TOPIC:
Bitcoin (as well as other virtual or cryptocurrencies) represents a decentralized payment system that operates independently of any government or central bank. People and businesses can exchange their currencies on a peer-to-peer basis, without passing through any financial intermediary. This means that the Bitcoin network does not reside under any given regulation, and can therefore be constructed to be agnostic to any jurisdictional rules. Given this current lack of a central regulatory authority, people can operate the network in a pseudonymous manner, without disclosing their identity to anyone. This provides opportunities for criminal activities, including tax-evasion, illegal drug trafficking and money-laundering.
However, Bitcoin also provides a series of benefits to consumers: it can be used to transfer funds across borders at virtually no costs—providing new opportunities for cheaper and faster money transfers, and potentially bringing new efficiencies into the financial market. There is currently a controversy over whether virtual currencies should be regulated and if so, by whom. Several states have passed laws regulating virtual currencies, but they have been criticized for imposing onerous obligations on Bitcoin operators and stifling innovation.
Blog Post:
Bitcoin Privacy and Anonymity
There are many cryptocurrencies other than bitcoin. Some of these are marketing them self as privacy coins. Alt coins like Monero XMR, Dash, Zcash, and PIVX are examples of currencies that are focused on privacy. Monero, the largest by market cap at 2.6 billion USD, if used properly on a secure computer can be impossible to track or connect to your identity. This response by the Monero team outlines the steps needed to be anonymous when trading their coin.
Concerns Surrounding Bitcoin Technology
The lack of authority and regulation around Bitcoin allows it to be used in promiscuous ways.The ICE has stated that crypto currencies have allowed for easier money laundering.
People argue that for bitcoin to ever take over as the global currency, a lot is going to have to change. The way our economy is currently set up this would not work. The transaction speeds are still slow(about an hour) and Bitcoins transaction fees spiked to almost $40 in the past 6 months. Bitcoin does has massive scaling problems because of this. At Bitcoins peak the infrastructure failed to keep up with demand.
Because of bitcoin’s lack of regulation there has already been questionable activity with cryptocurrency. Recently Bitconnect was revealed to be a 2 billion dollar ponzi scheme. John Oliver did a great segment on Bitconnect and cryptocurrencies. Bitconnect is an ICO (Initial Coin Offering) giving investors the opportunity to invest in their coin. Bitconnect used the hype of cryptocurrencies to convince people that is was possible for them to receive 1% interest daily and compound the profits. This is obviously too good to be true and ended in a spectacular free fall. When regulators started to get involve Bitconnect released all assets back to investors in the form of their currency which immediately went from a value of $380 to $10 in a matter of minutes.
Potential Benefits of Bitcoin
Bitcoin is a decentralized network that allows people to move large sums of money across the world. Because Bitcoin is decentralized it is very hard for any government or bank to manipulate or control the value. Bitcoin can be used as an alternative currency to take power and money away from governments. Bitcoin is being put to use in Venezuela, where inflation has reached 13,000 percent. Citizens are putting their money in Bitcoin as an alternative to their country’s currency as a much more stable choice. Governments do not have the ability to just print more bitcoin like they do for their own currency. It takes power away from banks and makes a peer to peer network.
Current Regulation
Bitcoin is a relatively new technology with very little regulation around it. Countries have been scrambling to tax and regulate this technology, partially because it is easy to avoid paying taxes on your bitcoin investments. Depending on which platform you use for buying and selling you could not be taxed.
The United States federal government has not created regulation on cryptocurrencies yet. The U.S. CFTC commissioner has said that cryptocurrency exchanges adopting a ‘self-regulation’ could encourage similar standards for other markets.
In utah their is currently no legislation that addresses Bitcoin. The technology doesn't have much legislation at all across the 50 states.
My Personal View
I want to preface that I am somewhat biased when it comes to this topic. I personally have been trading bitcoin for several years and have been a large advocate of this technology. I think the benefits of taking power away from governments and banks vastly outweighs the risk of some people using this technology for tax evasion and other questionable uses. People are always finding new ways to move illegal money and just because bitcoin is used for this purpose doesn’t mean the platform as a whole should be tainted. It’s like Russia’s twitter bots, you don’t blame twitter for Russia’s twitter bots influencing people’s views of political issues, you blame the people who made the twitterbots. I don’t think it's fair to look at bitcoin as the problem so we should look at the people using the technology for illegal purposes instead.
I'm curious to see what you think about the recent market crashes. I agree that bitcoin and other crytpocurrency should not be condemned because people utilize them in less than legal ways. However, it seems dubious that bitcoin and other cryptos can replace or even truly supplement current monetary systems because the value can fluctuate greatly and have no intrinsic value (at least as far as I understand it). I think bitcoin has potential and should be explored, but with caution.
ReplyDeleteLogan...you omitted the following paragraph from your recitation of the blog topic:
ReplyDeleteResearch the current status of Bitcoin regulation and opine on whether
virtual currencies should be regulated and, if so, by whom.
Please come to class on Monday prepared to answer the Q. of whether virtual currencies should be regulated and by whom.
