Originally published February 14 2014
The future of Bitcoin is in the hands of clueless regulators
by J. D. Heyes
(NaturalNews) In recent months, we've begun to pay more attention to the alternative currency phenomenon that is Bitcoin, but as time goes on - and despite more coverage of the currency and its uses - most Americans still don't know much about it, and that includes those who are trying to regulate its uses.
As reported by Wired, financial regulators in New York State recently held hearings on Bitcoin and other digital currencies. Unfortunately, perhaps, a number of businesses that seek to push digital currencies welcomed them. Many companies, such as Coinbase, which is a Silicon Valley startup that has $25 million in venture capital on hand, appeared eager to operate within guidelines established by federal and state regulators. However:
The problem is our financial regulators don't understand Bitcoin well enough to regulate it. That became increasingly obvious during the hearings, and it's not at all surprising. The five-year-old cryptocurrency is an unprecedented experiment in the power of peer-to-peer networking, open source software, and a certain kind of financial anarchy.
And that's the problem in a nutshell, say experts: Before you can regulate something (if it even needs regulating), you first have to understand what it is you're regulating.
Brett Combs of Bitcoin Coaches, an advisory firm, explains the concept behind Bitcoin in an email to Natural News:
You can think of Bitcoin as currency for the Internet. Although it can be used offline, its original purpose was to provide a digital currency and payment network where trust was not a factor in the transaction. It allows two people to transact business in different parts of the world and have confidence that the transaction is valid and not counterfeit. This is accomplished by a elegant payment network known as a peer-to-peer payment network.
'It is a terrible currency for illegal uses'
"The easiest way for people to understand bitcoin is that it can be described as 'cash for the Internet,'" adds Tony Gallippi, the co-founder and CEO of BitPay, a site dedicated to helping businesses accept Bitcoin. "By using bitcoin, a consumer will never be a victim of identity theft, and a business will never be a victim of payment fraud."
And Matt Branton, founder of CoinLock, a site where you can sell content anonymously using Bitcoin, told me: "Unlike credit cards, Paypal, and other existing methods, Bitcoin does not require traditional banking, cuts out the middleman, and has significant security benefits. This all helps to reduce the cost to the consumer."
That may seem straightforward enough, but to the New York regulators, the concept remains cloaked in mystery, if for no other reason than they have failed to do their homework. As reported by Wired, they were not even aware that there are legitimate reasons why businesses would want to conceal financial transactions using tumblers, a kind of bitcoin-mixing service frowned upon by politicians.
"Bitcoin has had a scandalous start to life as it was a preferred form of payment for illicit services, however Bitcoin is not anonymous and is already regulated at [its] borders of exchange," Vince Samios, a top editor of the Bitcoin Wikipedia page, told Natural News.
"Since the record of ownership is public everyone can trace the flow of money from its very beginning, to its current owner," he continued, "it is actually a terrible currency for illegal uses."
'Regulation of Bitcoin is creating uncertainty
As Wired noted, there may actually be legitimate reasons why companies might want to shield some of their business transactions, such as when companies that use Bitcoin would prefer to keep their sales growth hidden. "Make it impossible to hide this information with a tumbler and many legitimate businesses simply won't use Bitcoin. Or, worse still, they will move their transactions overseas, beyond the reach of U.S. regulators and law enforcement," said the online tech site.
Advocates of the digital currency say it has the potential to revolutionize e-commerce, but not if it is regulated to death before it even has a chance to blossom.
"If Bitcoin has no mass-market appeal, it will be of little use to e-commerce retailers and platforms since most consumers are very happy with current payment systems. However, the hardcore techies that have to try the latest thing will be drawn to the novelty of Bitcoin," Phil Rooke, CEO of SpreadShirt, an e-retailer, told Natural News.
"Regulation of Bitcoin is creating uncertainty. It will probably be regulated in the future - the question is how," added Dr. Malavika Nair, an assistant professor of economics at the Manuel H. Johnson Center at Troy University in Alabama. "Will governments be tolerant and treat Bitcoin like a new technology, or will governments try and suppress it?"
Sources:
http://www.wired.com
http://www.bitcoincoaches.com
http://www.internetretailer.com
http://www.spreadshirt.com
http://www.malavikanair.com
http://uk.linkedin.com
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