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What a “Grexit” Could Mean for Bitcoin

Last week, debates and negotiations over a potential Greek financial bailout finally came to a head, with Greece soundly rejecting a bailout proposal from international creditors. It was widely praised as a bold move for the nation, but at the same time it’s more or less a disaster scenario for the Eurozone. Officials in Europe have already stated that the preferred goal is to keep Greece on the Euro, but at this point the so-called “Grexit”—that is, a Greek exit from the universal European currency—looks more likely than ever.

Global political ramifications aside, would such an event, bizarre as it seems, be the breakthrough Bitcoin has been waiting for?

Some say yes, and as of this Monday, Bitcoin had actually reached a a four-month price high, seemingly in direct correlation with Greece entering its most tenuous point in its relationship with the Eurozone. Evidently, as Greek citizens worry over what exactly is going to happen with their day-to-day currency—and even deal with daily limits on bank withdrawals—many are deciding to go their own way, which in some cases means investing in digital currency. Basically, this allows them to regain control over their own finances, moving savings into an international form of currency that won’t be directly devalued or decommissioned as a result of ongoing financial negotiations.

The extent to which this can become the case remains to be seen. However, even aside from this Monday’s four-month high, the latest Bitcoin charts clearly show that since early June—when negotiations started reaching their most tense point in Europe—Bitcoin has experienced a steady rise. Bitcoin was worth about $223 at the outset of June, and despite a very slight early dip to begin the month, it’s since climbed with relatively little interruption to a level just above $270 to start the week of July 6th-10th. Greece is not entirely responsible for this rise, but the direct correlation strongly supports the theory that the digital currency is taking full advantage of economic turmoil abroad. Some have even gone so far as to suggest that it could gain some sort of official impact in Greece.

In fact, back in April, Greek Finance Minister Yanis Varoufakis even went so far as to say “we’ll run on Bitcoin” when discussing Greece’s financial future. This led to speculation on whether or not Bitcoin could truly become the de facto national currency for a would-be former member of the Euro system. It would be an incredibly high-profile transition for Bitcoin and could spark the type of international mainstream relevance that could take the digital currency to the next level.

Whether or not things actually reach that point, it looks pretty clear that Bitcoin has been a beneficiary of Greek turmoil. And with no one quite sure exactly what the long-term impacts of a “Grexit” scenario would be on the Eurozone, who’s to say other countries with weak economic outlooks won’t also see their citizens turning to more stable digital currencies? It’s absolutely a situation worth monitoring for fans and investors of Bitcoin.

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Dread Pirate Roberts Supporters Thrown for a Moral Loop

The radical libertarian world was just hit with a bombshell revelation the other day. Previously, the defense team of Ross Ulbricht surprised us by admitting that Ross was the originator of Silk Road, however they claim that Ross left the position after only a few months, handing it off to another entity. This “real” Dread Pirate Roberts, the one who ran the site for the the bulk of the time, eventually went on to drag Ross back in to frame him when he felt the heat from the Feds. Well, now the plot thickens; the defense team is naming a name: long time MtGox operator Mark Karpelès, the one who held the reins when it collapsed and who a lot of people are bitter towards. Furthermore, they have evidence to that end, as a federal agent testified that Mark was their original lead before they went after Ross.

This initially seems like a cause for small celebration. Here is a chance that Ross Ulbricht can be free, or at least substantially reduce the sentence he is liable to receive. But let’s slow down for a second because I think we’ve lost a little moral clarity here. It seems that at a certain point, the focus drifted from supporting the alleged heroic operator of the legendary Silk Road marketplace to supporting one Ross Ulbricht. Only allegedly the same thing, as some libertarians are quick to point out. According to the defense team of our hero Ross, the “real” Dread Pirate Roberts, operator of Silk Road marketplace, is Mark Karpelès. Well, if we’re in this because we support the Silk Road, shouldn’t our support now turn toward Mark?

