or other traditional payment methods.
The FTC will change this with new regulations. This is the kind of regulation I have been warning about. It will, in some, fashion force Bitcoin middlemen, like Bitpay, to offer the same chargeback features that credit cards do.  At that point, Bitpay will have to either raise fees for each Bitcoin transaction or perhaps withhold funds from retail merchants for up to 30 days. It will thus for retaiers become extremely expensive, or a major hit to cash flow. It will become an overall negative for retailers using Bitcoin. It will kill Bitcoin at the retail level. It's coming and there is nothing Bitcoin or the Bitcoin Foundation can do about it.

I had lunch this weekend with a multi-millionaire, who explained to me how the US court system works. He said it is very fair and consistent. whoever has the best lawyers wins. A tiny individual is never going to win a lawsuit against, say the Koch brothers, their lawyers will crush you. It is the same thing with regulation, it doesn't matter how may lobbyists the Bitcoin Foundation has, the $100 billion in annual fee credit card industry can hire more lobbyists and more effective lobbyists. Bitcoin is going to get crushed by regulation.You read it here first.That's how crony America works and I have no idea why so-called libertarian Bitcoin fanboys can't see this.


  1. "Keep your head down and pay your credit card fees like a good citizen"

    Regulations are a problem, but they are not unique to Crypto-Currencies. No sector of the economy and society is safe while congress in is session. They regulate whatever they want to regulate, but all their regulations and all their laws are impotent compared to your brand of self-regulating, self-mutilating defeatism.

    1. All these "crypto currencies" (LOL) are measured in dollars and under Art I Sec 8, the value of the dollar is regulated by Congress. So all "crypto currencies" (LOL) are regulated by Congress.

      It's no coincidence that Mt Gox was a trading card exchange before turning to Bitcoins (and then going bankrupt). Crypto trading cards is a more appropriate name.

    2. whoever you are, your ability to draw realistic connections is pretty embarrassing. Seriously i feel embarrassed for you. Its like you know so little about mtgox (basically an exchange with incompetent management) and bitcoin (was held on the incompetent exchange that made bad security decisions). its like you interpret the world backwards in a misguided and emotional fury. Why? your comment contributes nothing.. really. I mean if you have some issues in your own life and need a place to vent i guess thats ok. But i dont know man bitcoin is kind of changing the lives of millions soon to be billions of people without the ability to transact internationally. I know its useless to say because in all likelyhood you'll just respond with another misplaced-anger type comment but you could try learning a little about it before just commenting. Just a suggestion.

  2. Hi Robert - You really, REALLY do not understand Bitcoin. The government cannot block transactions conducted at arm's length. You can sell me your house for Bitcoin - and the payment transaction would occur between our online wallets that exist in the cloud - not subject to government control.

    Similarly, with the Blockchain app on my mobile phone, I can buy a draft beer from bar that accepts Bitcoin - and they simply fill my glass, and my mobile phone displays a QR code that the bar cashier's mobile phone scans - and my payment flows from my wallet in the cloud, to their wallet in the cloud. The government is out of the loop.

    So - government oversight can badger the exchanges where paper currency is turned into Bitcoin - and the reverse - but that scenario is a just a temporary one, until Bitcoin become ubiquitous - and transactions start bypassing the "convert into out out of fiat currency" step.

    I can send you payment in Bitcoin via an e-mail message, a Twitter tweet, a Dropbox or Google+ shared file - and many other ways.

    You are thinking in "old dog cannot learn new tricks" mode. This is money via e-mail - without a bank involved.

    I do not mean to be disrespectful - I like your blogsite. But - when it comes to crypto-currencies, you are listening to the Luddites.


    1. You REALLY, REALLY don't understand the government.It hates liberty AND it can force any middlemen such as Bitpay to start honoring chargebacks, which will result in fees equal to or higher than Visa, MC or Amex. Further, a house purchase is going to result in a recording of transaction, a possible mtg and insurance all points where the gvt can require identity. The gvy is not going to allow anonymous Bitcoin transactions. It will rule such transactions as money laundering, There is no real world above ground retailer that is going to take such an anonymous transaction under such gvt rules. Not going to happen. There is no upside for a retailer ad all kids of risk.

    2. Wenzel, even if you end up being right, its your lack of trying that really hurts. Its just so disappointing to see you be such a quitter.

      Also, don't you see that your rising level of butt hurt belies a sneaking suspicion that you might be wrong?

    3. @ Robert Wenzel March 3, 2014 at 11:46 AM

      >You REALLY, REALLY don't understand the government.It hates liberty AND it can force any middlemen such as Bitpay to start honoring chargebacks, which will result in fees equal to or higher than Visa, MC or Amex.

      Sure, that is possible but merchants don't have to go through a middleman payment processor. They can accept payments directly.

      >Further, a house purchase is going to result in a recording of transaction, a possible mtg and insurance all points where the gvt can require identity. The gvy is not going to allow anonymous Bitcoin transactions.

      Of course they're going to require identity at these exchange points. Here is where traditional money-laundering techniques will continue - whether bitcoin is used or not.

      Nevertheless, individuals can still pay individuals with near anonymity (and full anonymity once the tools are fully developed) with no middlemen and no third-party interference. Also, the simple fact that you can create a bitcoin wallet and hold bitcoin without anyone's permission gives you a high degree of privacy and financial control.

    4. The feds are going to regulate crypto currencies to the point that they will offer no "operational" advantages over current methods of payment. Once striped of it's anonymity, including by the threat of fines or prosecution to businesses who accept them, it's pretty much game over. It's only hope at that point will be to offer protection against debasement of the dollar. But even then it's a long shot. All the other perceived advantages will either be stripped away or simply won't be that important for most people. (The ability to move wealth across borders covertly just isn't a compelling factor to the vast majority of people.)

    5. In response to Steve's initial post: could you walk us sceptics through the transaction scenario of selling a house with Bitcoin as the medium of exchange? Given government's complete management of the real property transfer process, how will the use of Bitcoin (or wampum beads even) prevent it from exerting its control or keep it out of the loop?

    6. You really, REALLY do not understand contract law.

      Contracts for the transfer of an interest in land must be in writing and signed by both parties. You can't sell your house in a cloud for a bitcoin.

      Then you have to record the transfer with the county.

  3. "Nail in the coffin" LOL. Bitcoin has been declared dead so many times you'd think it was a cat. But it's not - it's the Honey Badger!

    1. It doesn't have to die. It just needs to become far less valuable for our prediction to come true. My ideal monetary system is one that is decided on by the public. No legal tender, etc, cap gains taxes, etc.

      Bitcoin is trying to exist as a free market money in a corrupt system. I like BTC, but not when the government "has" to step in. (or has the ability to)

      And even if BTC were existing in a free market, it would face the challenges of competition. Ultimately, in my view, the free market would like a currency to be backed by something physical. Not to say there is no/little demand for something like BTC.

    2. @ taco March 3, 2014 at 12:36 PM

      Government can only regulate what it can regulate. Not the private transactions between individuals. Bitcoin makes it much harder for Big Brother. People can simultaneously opt out of the dollar and keep their wealth portable and protected - free from any borders.

      Bitcoin needs no backing (just like gold needs no backing). Any backing would make it vulnerable since all it would take is a large army to invade the vaults. If we ever did get a free market, any backing would make it a target for compromise.

  4. The market always finds a way. Don't despair.