Bitcoin News

E-money researcher and Bitcoin Foundation board member Jon Matonis (@JonMatonis) describes how financial privacy of individuals is being trampled upon.  Excerpts:

“‘Private individuals should have more privacy [than politicians would be afforded], as they have not placed themselves into the political arena. They have not agreed to give up their privacy,’ [says Attorney Jenice Malecki (@SecuritiesLawUS)]. However, she also concedes that when it comes to offshore numbered accounts, ‘it does seem that banking secrecy is eroding. Slowly, but surely, banks are releasing information for governmental investigations.’”
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“Decentralized cryptocurrencies such as bitcoin arrived on the scene in early 2009 and now provide an outlet for personal wealth that is beyond restriction and confiscation. The exchange rate for government fiat currencies may be volatile now, but as the market price eventually finds equilibrium and stabilizes, bitcoin will become an important store of value.”
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“Think of bitcoin as your own personal financial safe haven or offshore bank.”
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“Future regulatory and confiscatory attacks on safe havens and banking secrecy will become irrelevant, because bitcoin provides for a personal ‘offshore center’ under direct and sole control of the individual.”
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“Legitimacy is a politically charged term. One person’s legitimacy may be another person’s aggressive and unjustifiable overreach. Also, what a certain government sees as legitimate may be viewed in other parts of the world as a violation of fundamental human rights. This is clearest in authoritarian regimes that impoverish and imprison their political opponents for so-called crimes against the state.”

 - http://bit.ly/150p0Ly
 - http://bitcointalk.org/index.php?topic=174567.0 (Further discussion of the article)

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Forbes contributor and Bitcoin Foundation (@BTCFoundation) board member Jon Matonis (@JonMatonis) considers the impact a government ban on Bitcoin would have on the fledgling currency.  Excerpts:

“The demand for an item, in this case digital cash with user-defined levels of privacy, does not simply evaporate in the face of a jurisdictional ban.”
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“Ironically, the ban would create something like the Streisand effect for Bitcoin generating an awareness for entire new demographic groups and new classes of society.”
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“[Bitcoin is] a bet that career mobility and independent contractor businesses will eventually outstrip the growth of the corporate wage-slave population.”
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“[The government’s] best response to Bitcoin is irrelevancy, or failing that, extreme gold-like market manipulation for as long as possible. The end game for the State is perpetuating the fiat myth — their fiat myth not the populace’s cryptographic Bitcoin myth. They have always known that faith in money is a mass illusion, however they never considered that they wouldn’t be in charge of the illusion.”

 - http://onforb.es/112nF0u
 - http://bitcointalk.org/index.php?topic=139516.0 (Further discussion of this article)

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Kyt Dotson, writer for SiliconANGLE (@SiliconANGLE), describes how Bitcoin was portrayed in yesterday’s CNN article.  Excerpts:

“In what could be best described as an odd screed against Bitcoin and its potential financial impact on the world, it delves into places that paint the cryptocurrency as a boogeyman while at the same time reporting on money laundering occurring in current banking industry.”
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“Sanati starts by poisoning the well: citing the black market success of Bitcoin due to its high liquidity and current underground nature in order to make it seem sinister. He even uses a lot of weasel words such as ‘shady’ and ‘sketchy’.”
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“Fears that Bitcoin might be used for laundering aren’t without merit; they just have nothing to do with the currency per se but how laundering works. Any system that has proven to work is going to become a useful tool for criminal activity—after all the USD is used in exactly this way, thus why finance laws exist.”
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“One of the important things that this article misses is that financial crimes, money laundering, and their ilk are already illegal.”
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“Parts of Sanati’s article do read like a hopeful examination of where Bitcoin could go. He sometimes reflects on the same things I do: […].  However, none of these issues lend to an entirely criminal nature—they’re all growing pains.”
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“There’s nothing inherent to the cryptocurrency that makes it a perfect criminal enterprise as much as it makes it a useful medium of value exchange.”

- http://bit.ly/SU7Gn2
- http://bitcointalk.org/index.php?topic=131488.0 (Further discussion of this article.)
- http://bitcointalk.org/index.php?topic=131679.0 (Further discussion of the CNN article.)