There are now only two approaches to take with regard to Mark. Either we can be happy he is taking the heat off of Ross or not happy. Suppose we’re happy. This is, after all, a guy who ran MtGox into the ground, caused many people to lose a lot of bitcoin, and, as some suspect, even ran off with a lot of btc himself. Even if we don’t support people going to jail for facilitating drug sales, we can perhaps be content in this sort of poetic justice. If Ross, the human being, is found not guilty or responsible for being Silk Road’s operator, we still of course can cheer that an innocent man is allowed to be free, or have a reduced sentence for his reduced role. But wait – then we’re conceding that the real heroic Dread Pirate Roberts, operator of the legendary Silk Road marketplace, is in fact not a hero. Suddenly we’re happy to see him behind bars. Remember how defensive we were when Ross was charged with soliciting a murder-for-hire? As our focus has turned toward our sympathy for Ross, the human being, we may have forgotten what we originally supported: The idea of a free market pioneer, morally true, despite and even because of complete disregard for the law.

Okay, so suppose we’re willing to forgive Mark the transgressions from MtGox, and not hold it against him in his capacity as the DPR. Suppose the murder-for-hire charge doesn’t apply to him, either. Or maybe he wasn’t the DPR in the first place. In that case, we still don’t have such a cause to celebrate this latest move from Ross’ defense team. It just transferred most of the heat from one innocent man to another. But it’s even worse than that, because now, Ross, our libertarian folk hero, the one who still started the Silk Road, is in fact a snitch who just fingered an innocent man, possibly the heroic real Dread Pirate Roberts. This is not at all to say that I wouldn’t forgive Ross for doing so, nor that I wouldn’t do the same thing under the circumstances. However it does hurt our cause for having supported him in our ideological capacity, and taint the minor hero status that he’d still earned for starting the site and running it a few months. At the very least it may send a mixed message if we continue to support Ross under this favorable view of Mark.

I suppose the best possible outcome, from a libertarian stance, is that Ross knows Mark had nothing to do with Silk Road and the Feds have nothing on him, but Ross’s defense team still uses him to create enough reasonable doubt to set Ross free. Seems a bit of a long shot, though. But really, this is not a great situation in liberty land.

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NH Representative Pushes Back on Virtual Currency Regulation

New Hampshire Representative Daniel Tamburello introduced legislation to exempt virtual currency users from Licensing of Money Transmitters. This legislation is similar to the Model Legislation I proposed on this blog in August of last year.

Another proposal before the New Hampshire legislature would “requir[e] the state treasurer to develop an implementation plan for the state to accept bitcoin as payment for taxes and fees.” The text of this legislation is not yet available, however, I oppose any legislation that mandates a government entity to do something that would increase the cost of operation.

It’s possible that other states will take up legislation to wither regulate or codify the use of bitcoin and other virtual currencies. Last year, in California the legislature repealed a law that stated, “No corporation, social purpose corporation, association, or individual shall issue or put in circulation, as money, anything but the lawful money of the United States.” And there is speculation that the California Legislature could consider legislation to regulate bitcoin.

There are no guarantees that any legislation will pass preventing governments from regulating virtual currencies. However, I believe it is beneficial for legislators, and the public at large, to have a conversation premised around preventing regulations of what is left of the free market.

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More Stolen Bitcoin to be Auctioned

2014-11-19-175751_1366x768_scrotFor the second time ever, the US Marshals will auction off stolen bitcoin. The first time this past summer, the US Marshals auctioned of nearly 30,000 BTC that were on the servers of the Silk Road online marketplace. Now, the US Marshals are seeking bidders for 50,000 of the ~144,000 BTC that belonged to Ross Ulbricht.

Ulbricht, as you may recall, has been arrested for allegedly operating the Silk Road marketplace on the Tor network. Forbes reports, “While he has pleaded not guilty to seven drug trafficking, money laundering, computer hacking, and ID theft charges, Ulbricht says he is the owner of the Bitcoin on his computer,” adding “If Ulbricht wins his court case, he will receive the money obtained in the auction. If he loses, the money will go to the Department of Justice’s asset forfeiture fund, Donahue explained.” This process of selling seized property without a criminal conviction is known as civil asset forfeiture, though unlike most instances of asset forfeiture, Ulbricht has been charged with a crime.

