
Bitcoin Central Licensed as Bank - enmaku
http://codinginmysleep.com/bitcoin-central-licensed-as-bank/
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dsr_
Are accounts insured in BTC or EUR? It seems to me that closing the bank (and
let's face it, that does happen in the real world from time to time) could
cause a run on BTC since the supply is so limited compared to traditional
currencies. If all accounts are actually insured in EUR, on the other hand,
BTC deposits are either not covered or are treated as equivalent to EUR via an
exchange rate, which implies actual equivalence.

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saturn7
Only Euro deposits are insured. It's like a trading account for stocks. You
cash is safe, but if your investments in stocks loose value then that's your
problem.

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Petrushka
Quite interesting that Bitcoin appears to be making inroads into the
mainstream financial system (which being registered a bank would seem to
imply). The primary issue with Bitcoin is that because it is issued by no one,
and is no one's primary currency, there is no incentive or ability by any
organization to regulate it through monetary policy. It's value is set only by
the market. The flaws with such a system is obvious, and Bitcoin experienced
it itself when it went through that massive devaluation a few years back. Even
with automated banking systems, the market structures used throughout the
world are based on currencies having a measure of stability to them in terms
of pricing, or, at the very least, that a central bank of some sort will give
ample notice before a massive change will occur. With Bitcoin, that all goes
out the window, and pricing becomes a major challenge. As such, I don't see
anyway Bitcoin can move into the mainstream marketplace. It has to be a niche
provider. So this step is very interesting and counter-intuitive.

Should note, when I say no regulation, I mean it can't be regulated according
to market movements. It's regulated by a pre-set system of release, not one
that can react to changing circumstances.

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yebyen
> Bitcoin experienced it itself when it went through that massive devaluation
> a few years back.

When?

I remember one major dump taken by the price of Bitcoin, and it was a few days
into a great big bubble.

<http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25zv>

If you were counting on the price to keep going up and up, maybe then you saw
it as a massive devaluation. I myself would have called it a bubble that
burst... compare the price in May of last year to the price in May of this
year, or September-to-September, and it just looks a bit volatile, but on
average rising.

EDIT: OK, so when I look at the chart and stop trying to argue a point, I do
see a protracted devaluation. I remember hearing it was because a large
account was hacked and the hacker dumped a large number of coins on the
market. That was after that peak in last June. No explanation why the price
would have soared so high, but for folks who weren't on the scene, that might
explain the downturn.

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Petrushka
Exactly. "No explanation why the price would have soared so high" is the exact
reason why Bitcoin will have issues trying to tie into the larger financial
structure without series difficulties.

Ever seen Trading Places? The stock market scene at the end where they make a
killing is based (fundamentally, forgetting about the fraud) on the fact that
the value of the Frozen OJ drops to 25% of its former value in a single
moment. The normal financial system has things in place, both internally and
externally, so that (fraud not withstanding) such a rapid (de)valuation
increase doesn't happen regularly (when it does, you get 1873, 1929, 2008,
etc). Bitcoin doesn't have the internal measures, as it isn't issued by a
central authority, which can alter the amount of currency in the market at
will. As such, it would need some many external controls, such as say a
24-hour transaction period, to be useable on the open market, which would in
turn make it unreasonable for the open market.

And if you're wondering why Bitcoin is being seriously studied by economists,
that's why. No one has seen anything like this ever, and what happens, and how
that can influence general economic models, is fascinating.

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yebyen
I understand your point, but I think you've successfully argued against it
when you told me that there is "no such authority on Bitcoin who can alter the
amount of currency on the market at will"...

What would a 24-hour transaction period do exactly? Bitcoin is supposed to be
used like cash. If you spend it then it's gone, most immediately, and if you
value it highly then you keep it in a safe.

Price goes up, price goes down, safe is still safe. Until it gets cracked,
then if you're a real player, the market is flooded with (illegally obtained,
but generally not really tainted and otherwise fairly easy to clean) pile of
coins.

I'm no economist, but I understand "redistribution of large collections of
wealth can lead to rapid deflation without countermeasures." That's equally
harmful to big-time owners as well as little guys.

We should be thinking about the countermeasures.

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Petrushka
The points I'm making don't have anything to do with transactions in a
primarily Bitcoin marketplace. The issue is that there is nothing in place to
maintain price rates, even including that, as you note, its primarily digital
existence and small size make it highly susceptible to fraud. This is a major
issue for converting Bitcoin to other currencies.

That Bitcoins are supposed to function as cash doesn't mean they are
automatically stable. Consider that Bitcoins are becoming more accepted by
online retailers, and lets say that, for instance, Amazon decided one day to
not only accept them, but, because of the simplicity of Bitcoin transactions
(e.g., you don't have to pay eBay to implement PayPal), any and all Amazon
products would be 5% off using Bitcoins. Such a situation is unlikely, but if
you imagine instead of Amazon, a number of small players, like how Wordpress
is doing it, it's feasible. Then, suddenly, the government steps in and forces
Amazon to pay sales tax, and, because Bitcoin isn't accepted by the US
Government as a full currency, they decide to set some arbitrarily low Bitcoin
to USD rate, and Amazon stops taking Bitcoin. Such a series of events would
lead initially to a massive increase in demand for Bitcoin, then a massive
decrease. Again, fiat currencies have systems built in place to protect
against such an occurrence, including scale. Bitcoin does not, and so its
interaction with the general market will scare people off unless there is some
sort of holding policy in place (like a 24-hour transaction period) to secure
the Bitcoin's value.

Not a great example, but it will do.

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yebyen
Thanks for that! It sounds more plausible than a regular house of cards. I
never even think of sales tax. It makes things a lot more complicated than
just having income tax.

For instance, should you collect sales tax when selling bitcoins? If you are
in a jurisdiction that collects sales tax, then I don't see why not. Also pay
income tax on your mining rewards. Now, good luck making a profit! *(without
adding a secondary business, unrelated to mining. hey, at least you can be
paid in bitcoins!)

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apeace
This is a huge step backwards. I don't understand why anyone wants this to be
done.

Banks are already great for things that banks do, like insuring deposits and
putting your account within reach of authorities. Presenting an ID to get a
Bitcoin account which is regulated by central authorities, both private and
government, seems antithetical to the purpose of Bitcoin.

This isn't to say one organization going mainstream PSP will hurt Bitcoin. I
simply don't see the point, that's all.

The rest of us will continue using Bitcoin through Tor and i2p, keeping our
money safe and anonymous.

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jerguismi
> This is a huge step backwards.

I don't understand this mentality. There is only an additional service on the
market, nobody forces you to use it if you don't see the need. If somebody
else finds it useful, how it is your problem?

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apeace
My comment was not to ask anyone to stop forcing a service on me, or to point
out that it's harming me. As I said:

> This isn't to say one organization going mainstream PSP will hurt Bitcoin. I
> simply don't see the point, that's all.

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minato
What kind of bank make a test on an FAQ page ?! <https://bitcoin-
central.net/s/faq>

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xntrk
Bitcoin Central to be hacked in 3...2...1.....

