Bitcoin on the way to being regulated

Hi All,

The fact that regulation would come to Bitcoin was obvious to me, I just did not realize that it would come this soon. The recently issued regulations apply to "virtual currency," and includes chips and other on-line awards which one can trade for "real" currency or goods. I had a conversation today with an attorney whose job includes approving or nixing virtual currency the sales folks in his company come up with. She said that although the regulations do not mention Bitcoin by name, legal people have interpreted that it is intended to do so.

Here is what I found http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

She further indicated that once the regulations tighten, and the illicit transactions (a good percentage of Bitcoin use) find safer venues, Bitcoin cannot survive in its present form.

At the last LPSF meeting, the membership present voted to have LPSF accept donations in Bitcoin (with me as the only No vote, since LPSF did not wish to place any guidelines on our use of Bitcoin). So this post is not intended to dissuade LPSF's use of Bitcoin, but only to make sure we keep informed.

Marcy

The proposed regulatory framework issued by the Financial Crimes Enforcement Service were issued in the same timeframe as the Cyprus debacle and were largely seen as a move to clarify the legitimate use of the cyber currency. This contributed to the increase in announcements of start up funding derived from traditional fiat banking sources.

Of course, I find amusement in the name of the above agency, as it exhibits a very rare honesty on the part of our overlords.

The creation of even proposed rules provides significant legal protection to those engaged in bit coin exchange, as there are longstanding legal principles that adherance to even proposed rules protects one in the event of regulatory change in the future.

The framework reveals the authorities concern with the conversion of bit coin to the official currency. those engaged in trade for services and holding of bit coins are not of concern in the proposed regulations, and it appears from the market's reaction that overall the regulatory framework has increased the perceived safety and legitimacy of the currency.

while I personally view the present monetary order as a bug looking for a windshield, to paraphrase John Mauldin, the cyber currency has characteristics that make it very useful in everyday legitimate commerce.

The cost of transacting is dramatically reduced when both customer and provider are essentially their own bankers.

google killed the Yellow Pages and many other advertising venues,. Apple and MP3 killed CDs and now file sharing threatens them. Efforts by the authorities to kill file sharing has been futile and the music industry is evolving to a more grassroots model to fill the void.

The futility of the authorities in contolling file sharing was highlighted in a particularly satisfying chain of events in New Zealand. US authorities pressured coooperation by New Zealand police in an early morning raid of the mansion of the foundere of mega download. In a show of raw force helicopters landed shock troops on the foof.

The entire affair brought down the ire of the New zealnad judicial system onto the police and government for such a blantant perversion of law.

Methinks that your friends asertion that bit coin will have to adjust to the regulators may be incorrect.
The opposite may be the more likely outcome. The centralllized regulators will have to adjust to a global decentralized peer to peer open sourced currency.

Just as every attempt ot delegitimize precious metals has been met by the continued resistence of the global decentralized marketplace, so will attempts to deligimize bit coin by fiat likely be met by the unstoppable forces of market acceptance of superior technology.

Wvery individual, family, company and organization should maintain a diversified cache of savings.

Methiks that the lpsf should be no different. Bit coin, like gold, is a safety mechanism in diversifying assets, especially if there are those who prefeer who donate through that medium of exchange.

For a number of years, I have donated gold or silver coins at the nation or state conventin banquets, and always been a bit perturned that the the donations were not accounted for. in the donation hype.

It just seems to be that it is not only prudent to diversify our asset base, but also a moral imperative to lead by example.

Hi Phil,

Thank you for the excellent analysis. It provides a clear opposing argument to my friend's assertions. As I have indicated previously, I am not entirely against LPSF providing alternative venues for donations, and certainly not against it being on the side of alternative means of exchange. My only hope is that LPSF will be cognizant of all the circumstances and view points surrounding Bitcoin.

Marcy