By contrast, the Australian government waited to obtain a conviction before announcing they plan to auction seized bitcoin. Coindesk reports, “Australian law enforcement officials are now in possession of 24,500 bitcoins following the conviction of their original owner… Richard Pollard.” Pollard plead guilty to commercial drug trafficking and was sentenced to 11-years in prison. Coindesk adds, “Pollard’s bitcoins are subject to a restraining order and a 28-day appeal period. Should the funds be forfeited to law enforcement officials as expected, the bitcoins will then be sold at auction by the Victoria Department of Justice.” And, like Ulbricht, Pollard allegedly had connections to the Silk Road, though unlike Ulbricht, Pollard was accused of being a seller on the site.

What do these auctions and possible auctions mean for the future of bitcoin? Some people, according to Coindesk, hailed the first US Marshals auction as boosting bitcoin’s credibility. I disagree, though don’t assume I’m saying that the auction of stolen funds diminished the credibility of bitcoin. The fact that at least two government agencies have seized (and one has auctioned) stolen bitcoin does not directly affect the credibility of the items stolen and auctioned. Bitcoin has credibility despite being stolen and sold by governments. Bitcoin has credibility because it can be used as a medium of exchange, and unlike government backed currencies, it is traded voluntarily and without the force of The State (see footnote). Saying that governments give credibility to bitcoin by auctioning ones they’ve stolen, is akin to saying governments give credibility to murder by having hired men commit those actions!

note: The State – capital T, capital S – is a coercive monopoly. The State has monopoly control over the use of coercive violence in a given geographical area.

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Bitcoin Rises in the Death Throes of Empire

The recent news about PayPal’s integration of Bitcoin created a new spark for the world’s first stateless currency. Early last year, became the first major online retailer to accept Bitcoin. Other large merchants like Dell, Tiger Direct and Expedia soon followed their lead. Since its inception in 2010, Bitcoin continues to attract merchants, new adopters and innovators into the network. PayPal’s move is another big milestone for this young decentralized digital currency.

As the buzz spreads, we are only beginning to see the revolutionary force of the blockchain, the underlying technology of Bitcoin. On the surface, it appears that the potential enshrined in this piece of computer code has to do with improving merchant processing. Yet, Bitcoin’s disruption in the payment system is not just about making the shopping experience more efficient and cheaper. Its effect and larger ramifications lie in the complete transformation of payment and monetary systems themselves.

Bitcoin is a new paradigm that fundamentally challenges the way we do finance. It is an open source protocol that enables peer-to-peer distributed consensus at a large scale without any governing center and with no command from above. With its first application as currency, Bitcoin is now used as a public asset ledger to keep track of all transactions and record them for all to see. The life of this system is sustained through computers that are spread around the world, working together to engage in “proof of work”. This proof is to solve difficult mathematical problems. It takes 10 minutes to solve the problem and each time, 25 new coins are issued while all the transactions in that time are verified. This continuous process is called “mining” and is the beating heart that supports the circulation of value and trust in the system throughout the entire network.

The problem that Bitcoin solves is the double-spend. Before Bitcoin, we needed third party ledger reconciliation to prevent double-spending. Bitcoin is a value transfer network without a central authority, something that has always been necessary in any state-issued currency or fiat payment system. Bitcoin eliminates the middleman, thus reducing costs in any transaction. There are no charge backs and no exuberant fees. With Bitcoin, we can also become our own bank by simply downloading open-source software and keeping our private keys in our hands.

This gives us a perspective to examine the existing payment systems. One might ask why Visa and MasterCard charge exorbitant fees, with the 3% that merchants must pay being mostly passed on to the customer. Why do banks take monthly service fees and charge huge penalties for insufficient funds? It is because they have a monopoly that they can act as a cartel.

Bitcoin not only calls us to question the conventional everyday reality of consumers, but also reveals the bias and political values inherent in the existing financial system. In a sense one can only become aware of them once we have a different system to compare it to. This direct peer-to-peer currency enables a new payment network that is a true alternative to the existing financial industry. This came to public attention when WikiLeaks, following the massive release of US diplomatic cables, faced an unlawful financial blockade by Bank of America, Visa, MasterCard, PayPal and Western Union. Bitcoin was used to circumvent this economic censorship. In fact, editor in chief Julian Assange recently noted how their Bitcoin investment helped to sustain the organization at a critical time.

