

More Bitcoin Regulation Is Inevitable - siavosh
http://dealbook.nytimes.com/2014/02/03/more-bitcoin-regulation-is-inevitable/?_php=true&_type=blogs&smid=tw-share&_r=0

======
civilian
> Bitcoin has fluctuated wildly in value, highlighted by a chart from Coinbase
> showing that it increased over 400 percent in November and then lost nearly
> half its value in December. That type of volatility is an invitation to
> unscrupulous dealers and merchants to overcharge or underpay.

> To protect consumers who want to use Bitcoin for legitimate transactions,
> the government may adopt reporting requirements on virtual currency
> exchanges so that there is a public repository of information about prices.
> Although the government cannot control the value of a virtual currency, it
> can make the currency more transparent to users so that they are not
> defrauded.

\---

Ehhh, really? In one paragraph they point out the price history of Coinbase,
and then in the next paragraph they say "the government outta do it".

And yeah-- the government is technically unable to control the prices of
virtual currencies but government also _should not_ be in the business of
controlling prices anyway. That leads to a distortion of market prices and a
bad deal for one side or the other.

------
TrainedMonkey
I agree. I think every bitcoin transaction should be reviewed by finely
trained employees of Finance Security Agency (FSA). Amongst other things they
should make sure:

1\. Correct amount of bitcoins were withdrawn from source bitcoin wallet.

2\. Correct amount of bitcoins were deposited into target wallet.

3\. Both target and source wallets are valid.

4\. Etc.

AFAIK, bitcoin is currency and FX market is in generally way less regulated
compared to securities market. Thus any regulation introduced would be
targeting money transfers between individuals, rather than exchanges[1].

[1] We probably should regulate exchanges, as of right now it is super simple
for exchanges to make profit on their customers. Consider following strategy,
whenever bitcoin order comes in that moves market exchange would execute small
order in same direction before customer order, reverse order as soon as larger
order moved market. Instant profit.

~~~
sln
I really want to believe this comment is a joke...

Everything that you mention that needs to be "regulated" is already regulated
by the bitcoin protocol itself. In fact, the whole point is to replace
regulation with strong cryptographic proof.

~~~
TrainedMonkey
Good sir, surely you jest, how else we will maintain security of this nation
if FSA will not monitor and double check every single transaction? What if
some bitcoins will go missing in transit from source to target wallet?

First part of the post is indeed a joke, I am pretty sure comments on FX
markets and strategy that exchanges could use to game the customers are
accurate.

------
DennisP
"FinCen went a step further in its guidance by including any person who puts
into circulation a virtual currency, which means that the so-called Bitcoin
miners are also subject to the regulations."

This is out of date. FinCen issued vague guidance months ago suggesting miners
might be regulated, but recently clarified that they are not.

[http://www.coindesk.com/fincen-bitcoin-miners-investors-
mone...](http://www.coindesk.com/fincen-bitcoin-miners-investors-money-
transmitters/)

------
kudu
> The idea that Bitcoin could be an alternative to traditional money that
> would allow users to conduct transactions anonymously beyond the pale of
> intrusive government regulators has proved to be little more than a pipe
> dream

That statement is incredibly ignorant. Regardless of what any government
decides to do, people will always be able to conduct unregulated transactions.
The subject at hand is the regulation of money transmitters, such as
exchanges.

------
shmerl
Regulation where it's necessary (like exchanges) is understandable. Regulation
of transactions between individuals and vendors for example is not reasonable.
And virtual currency should prevent such regulations by its own design - i.e.
there simply should be no technical way to regulate that.

~~~
1qaz2wsx3edc
Seeing as the ledger is public, regulation of transactions through aggregate
means is inevitable. It's just a waiting game right now.

~~~
DennisP
Worth noting there are several projects working on making crytocurrencies much
more private. Matthew Green's zerocoin and zerocash are the strongest,
providing provable anonymity.

In principle, zerocoin could be added to bitcoin, but the bitcoin devs aren't
up for it yet. Zerocash is so different it pretty much has to be an altchain.

