

Forget piracy, U.S. government is going after Bitcoin  - ra
http://venturebeat.com/2011/06/08/government-crackdown-on-bitcoin/

======
thomasz
A little bit off topic: I was curious if you can really do something with
bitcoins aside from speculation. It turns out that there are some places that
accept bitcoins. But it seems that actually _using_ bitcoins as a currency
instead of a speculative asset doesn't seem like a good idea right now:

The sites seem to either try to adjust prices often, or don't. The sites that
don't are hopelessly overpriced: Let's say I want the biggest vps for sale at
<http://lightfoot.dashjr.org/?page=vps> . I can either go through the hassle
of buying 49 bitcoins for ~1450$ at mtgox to pay for the vps, or I could pay
118$ directly. Even the sites that adjust the price have a huge problem: If I
convert dollars to bitcoins, I would be tempted to wait a couple of days and
sell on mtgox and then buy the service with dollars.

So, buying stuff with bitcoins is not the best idea right now. If you want to
do something with bitcoins, buy them and sell them at a higher exchange rate
later. The only problem is that we all know that this can't go on forever.
Therefore, the exchange rate is bound to go down sooner or later. If that
happens, we would be in a mirror inverted situation: Selling stuff for
bitcoins would suck. Prices would have to reflect the overhead of continuously
adjusting prices and converting bitcoins, putting them at a disadvantage
against "real" currency.

Price instability is poisonous for a currency. Some aspects of bitcoins lead
to excessive speculation, and therefore, prices will always be unstable,
therefore, there is no incentive to use bitcoins as a way to buy or sell
(legal) goods.

~~~
_Lemon_

       > If I convert dollars to bitcoins, I would be tempted to wait a couple of days and sell on mtgox and then buy the service with dollars.
    

Remove the "purchasing a service" element out of the equation and this still
holds up -- the temptation to put money aside in bitcoins is still there.

As the service is a month-to-month thing, there's a limit on the amount of
time you can wait if you did purchase by bitcoins. Also, if the price of
bitcoins is going up, it's encouraging customers to pay earlier and earlier
which is a good thing as most customers seem to wait until the last day (but
server bills come up before then...).

~~~
thomasz
No, it's encouraging the customer use an established, stable currency which
doesn't force him to closely monitor the exchange rate. Usually, he doesn't
want every transaction to be highly speculative.

~~~
Jach
It also depends, psychologically, on how early you got in. If you bought a
bunch of bitcoins at $1 per BTC (or less), and a company is selling X for 1
BTC, you might think "Ooh, I'm getting X for just $1!" (Or if you do mining,
calculate the electricity costs.) Sure, 1 BTC may be worth ~$30 right now, but
you presumably want item X _right now_. Plus you get a physical asset worth
~$30 for what cost you in stable-money $1. (Though with the surge over the
past week or so I'd agree with you on avoiding spending for that period if
possible.)

~~~
thomasz
No way. Say I bought 49 coins for 49$. I wouldn't use them to buy one month of
vps. I would convert them to ~1400$ and use 118 of those good old dollars to
buy the service, tell myself how clever I am and spend the rest on cocaine or
something like that.

------
woodall
No it's not. A few senators are pressing the issue. The founder of BC is
scheduled to give talks at the CIA, if they were going to bust him, they would
have been more upfront then about the issue. I don't doubt that BC will be
pressured by the government, but venturebeat is jumping the gun with this one.

~~~
doublec
Gavin isn't the founder. He's the current maintainer of the open source
software. The founder was Satoshi Nakamoto who is apparently no longer
involved with the project.

~~~
gamble
And may not actually exist.

------
Joakal
Might be a topic of interest of a company that rivalled Paypal: 'Bullion and
Bandits: The Improbable Rise and Fall of E-Gold' [0]. A guy had an ambition to
have currency backed by gold rather than the Federal reserve. In his
execution, he had also allowed anonymous accounts but soon had trouble with
the FBI due to the anonymity.