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Forbes contributor Jon Matonis (@JonMatonis) describes a generally overlooked vulnerability for Bitcoin — the possibility that key disclosure laws could be used against an individual.  Excerpts:

“Key disclosure laws [exist in the U.K.,] Australia and South Africa which compel individuals to surrender cryptographic keys to law enforcement without regard for the usual common law protection against self-incrimination.”
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“Key disclosure laws may become the most important government tool in asset seizures and the war on money laundering. When charged with a criminal offense, that refers to the ability of the government to demand that you surrender your private encryption keys that decrypt your data. If your data is currency such as access control to various amounts of bitcoin on the block chain, then you have surrendered your financial transaction history and potentially the value itself.” 
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“Bitcoin not only disrupts payments and monetary sovereignty, it also disrupts the legal enforcement of anti-money laundering laws, asset seizure, and capital controls. It is very likely that a key disclosure case will make it to the U.S. Supreme Court.”
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“Another legal strategy to complicate matters could be to split the passphrase with another person and claim that you are never in possession of the entire real passphrase.”

- http://onforb.es/Qjj3Pe
- http://bitcointalk.org/index.php?topic=109105.0 (Further discussion of the article)

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Timothy B. Lee (@BinaryBits)’s latest post on Bitcoin explores a frequently raised topic regarding Bitcoin and the law.  Excerpts:

“Nothing like Bitcoin existed when current laws were written. A wide variety of laws regulates banks, money transmitters, currencies, and securities—but none of these categories are a good fit for bitcoins.”
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“Nikolei Kaplanov says ‘so long as you are purchasing legal things and you’re conducting yourself in a manner where you’re making regular exchanges in person or through a company online, there are no legal hurdles whatsoever.’”
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“Kaplanov said it was ‘not a laughable argument’ that Bitcoin miners are money transmitters, though he did think it was a ‘huge stretch.’”
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“Bitcoin exchanges need to register as money-transmitting services with the relevant state or federal authorities and comply with regulations governing money-transmitting services, Kaplanov said.”
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“Bitcoin products keep arriving, and if their popularity grows, states may take a more active interest in regulating the currency than they do now.”
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“Shutting down the network in one country is unlikely to have much effect. It will continue to operate in other jurisdictions, and users in the jurisdiction where the technology is banned can easily participate in Bitcoin transactions via VPN.”
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“[Kaplanov] thinks it would be a bad idea for the US government to do anything dramatic, such as try to outlaw the cryptocurrency.”

- http://bit.ly/T4c3WT
- http://bitcointalk.org/index.php?topic=103022.0 (Further discussion on the articles)

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Rohan Pearce (@rohan_p) wrote a piece in Computer World Australia describing ways Bitcoin was flagged as a “potential vulnerability” as part of a July 2012 report on money luaundering by Australian watchdog AUSTRAC.  Excerpts:

“‘AUSTRAC is aware that digital currencies, such as those offered by Bitcoin, may become more attractive to criminal groups, particularly in response to tighter regulation and monitoring of established or traditional financial channels by both government and the traditional financial service providers themselves,’ [AUSTRAC CEO] Schmidt says.”
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“‘By not being able to easily trace either the criminal or the placement of money, and coupled with the issue of which country should criminal proceedings be brought in, it is appealing to criminals who want to quickly launder money,’ Chambers-Jones argues.”
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“‘By far the bulk of attempted money laundering activity continues to be undertaken through the mainstream financial system,’ Schmidt says.”
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“Chambers-Jones believes that while governments and law enforcement agencies are aware of the potential of virtual world money laundering, there needs to be political will to specifically regulate the area.  ’You need to get all countries to agree on a policy and this is going to be incredible difficult to get a consensus on because of the societal difference which underpin legislation,’ she says.”
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“‘No one country or body regulates and monitors the internet, and therefore no-one can control in the most part what goes on within the internet,’ Chambers-Jones says.”

