
Governments Worry That Cryptocurrencies Could Be the ‘Next Swiss Bank Account’ - chollida1
https://www.bloomberg.com/news/articles/2018-01-29/crypto-as-next-swiss-bank-account-sends-governments-scrambling
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kang
Governments worry that those 'Swiss Bank Accounts' aren't exclusive anymore.

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mvindahl
Over the years, a lot of governments have outlawed offshore online gambling.
They mainly do so by proxy, by making it illegal for banks or credit card
providers to transfer money to unapproved gambling operations. In addition, to
offer an alternative, most governments allow some kind of gambling to run in
the country, but these are regulated and taxed.

I guess there are always ways to circumvent these government regulations and
put your money in an online casino in Barbados or whereever but it takes a
special kind of person to want to go through the hassle.

In very much the same way, governments could choke the flow of real money in
and out of cryptocurrencies if they wanted to. They are probably planning to
do so but it hasn't been on the top of their priorities just yet, the crypto
bubble being more of an annoying mosquito than a threat to the economic
stability. A government crackdown won't mean that crypto currencies will go
away but it will be obvious to everyone that they'll forever be RPG play
money, and only a small amount of enthusiasts will want to hold them. Prices
will adjust accordingly.

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Vadoff
A country can outlaw cryptocurrencies from their country, but the rest of the
world won't simply follow suit.

With countries like Japan or Korea embracing cryptocurrencies, it's
unrealistic to think they'll become "RPG play money".

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mvindahl
I don't think any "real" countries have any interest in cryptos becoming a
competitor to their respective national currency. That would be giving away
control over the economy, and why would any government want to do that? Thus I
think we'll see both South Korea and Japan taking an increasingly hostile
stance towards cryptos alongside all other developed countries.

I could imagine, on the other hand, freeloader countries like the Cayman
Islands adding cryptos as a supported way of stashing away money. Thus, they
could become a gateway between the legit economy and the crypto economy in the
same way that they are already a gateway between the legit economy and money
raked in by tax evaders, drug lords, and dictators. Thing is, the crypto part
doesn't really add any value to their offering. And the real question with
respect to Cayman Islands etc. is why we don't simply outlaw bank transfers
back and forth from these places.

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BatFastard
I can see only one reason why any government would ALLOW cryptocurrencies.
While they could someday be used as a digital currency, right now they have
very little positive value, and significant negative value. So the ONE reason
I can see why government support them is for their own nefarious needs.

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miscreanity
Bingo. Blockchain systems are ideal for tracking & control, even beyond credit
cards and the like. Bitcoin is simply so much more accessible.

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BatFastard
Blockchain is amazing. Its use in cryptocurrencies is just the cat that got
out of the bag...

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mrep
The centralized use case (not run by arbitrary nodes) might have some use
cases but the decentralized versions run on untrusted nodes which are all the
craze are ridiculously uneconomical.

Here is an article estimating Google (one of the most profitable software
companies) hardware expenditure at 5 billion a quarter [0], or 20 billion a
year. With their 20 billion in profit a year, a doubling of server costs would
make one of the most profitable software companies uneconomical.

Bitcoin and most other cryptocurrencies rely on everyone processing every
computation which is insanely cost heavy which is why bitcoin processes a
fraction of what visa does but costs the electricity of a small country.

Google's server requirements would obviously be uneconomical with that
architecture but can any architecture that relies on untrusted nodes to do the
computation be economical when a company such as Google could not run on twice
the infrastructure costs?

And thats just one of the downsides with decentralized cryptocurrencies of
which there are many.

[0]:
[http://www.datacenterknowledge.com/archives/2014/07/23/from-...](http://www.datacenterknowledge.com/archives/2014/07/23/from-112-servers-
to-5b-spent-on-google-data-centers-per-quarter)

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merkaloid
Cryptocurrencies don't require you to give away your computing power for free,
the blockchain gives them rewards for securing the network.

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mrep
That reward needs to be sold to pay for the infrastructure costs of running
that node which comes from increasing the supply of your cryptocurrency which
decreases the value of each cryptocurrency token.

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chrischen
Funny how that's what they're worrying about rather than the rampant penny-
coins and essentially unregulated securities. Even if you don't invest in an
ICO directly, investing in Eth or Bitcoin is essentially funding those ICOs
and allowing otherwise unqualified investors to speculate on the ecosystem.

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wlesieutre
The government can worry about two things at once

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tvanantwerp
As someone working in policy in DC, this often doesn't seem to be the case.

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wlesieutre
It's not like the SEC has been silent on cryptocurrency ponzi schemes though.

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dmitrygr
Unlikely, since (1) the current top few cryptocurrencies are not anonymous,
merely pseudonymous; and (2) they are not stable enough to reliably stash a
few dozen million USD and expect to get them out a decade later on a day's
notice.

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kneel
I think one of the major misconceptions about cryptocurrencies is that people
will want to turn their coins back into fiat.

There are billions being invested into cryptocurrencies in a grassroots
manner. This didn't happen because people love fiat. Their speculating on a
future where fiat is a minority currency.

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AznHisoka
I know a few people who put a huge stash into crypto because they don’t want
their spouses to know about their money when they get married.