[0] <http://www.wired.com/threatlevel/2009/06/e-gold/>

~~~
mw63214
A lot of the U.S. power comes from our currency and its stability(relative to
the rest of the world). To challenge this would mean an increased risk, both
financially and militarily. That being said, I think instead of attacking this
rising trend, maybe an open(more likely not-so-open) discussion is needed from
many branches of the government and a lot of simulation to assess systemic
risk.

~~~
danneu
Interesting, considering the #1 entity that's challenging the US Dollar is the
government. You make it sound like Bitcoin is suddenly grounds to be concerned
about the future of the dollar while the government has been pilfering its
worth for decades.

~~~
mw63214
"Interesting, considering the #1 entity that's challenging the US Dollar is
the government."

I'm in 100% agreement, along with many other heavily-vested countries.

------
jarin
I believe the same Senators are trying to go after Tor as well, which is
comical because Tor was originally sponsored by the US Naval Research
Laboratory.

Remember when Congress tried to get encryption banned (or hobbled) too, once
they realized that people other than the government could use it?

Anyway, I think they'll probably start focusing on issues the general public
can understand as election season gets closer.

~~~
gnosis
_"I believe the same Senators are trying to go after Tor as well ... Remember
when Congress tried to get encryption banned (or hobbled) too, once they
realized that people other than the government could use it?"_

The difference is that encryption is critically important for much of the
internet's infrastructure, while Tor isn't.

So they couldn't eliminate the use of encryption without crippling the
internet, while getting rid of Tor wouldn't have much of an effect on the
internet at all.

------
richcollins
_Unlike other currencies, Bitcoin uses a peer-to-peer technology to manage
transactions and validate payments. Since no bank is involved, purchases don’t
leave a paper trail for law enforcement agencies to track criminal activity._

How is this different than us dollars in cash?

~~~
gamble
There are a large number of laws that create a paper trail when substantial
amounts of cash are used.

If you withdraw more than $10,000 in cash, your bank has to report it to the
government.

If the bank thinks you're 'suspicious', they have to report it to the
government.

If a business accepts more than $10,000 in cash it has to report you to the
government.

The US is actually more lenient in this regard than some countries, where
large cash purchases are (or will soon be) banned outright.

~~~
CaptainZapp
Apologies for my curiosity. But which countries ban (or are about to ban)
large cash purchases?

Very much appreciated if you have references or pointers.

~~~
gst
Italy has already been mentioned in the replies.

Sweden is another one. Actually they are currently discussing/planing to
completely ban cash transactions: <http://www.bbc.co.uk/news/world-
europe-10538032>

~~~
CaptainZapp
Thanks for the link.

I'm not surprised regarding Italy (where I had to produce a passport and get
myself registered in order to use an internet cafe), but Sweden does surprise
me.

------
hcho
I wonder if this is going to be Barbara Streisand moment of bitcoin. Up until
now, it was largely techies who had interest in the currency. This and the
ensuing media interest might take it to mainstream.

~~~
gst
A few days after this German lobby group argued against Bitcoin the Bitcoin
value (in EUR) nearly doubled. In addition, even my non-techie friends now
know about Bitcoin.

~~~
bermanoid
There are some indications that at the moment the real limiting factor to
Bitcoin's ascent is the ability to funnel USD into it: this is purely
anecdotal, but I've noticed that every time a batch of Dwolla transactions
clears through MtGox, BTC spikes substantially, and in between these times it
does relatively little.

That's not necessarily a good thing for BTC, since it means that the
theoretical unrestricted market is, in fact, heavily bottlenecked at the USD
faucet. From what I've heard it's just as difficult, if not more, to get money
out quickly, which means this market is effed up in all sorts of ways.

IMO, the best thing Bitcoin could do would be to enable an identity-connected
sub-system that directly tied Bitcoins to individuals, so that transactions
could be better tracked and regulated - the fact is, most people don't need
anonymity in their transactions, and the legal shadiness of the current
approach means that it's never going to be simple to move money in and out.