In this instance, we saw how private companies signaled by the US State Department stopped processing transactions for this stateless whistleblowing site. The financial blockade of WikiLeaks is just the tip of the iceberg revealing a force of control behind the Western payment systems. PayPal has a list of countries that they deny services to and the company has the sole power to shut down and freeze any accounts. In May of this year, the White House put sanctions on several Russian banks and Visa and MasterCard complied and blocked transactions.

What values are transferred through this traditional payment network? Bitcoin’s unmediated peer-to-peer exchange and public ledger system exposes the secret code behind the existing operation of the machine, namely central bank control of the supply and flow of money for the creation of the first truly global corporate empire. It also reveals the role of Western financial institutions as a patronage network that sustains the lifeblood of this empire.

In Empire of Capital historian and scholar Ellen Meiksins Wood (2003) argued how the current forms of imperialism work in a different manner from old colonial empires. She described that while empires of the past are characterized by domination of territory and subjugation of people through “means of ‘extra-economic’ coercion, by military conquest and often direct political rule” (p. 12). Yet now “capitalist imperialism can exercise its rule by economic means, by manipulating the forces of the market, including the weapon of debt” (p. 12).

In the last century, with the dominance of oil as a resource engine underlying all societies, those who control oil resources have come to gain massive control of global geopolitics. US domination depends on its control of oil and the world staying dependent on forced transaction for oil with the dollar. Both the central banking systems and the extremely profitable oil industry worked to maintain control of the spigot for both oil and currency that could dictate the markets. The result was creation of the petrodollar, namely the hegemony of one currency to use for worldwide oil trade. This is protected by the U.S. military industrial complex with 1000 bases spread around the world. As Nobel prize-winning economist Paul Krugman correctly put it, U.S. fiat currency is “backed by men with guns”.

The Federal Reserve private banks print money out of thin air and often debase the currency. Credit card and student loan businesses suck consumers into a web of debt. Attorney and author Ellen Brown wrote that credit card companies were “set up by big Wall Street banks and the card-issuing banks get about 80% of the fees” and that through monopoly they became the most profitable pursuit of the banking and payment industry. With hidden fees, usurious debt and interest, and hidden private sales taxes, the US government collusion with financial giants commands the flow for corporate gain without the consent of the governed.

This central control of finance has enabled the US to maintain and further expand its superpower status that it attained after World War II. Economist David Korten (1995) noted that American hegemony was further granted through the creation of global financial institutions to stabilize currencies and facilitate capital investment in so-called developed nations through the establishment of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), also known as the World Bank. The IMF has become the world debt enforcer, making sure resources from indentured nations are funneled into the U.S. Treasury, industries and banks.

The regime of central banks with their economic hit-man investors move from one place to the other to create bubbles that can absorb their surpluses until the last one bursts. They create another bubble and perpetuate the attendant colonization and exploitation. With the ongoing debasement of currencies, global ebbing of liquidity and parabolic expansion of debt, major currency crises are now emerging on the periphery. In March 2013, a crisis of forced austerity hit the small Mediterranean island nation of Cyprus and the government closed the country’s second largest bank in return for an international bailout by Eurogroup, the European Commission and European Central Bank. A similar trend is occurring in Argentina. Early this year the national currency, the Peso, fell in steepest loss since the country’s 2002 economic collapse.

These Western patronage networks engage in financial colonization through rent seeking and financial exclusion. According to new World Bank research, 2.5 billion people around the world are unbanked. The system discriminates and takes advantage of those who are marginalized. One instance of this is the remittance industries. In the article “Economics of Trust” Richard Boase pointed out how the remittance industry through monopolies have made profits according to the World Bank report of somewhere between “$400bn and $530bn in 2012”, which is expected to grow to over $680bn in the coming years. Giant money transfer agents like Western Union extract an average of more than 12% of hard work for migrants in their efforts to send money back home.

Bitcoin not only sheds light on the inherent injustice embedded in the existing hierarchical financial systems, but at the same time offers a game-changing solution. Bitcoin adoption is increasing by those who been subprime targets of Western predatory usury. In countries like Argentina and Cyprus where governments steal their money through debasement, Bitcoin is becoming a safe haven. With global decentralized payments, the unbanked or underbanked who have been systematically oppressed can participate in the world’s economic activities on their terms. With this borderless transnational currency, Somali migrant workers can emancipate themselves from the rapacious monopoly of the remittance industry and keep most of their money in their own hands.