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cryptoz
Why are they marrying someone who they don't trust? That sounds like an awful
state of affairs and likely those marriages will not last. Don't most wedding
vows include a line about being honest? Yikes to those marriages.

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AznHisoka
Yes and no. emotionally, its a bad idea. Rationally, it probably isnt an awful
idea to hedge against a marriage not working out

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cryptoz
> Rationally, it probably isnt an awful idea to hedge against a marriage not
> working out

That doesn't make sense. Rationally, hiding that money in secret is a reason
that the marriage won't work out. Hide that money, tell lies, be a scheming
and awful person, and there will be a self-fulfilling prophesy of that
marriage not working out.

~~~
AznHisoka
That may be true but most marriages don’t work out and they are not self-
fulfilling prophecies.

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alex_young
Isn't the real risk that cryptocurrency becomes the new laundry service?

Buy FOOCOIN, spend FOOCOIN on asset, don't report to the IRS, repeat.

Other direction:

Sell asset for FOOCOIN, buy $ with FOOCOIN, don't report to the IRS, repeat.

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PeterisP
If you by _large_ assets with FOOCOIN, the same rules apply for asset seller
as if you paid in cash, i.e. they must report the transaction to authorities
if it's above a certain amount (wasn't it $10k in USA?).

So either you're limited to small amounts, or you have to buy the assets under
the table with the usual laundering problems.

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koolba
Structuring your payments to be multiple below the $10K threshold specifically
to avoid triggering AML reporting requirements is illegal.

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joeblow9999
"“We don’t think this ecosystem can grow without regulation,” Beck said."

Uhhh its already grown by leaps and bounds. Control for the sake of control.
That's all they want.

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Feniks
Governments don't like black markets, untraceable transactions and people
hiding their assets.

You may not agree with it but there IS a rationale behind this.

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wslh
That's true but governments can only add friction to digital assets (e.g.
eliminate exchanges) but cannot destroy them. Also, I think at least now they
have some ideas about the volume of black markets. Even with blockchains like
Monero you have an idea of usage.

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root_axis
Of course governments could destroy them, just force ISPs to leverage deep
pack inspection to systematically cripple nodes in the network.

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squeegee5
I'll take RSA for $500, Alex.

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root_axis
Cryptanalysis has been able to reliably identify traffic despite encryption
for quite some time. No, they can't extract secrets (as far as we know), but
they can certainly identify the type of traffic being transmitted.

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squeegee5
You are talking about behavior- and inference-based traffic analysis. What
you're talking about is definitionally not inspection.

It is trivial for a defender to 1) enforce whitelists, 2) defeat analysis with
arbitrary use of Nagle's algo, 3) put bitcoind or other node services on non-
standard ports with non-standard sender-receiver behavior, 4) enable other
services with similarly non-standard configurations, 5) setup multi-homed
constellations, where nodes transmit on one channel and receive on another, 6)
do I really need to go on? There are dozens of things that can be done here to
defeat traffic analysis.

There's billions of USD-equivalents invested in this thing. Hand-wavey claims
like 'Cryptanalysis has been able to reliably identify traffic despite
encryption for quite some time' evidently do not take into account competent
defenders. Bitcoiners will buy time on, or even launch, their own satellites,
if public nodes begin getting stomped on and there is in fact some usability
issue preventing miners from relaying transactions.

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CryptoPunk
Governments are not going to be able to stop this from happening without
massively invasive laws against what software people can run on their
computers, public access to encrypted communication and private exchange.

Governments will hopefully be forward thinking about this and accept the
changes that technology brings. Ultimately it's government's responsibility to
accommodate social and technological trends, not vice versa.

Some of the worst chapters in human history came about when political
authorities tried to resist the tide of change, like President Franklin Pierce
who pushed back against the abolitionist movement pre-Civil-War by approving
the expansion of slavery westward, and thus setting the stage for the war to
come.

In recent decades Western governments have been reasonably enlightened when it
comes to technological change, as in the case of abandoning export control
laws barring wide dissemination of strong cryptography in the 1990s, and the
institution of safe harbor laws, both of which facilitated the growth of the
internet. I hope they carry that philosophy toward cryptocurrency.

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TeMPOraL
> _Governments are not going to be able to stop this from happening without
> massively invasive laws against what software people can run on their
> computers, public access to encrypted communication and private exchange._

Hopefully they'll be able to stop this and other problems with emission taxes.

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CryptoPunk
Whatever the tax is, I hope it is on some kind of physical consumption of
scarce resources, rather than on economic transactions that are inherently
private and increasingly out of the bounds of any jurisdiction.

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TeMPOraL
Yes. In my imagination, a widely deployed CO₂ tax would rise electricity
prices just enough to wipe the profits off Bitcoin mining and make maintaining
the blockchain that much less profitable for people, killing the currency
outright.

But then again, it might only delay the inevitable...

(And to be clear - I don't mind innovations in finance, new kinds of money,
new mechanisms of social consensus, etc. I only dislike systems with huge
energy waste, especially one unsustainable in long-term, as such systems
grow.)

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jokoon
Well yeah, better start regulating them, and quickly. At least the exchanges.

Crypto currencies are ideal if you want to launder money.

Not to mention the volatility of it might keep doing damages.