When BTC is as easy to get into and out of as euros or yen, that's when things
will start to get seriously interesting...

~~~
gst
I think the bitmarket.eu approach works quite fine:

The seller stores his Bitcoins at the bitmarket.eu (free) escrow service. The
buyer wires the money via bank transfer directly to the seller. The seller
releases the Bitcoins on bitmarket.

At least in Europe bank transfers are easily possible between foreign
countries and even free (or at least very cheap) between European countries.

Saying that I wouldn't buy any Bitcoins right now. While there is a huge
demand, I do not see any indication that those coins are used for any
significant amount of real trading (i.e., buying services). Seems that most of
those people just buy the Bitcoins due to speculation. When the hype is gone
there is a very good chance that the market crashes again - if the real market
does not grow with the current bubble.

------
nostromo
I really don't see how they can regulate Bitcoin -- that's kind of the whole
point. Unlike e-gold there's no central authority to take down. The exchanges
could simply move to a friendly host country, much like The Pirate Bay.

~~~
Strom
The government can declare the use of bitcoin illegal. This won't stop regular
users, like it doesn't stop them from using the pirate bay. But no business
will be able to accept bitcoins anymore and as such bitcoin's potential will
be severely limited.

~~~
bartl
My guess is that the only people left to use Bitcoins is precisely for those
illegals activities... Precisely the people they're trying to stop. It's not
because something isn't legal that it stops working.

~~~
Strom
When the government makes bitcoin illegal they will ofcourse claim it's to
prevent child pornography, terrorism and drug selling. However the real reason
will be tax evasion and the law would be successful in taking care of that
_real target_.

~~~
Jach
The silly thing is that if they do make it illegal because some businesses
won't report bitcoin profits to the IRS, that will just guarantee that _all_
businesses (licensed or unlicensed) using bitcoin won't report profits.

------
nlz1
Replace "Bitcoin" with "money laundering" and "tax evasion" to understand why.

~~~
jarin
The only method of payment for these illegal purchases is money laundering.

The only method of payment for these illegal purchases is tax evasion.

Hmm...

------
reemrevnivek
They lost me at:

> The only method of payment for these illegal purchases is ... Bitcoins.

------
chippy
Another example of the intentional hype around Bitcoin, made by the holders of
Bitcoins, designed to increase interest, and therefore the value of their
existing Bitcoins. We are being conned, and spammed.

~~~
Tichy
You think those two senators are holders of Bitcoins and only made that
announcement to increase the value of their holdings?

~~~
jarin
Of course, didn't you know that the New World Order, Shadow Government, and
Illuminati don't even take Visa? Bitcoin only at the Area 51 gift shop.

------
beedogs
Just imagine if it weren't a complete and utter pain in the _ass_ to purchase
and sell bitcoins. (And, please, don't tell me it isn't.)

~~~
jarin
Bank transfer through Dwolla is easy. Of course, it takes so goddamn long that
by the time you actually buy some bitcoin it's gone up 80% from when you
initiated the transfer.

------
wladimir
Now the real trial by fire for bitcoin begins...

One thing is for sure, this is going to be interesting.

/me gets popcorn

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InclinedPlane
I know a little bit about all the rigmarole that banks and companies like
paypal and amazon have to go through in order to comply with various money
laundering and tax evasion laws. I'm not surprised that bitcoin hasn't done
their due diligence on the subject and are now catching flack.

~~~
Confusion
That's hardly surprising, because _there is no bank or company involved_ to
hold accountable.

~~~
_Lemon_
While it depends on the country, you don't have to be a bank to be regulated
in the UK.

For example, the Financial Services Authority says you need to be registered
for accepting deposits or issuing e-money:
<http://www.fsa.gov.uk/Pages/Doing/Do/index.shtml>

I have no idea whether this is simply or cheap though...

------
Wickk
Misleading title is misleading