- http://bit.ly/RUbenj
- http://www.austrac.gov.au/files/typ_rprt12_full.pdf
- http://bitcointalk.org/index.php?topic=100764.0 (Forum discussion for this report)

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In a newsletter from Mondato (@MondatoPortal) is an article on how underground money transfer networks are subverting central authorities as well as the traditional financial system.  Excerpts:

“As mobile penetration continues to grow exponentially, even in restrictive economies such as North Korea and Iran, underground value transfer may soon find a new vehicle – the mobile phone.”
“Newly emergent virtual currencies like Bitcoin have the capacity to fly beneath government regulations, opening alternate channels for subversive money transfer.”
“The international community may be powerless to stop the emergence of Bitcoin, particularly in contexts such as North Korea, Somalia, or Iran where there is demand for alternative monetary systems.”

- http://bit.ly/MLHelX
- http://www.bitcoinmoney.com/post/25553288020

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A post on Bitcoin Money blog (@BitcoinMoney) describes a session at an upcoming conference in which regulators, bankers and anti-money laundering specialists will be discussing our favorite digital currency.  Excerpts:

“One of the conference sessions under the Trends in Technology track, titled New Trends in e-Payment Methods: Understanding the Virtual Customer, will let attendees: ‘Analyze financial crime trends and vulnerabilities in credit cards, Bitcoin and pre-paid cards, especially in developing countries’.
“Why might Bitcoin be getting addressed explicitly this year? There have been no laws passed addressing Bitcoin or digital currency in general even nor have regulators given any guidance for dealing with Bitcoins.”
“These delegates are the lieutenants for the old guard. They help assert control so that we have no choice but to continue suffering through price increases as currencies around the world are debased. They maintain the control which ensures that we are tied to a system that rewards its loyal customers with $30 overdraft fees, 30% interest rates and $3 million bonuses for the executives”.

- http://www.bitcoinmoney.com/post/19526528411

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A post on Bitcoin Money blog describes statements by FinCEN director Freis regarding Prepaid Access and on who might be required to register as a U.S. money services business (MSB). Some of Freis’ excerpts:

“The new rule was designed to be technology neutral and is meant to be adaptable to a range of products, such as a plastic card, an internet system, or a mobile phone network”.
“[Criteria that determines if a product is subject to the new rules include] whether the product is reloadable, can be transferred to other consumers, and, […] can be used to transfer funds outside the United States”.
“We will be publishing [a] proposal for public comment very soon [on the requirement that tangible prepaid access is declared] when it is transported across a border, similar to the existing declaration required for international transport of cash and monetary instruments”.
“An entity that engages in money transmission in any amount is subject to the BSA rules”.”The term ‘currency dealer or exchanger’ [has been replaced] with the new term ‘dealer in foreign exchange,’ a term used to include the exchange of instruments other than currency as a category of MSB”.
“It is recognized that AML/CFT regulations need to be applied not just to banks, but rather to a range of financial and other types of commercial institutions. Why? The reason is that any way that you can move money—any way that value can be intermediated—can be abused by criminals”.
“Violations by much smaller entities might also merit monetary penalties”.
“Over the past year FinCEN has been engaged in an initiative to identify unregistered money services businesses, primarily independent money transmitters”.
“Now that FinCEN has established a solid regulatory framework for prepaid access in the United States, we must continue to promote analogous steps in foreign jurisdictions”.

A response in the Bitcoin Money post:

“Bitcoin is not a ‘prepayment of value’ that the product’s buyer would then later redeem to gain access to those funds previously paid.  However, the words chosen in the ruling and in this speech are so broad that they appear to cover Bitcoin transactions as well”.
“The final ruling appears to have raised little concern among the Bitcoin community”.
“The state does appear to have positioned themselves with such a broad net that they could impose civil fines or criminally prosecute any miner or trader who [exchanges Bitcoins] without registering and complying”.

- http://www.bitcoinmoney.com/post/11074108719
- http://www.fincen.gov/news_room/speech/pdf/20111005.pdf (Freis’ transcript)
- http://www.gpo.gov/fdsys/pkg/FR-2011-07-29/pdf/2011-19116.pdf (Final Rule)
- http://www.fincen.gov/news_room/nr/pdf/20110715.pdf (Money Services Business Definition)

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