In the 2008 financial meltdown and currency collapses we have seen signs of the deep problems of this centralized system. These global institutional crises and endemic corruption are converging with the imminent end-game of the petro-dollar. All empires fall. Amid the initial flaming death throes of this empire, the Bitcoin technology has risen. Now the invention of the blockchain peer-based trust system enables people to create their own money and enter into their own untethered transactions.

Collective divesting from the patronage financial networks of warmongers and corporate patrons brings disruption to the controlled pipeline that funds the dirty resource wars and supports insidious debt peonage. Ordinary people the world over can work together to end this financial colonization and apartheid. We can now walk away from all this unnecessary bloodshed and move toward a new global society where the flow of our common humanity that is kindled in the heart can determine our future.

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Ecuador Bans Decentralized Cryptocurrencies; Institutes State-run Cryptocurrency

I just heard the news from Ecuador a few days ago after seeing an article from CBS Money Watch. After some research, I learned that the Ecuadorian National Assembly actually voted in July to ban cryptocurrencies. At the same time, the National Assembly voted to create a State-run cryptocurrency that some believe may replace the USD as the official currency of the socialist nation. President Rafael Correa denies any plan to replace the U.S. dollar, and said the project’s only problem is that it has taken this long.

A statement by the National Assembly reads, “electronic money will stimulate the economy,” adding that it will be accessible to more Ecuadorians, especially those who are unbanked. The new Ecuadorian e-currency, according to the National Assembly “will be backed by the assets of the Central Bank of Ecuador.”

The Ecuadorian government is combining one of the best aspects of Bitcoin, helping the unbanked, with the worst aspect of government, control! For many, the draw of Bitcoin and other cryptocurrencies is the fact that there is no central authority that has total control over the currency. Few details have been released about the state-run cryptocurrency, other than it is expected to begin circulating in December, does not yet have a name, it would not be “like Bitcoin” and the amount created will supposedly depend on demand. Though, as with all things government controlled, supply and demand are rarely at a happy medium. One of the major downsides to having any state-run currency, is the ease with which the central authority can inflate the currency – can you say “Quantitative Easing”?

Additionally, at this time, use of the e-currency would not be mandatory, and the law currently says the new currency will not be used to pay public employees or state contractors. This may be the only redeeming quality of the entire legislation. Though, if the Ecuadorian President or National Assembly ever decide they want to drop the USD, then expect public employees to be paid in the new currency. The next step after that is to declare the e-currency legal tender, and then people will be forced to use it.

The chairman of the Committee on Economic and Tax Regime stressed this is the result of extensive socialization with the public and private banks. More socialization is never the answer to combat growing socialization, nor does it make sense to attempt to ban people for using a currency that competes with a supposedly voluntary currency. I hope that the Bitcoin users of Ecuador are neither scared to continue using the currency, nor punished for daring to compete with this supposedly voluntary state-run e-currency. I guess only time will tell if the socialist government decides that cryptocurrency IS a crime!

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Freeing Markets with Cryptocurrencies

In order to understand how society has arrived at its current state, one must understand its past. Confucius said, “The beginning of wisdom is to call things by their proper name.” and with this declaration, one can understand how propaganda, through the State apparatus, has skewed and subjectivized everything in society. Orwellian double-speak is in full swing, with words holding contradictory meanings, effectively destroying wisdom, evidence and reason, and allowing for the enlargement of our rulers. But with the advent of the Internet and now cryptocurrency, the tides are quickly turning, showing these evils for what they truly are. As society has grown, understanding of property ownership and free-markets has allowed for the vast majority of human kind to flourish. A Yale study shows that,

“We are in the midst of the fastest period of poverty reduction the world has ever seen. The global poverty rate, which stood at 25 percent in 2005, is ticking downwards at one to two percentage points a year, lifting around 70 million people – the population of Turkey or Thailand – out of destitution annually. Advances in human progress on such a scale are unprecedented, yet remain almost universally unacknowledged.”