------
programminggeek
Any business opportunity, currency, financial instrument, etc. that makes
enough money is absolutely 100% going to be regulated for two reasons:

1\. Consumer Behavior Requires It

2\. Large Companies Thrive On Regulation

To point one, if you have anything that is making people a lot of money one
way or another, there will be scams and fraud. Once there are scams and fraud,
the government gets involved and has to clean up the mess. Then laws are made
to stop the problems from happening in the first place. Eventually you need
business licenses, certification, etc. to transact business because too many
people got ripped off.

To point two, regulation and rules actually end up favoring the entrenched
companies. Usually regulation creates barriers that reduce competition. For
example, to trade securities, sell insurance, or sell real estate you need to
get a license. To get a license you need to take exams and pay money to be
certified. Most people won't go through that effort and so the larger
companies make a lot of money from the lack of competition.

Rules and regulations might be annoying, but they are a sign of maturity and
growth in many cases so it's not all bad.

~~~
baddox
That's an interesting way to put it. You're basically saying that Bitcoin
_will_ be regulated, either because the regulations will be good for society
(in which case society will advocate for them) or bad for society (in which
case society may not advocate for them, but those with political power will).

~~~
rayiner
I think the (2) has an unnecessarily biased phrasing. The capacity to deal
with regulation, whether that regulation is good, bad, or otherwise at the
macro level, is just one of the many economics of scale that can be harnessed
by large companies. Because of (1), regulation is inevitable, and once you
have almost any regulation at all, a competitive benefit accrues to larger
companies, who can consolidate the regulatory compliance function in a way
smaller companies cannot.

This is a perspective that is often overlooked on HN, understandably, but the
fact is that startups are in many ways extremely inefficient businesses. Most
business functions, from accounting to training to regulatory compliance,
simply don't scale down very well, for reasons that have nothing to do with
politics.

~~~
penrod
It is not just that large companies are more efficient at dealing with
regulation; Large companies actively lobby for regulation as a way of
protecting themselves from (smaller) potential competitors.

It may be that regulation for the public good is inevitable and desirable, but
one cannot assume a priori than any particular regulation exists for that
reason.

~~~
rayiner
I don't think, on the net, large companies lobby for regulation more than they
lobby against regulation.

~~~
penrod
Appeal to authority and all that, but..

"the pressure on the legislature to license an occupation rarely comes from
the members of the public . . . On the contrary, the pressure invariably comes
from the occupation itself."

Milton Friedman

"…as a rule, regulation is acquired by the industry and is designed and
operated primarily for its benefits."

George Stigler

------
fiatmoney
There's an important distinction between the "regulation of bitcoin" and
"regulation of businesses's or people's use of bitcoin".

You could, for instance, say "use of an unregistered wallet is a crime", but
it would be very difficult within the protocol to prevent bitcoins from
flowing to unregistered wallets.

------
higherpurpose
I'm not surprised to see this "threat" angle approached by NYT. Most of their
articles on Bitcoin have been negative so far, and about how awful Bitcoin is
whether from an economic point of view or from an "enabling crime" point of
view.

Normally, you would see "real journalists" try to balance the views, and
insert opposite views and quotes in their articles. But not here, it seems.

~~~
bcoates
One of the things you can say in favor of the NYT is that they never bought
into the TV news balance fad.

------
300bps
As long as there is cash, there will be a way to get bitcoins outside of an
exchange and outside of any regulation.

Even if this were not the case, the more regulation added to bitcoins, the
more people move to alternative crypto currencies. I don't see people seeking
to regulate litecoin, dogecoin, coinye, etc.

~~~
kamkazemoose
I imagine most regulation to bitcoin would be more vague and instead be
written to apply to all cryptocurrencies.

People aren't calling for the regulation of other cryptocurrencies mostly
because they don't have the same kind of usage and economy surrounding them
that bitcoin has. If people start trading coinye in the same way and it
reaches similar volumes as bitcoin, you'll see the same sort of talk. It just
makes more sense to treat cryptocurrencies the same under the law, unless
there is something about a particular one that made it most different than all
the other current variations.