However, this does not mean we are out of the jungle. Regulation, taxation, inflation, confiscation and war are still in good health and gaining at an ever-faster pace. But, as with everything in life, each action has an equal and opposite reaction with liberty and markets pushing against the regulation and domination that is so ever present in our lives. Cryptocurrency is leading the fight for true deregulation and giving back control of one’s money, property and resources at an astonishing rate. Thanks to the Internet, the double-speak that is so prevalent is being hacked away at an increasing pace. Famous Austrian economist Murray Rothbard notes that,

“The Free market is a summary term for an array of exchanges that take place in society.”

Cryptocurrency is now providing a platform for peaceful and voluntary exchanges to occur outside of the statist paradigm. To show how cryptocurrency is restoring the broken structure of peaceful exchange, it is important to note the difference between control and ownership. Ownership has degrees of control within it, but it does not truly retain the exclusive rights of control in full capacity. Control on the other hand has the complete package of exclusivity when it comes to property and this is where cryptocurrency reigns king. For instance, one may claim to “own a house”, but this is more accurately stated as a “permission slip of partial control” by State privilege. One may be able to occupy, arrange, destroy or discard a house, but in Western countries and others, property taxes exist as a de facto “right to use” grant from State institutions. Legitimate control is never allowed for those outside of the bureaucratic regime. The same intrusive and destructive measures apply to money and value mechanism.

This is best seen in the public/private relationship of central banking, where coercive control is instituted by States and prohibitions are established against all other forms of monies/currencies from competing with State functions. The most notable recent case with Bernard von NotHaus and Liberty Dollar. Control of money has been sized and any legitimate attempt by individual actors to opt-out is quickly snuffed out. Through manipulation of interest rates and legal tender laws, double-speak is seen again where the “Federal Open Market Committee” “goes to market” to “discover prices”. Obviously, this has nothing to do with the market operations of peaceful individuals and voluntary exchange. But now, individuals are taking a stance against such violations and are using cryptocurrencies to finally regain authentic control again of their resources and life. With cryptocurrencies, the mechanism of freedom are finally being reverted back to cooperative market forces. Control of property is the true pinnacle of individual autonomy and with the Internet and cryptocurrencies shaking the statist world, sovereign peoples are now the sole controllers of their money and resources. Blockchain technology has revolutionized property rights by allowing for mass disclosure of assets, property, value and resources on a trustless, distributed, mathematically validated structure, which means individuals have direct control of what is theirs. To further elaborate, Murray Rothbard states that property,

“…begins with the basic axiom of the “right to self-ownership.” The right to self-ownership asserts the absolute right of each man, by virtue of his (or her) being a human being, to “own” his or her own body; that is, to control that body free of coercive interference. Since each individual must think, learn, value, and choose his or her ends and means in order to survive and flourish, the right to self-ownership gives man the right to perform these vital activities without being hampered and restricted by coercive molestation.”

Because of these inherent characteristics, cryptocurrency finally allows for a pipeline out of the coercive State institution and provides a break-point for individuals to truly opt-out of the regressive and detrimental system of fiat and legislative domination. With these crucial definitions put into place, one can now begin to understand how crypto is giving true control back to the individual and allowing for markets to flourish once again. We have seen a massive boom in the space of Bitcoin and now, with alt-coins, competition is growing at a spectacular rate, testing the market for which features and prospects are in demand and which are not. As these coins test the water for market demand, the crypto-space will expand and grow to satisfy all market participants. Andreas Antonopolous, cryptocurrency enthusiast and entrepreneur reflects on this competition between altcoins in an interview,

“Once you break the link between a fixed market for these things – like we’ve had with publishing institutions or financial institutions – you allow anyone to use those as a tool of expression, and in response, people will start using them…Once you look at it from that perspective, the question about how many alt-coins there will be is equivalent to the question of how many bloggers there will be on the Internet.”

With all these points taken into account, one can truly begin to see how the waters are parting when it comes to State monopoly vs. free-market experimentation. For too long, the most crucial parts of society have been defined, occupied and manipulated by institutions such the State, but with the Internet and the cryptospace finally in full bloom, the rulers are effectively trying to put a stranglehold on sand. As each individual takes charge of their life, property and money, another sand particle slips out and it is only a matter of time until the stranglehold squeezes its own body out of existence.

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Hands off Bitcoin: Model Legislation

The New York Department of Financial Services (NYDFS) last month rolled out a proposal to regulate “virtual currency businesses” worldwide if the company had at least one customer within the Empire State. In response, the Intergalactic Bit License was created, with Davi Barker stating, “we can laminate stuff, too.”

Also in response to this proposal came model legislation – I know, not something you’re used to seeing on BNB. Though drafted specifically to be introduced in the New Hampshire Legislature, this model legislation can be used anywhere – the only modifications needed would be to the “new section” to be added, the location, and the agencies to be affected. A bit of irony is that the definitions used in this model legislation all came from the proposal by NYDFS. The NYDFS used these definitions as things that would require a special license; whereas, the intent of this proposal is to prevent regulatory agencies from implementing broad regulations over what should be self-regulated decentralized currencies.

Relative to Virtual Currencies
New section 383:9-k
The New Hampshire Banking Department, and the Bank Commissioner shall not have authority to regulate any Virtual Currency or Virtual Currency Business Activity as defined in this chapter.
Virtual Currency means any type of digital unit that is used as a medium of exchange or a form of digitally stored value or that is incorporated into payment system technology. Virtual Currency shall be broadly construed to include digital units of exchange that
(1) have a centralized repository or administrator;
(2) are decentralized and have no centralized repository or administrator; or
(3) may be created or obtained by computing or manufacturing effort.
Virtual Currency shall not be construed to include digital units that are used solely within online gaming platforms with no market or application outside of those gaming platforms, nor shall Virtual Currency be construed to include digital units that are used exclusively as part of a customer affinity or rewards program, and can be applied solely as payment for purchases with the issuer and/or other designated merchants, but cannot be converted into, or redeemed for, Fiat Currency;
Virtual Currency Business Activity means the conduct of any one of the following types of activities involving New Hampshire or a New Hampshire Resident:
(1) receiving Virtual Currency for transmission or transmitting the same;
(2) securing, storing, holding, or maintaining custody or control of Virtual Currency on behalf of others;
(3) buying and selling Virtual Currency as a customer business;
(4) performing retail conversion services, including the conversion or exchange of Fiat Currency or other value into Virtual Currency, the conversion or exchange of Virtual Currency into Fiat Currency or other value, or the conversion or exchange of one form of Virtual Currency into another form of Virtual Currency; or
(5) controlling, administering, or issuing a Virtual Currency.

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Politicians Begin to Accept and (Attempt to) Regulate Bitcoin

The FEC recently issued an opinion that opened the door for candidates and committees to begin accepting bitcoin. An article by highlights a few of the candidates who have begun accepting the alternative currency. One such candidate is Steve Stockman, who last month introduced legislation to overturn the IRS decision that bitcoin is property. Stockman’s bill, the “Virtual Currency Tax Reform Act,” would define “Virtual currency” as “a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value.” The bill also states, “The Internal Revenue Service shall treat virtual currencies as a foreign currency for Federal tax purposes,” and impose a 5 year moratorium in which the federal government would not be allowed to “impose, assess, collect, or attempt to collect capital gains tax on virtual currencies.”

The key words in that moratorium are “capital gains tax.” The bill would not make bitcoin and other crypto-currencies tax exempt, it would simply change the regulatory definition from “property” to “currency.” This would then put the IRS regulation in-line with the FinCEN definition that crypto-currency is currency. The FinCEN regulations require a “money transmitters license” in order to operate a business “that provides money transmission services. The term ‘money transmission services’ means the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.”

I realize that a sizable percentage of bitcoin users will not comply with any regulations placed on it. While I am in no way supportive of any government regulation of bitcoin, there are people and businesses currently accepting bitcoin that will comply with the regulations, and they need as much support as possible from the people who aren’t complying. If whatever regulations come about place too much burden on the businesses, they will stop accepting bitcoin.

A locally-owned store in Keene, NH (that currently accepts bitcoin) was approached about having a Bitcoin ATM, and after looking into the regulations, decided it was too much hassle to get the needed license to have the machine in the store. If the burdens for just accepting bitcoin become too high, this store may stop accepting bitcoin. I know, the hardliners approach is, “they can put any regulation they want, I’ll just ignore it.” But not everyone will, and if bitcoin (or crypto-currency, in general) is to thrive, we must work together, and try to have as little regulation as possible.