I really really like the idea of bitcoin a lot. It would be so nice to have a worldwide currency because It would make traveling so much easier. Currencies can get quite confusing when you go from country to country and this would be such a nice benefit. However, I have a lot of caution when It comes to the real use of bitcoin. It seems to me since crypto-currencies are used so much for tax evasion and things on the dark web, they should be monitored. However, if the crypto currency had different regulations from every country It would be extremely hard. So I think the world should come together and make a crypto currency commission only if they see that It will be the future. If every country can agree on fairness of the currency then I think crypto currencies would be a great thing. I think this is unrealistic however and while this isn't set up every government agency needs to regulate It.
ReplyDeleteOverall I agree with your conclusion, but I don't know much about bitcoin beyond this week's readings so my judgement is certainly less educated. To me, your point that people who use bitcoin for illegal activity are the problem, not bitcoin itself, is the most compelling argument. Similar to my stance in some other situations, I think as a society we should focus on the root of problems like drug abuse, rather than pointing our fingers at the way something is transferred, or problems will never improve, but rather just get pushed somewhere else.
ReplyDeleteRegarding the regulation of digital currency, I don't fully trust either public regulation like bitcoin uses or government regulation. However, I do think digital currency will inevitably be regulated by some group, so if I had to make an initial stance I would think that a body like the UN, which is made up of many countries rather than a single government, would be best fit to regulate digital currency. This idea is based on the fact digital currencies are used worldwide, and so should be kept in check by a body that functions on the global scale, although I don't know how regulation would actually function.
I agree that we can’t blame bitcoin for the actions of those that use it for illicit purposes. Like Lily, I don’t know much about it. The extent of my knowledge comes mostly from my friends who invested in it a couple months ago when it kind of blew up. I also agree with Andrew, the idea of bitcoin replacing currency seems sketchy because of how much fluctuation occurs and how quickly it seems large changes can happen. I think there should be some form of regulation, I just don’t really know where that would come from because I know so little about the subject.
ReplyDeleteWhile I see no problem in taking power away from the banks and government as a whole I really see no plausible way to go about switching the United States, let alone the whole world over too this system. It would take many years and I believe that it would confuse the everyday citizen too much because it is not a physical entity and in the current state of the market it is hard to put a specific number on how much your Bitcoins are actually worth. Everyone already knows about how much they can get for a single US dollar, but the value of 0.001 Bitcoins changes everyday. I believe that this steep learning curve is too great for it to every become an effective system of currency for the masses and will remain viable, but more of a niche.
ReplyDeleteI am not very l informed on bitcoin as well. Though, I do think Bitcoin should be regulated, as things left unchecked seems a bit unsettling, but as to who I am not completely sure yet. Logan, I think you make a good point in distinguishing between company and consumers in terms of usage. But bitcoin has the ability to enable illegal activity, I think there’s the distinction between the comparison you made with Twitter.
ReplyDeleteWhile I do agree that bitcoin and other cryptocurrencies aren't inherently evil, and can lead to a lot of good for certain users, I also believe they deserve some type of regulation. As someone who knows little about cryptocurrency the news I hear about most regarding cryptocurrencies is whenever they fail or are used for corrupt means, which makes me want to stay away from virtual currency altogether. It also seems like it's possible to connect a person to their transactions, which makes me nervous as to what some people will do with that information. Regulations, even if it's just self-regulation, would help me regain faith in cryptocurrency.
ReplyDeleteLogan, I think there are people out there blaming twitter for the election influence. ;)
ReplyDeleteAs for crypto currency I do believe some serious regulation is in order. The idea of an unregulated, uncontrolled, virtual currency having the capacity to make or break the entire world economy with next to no overtsight terrifies me. The problem is who can regulate it? If it can be used the world ‘round and isn’t subject to borders, a single country cannot claim right to it. Does the WTO control it? I’m not convinced that’s necessarily a good idea either. My own personal biases would lead me to save United States government should regulate crypto currency within our own borders, and that the government has total right to do that! But I should also acknowledge that in a matter how much I read about crypto currency it’s still never makes sense to me. I don’t like the idea behind it, and it feels so arbitrarily fake to me (Ironic, I know given what real money is). So with my limited ability to grasp the sheer magnitude of crypto currency‘s, I believe the government should regulate it.
I mostly disagree with you, Logan. The biggest issue I have with Bitcoin is the same issue I have with a lot of new technologies; it is basically unregulated. Now, I have no idea how to or who would successfully regulate something as global and new as Bitcoin, and it worries me that it's completely unrestricted and not tied to any central authority like the US dollar or Euro. Of course, the main concerns about Bitcoin seem to be that it makes money laundering and other illicit activities easier because it has no oversight.
ReplyDeleteI personally view Bitcoin as more of a traded commodity (albeit a virtual one, which makes me ask why people gave it value in the first place), like gold or platinum, than an actual currency. Perhaps, like gold, the best way to regulate Bitcoin is through an internationally agreed-upon organization, maybe even one that could establish a broad regulation on so-called "cryptocurrencies," especially since they don't seem to be going anywhere anytime soon.
I too am not familiar with bitcoin. Thus, I don't really know if regulations could reduce the use of this technology for illegal purposes. As crypto-currencies have become more popular, however, their influence over the larger economies of the world has also increased. In addition, the value of these currencies fluctuates significantly. So I believe that some regulation could and perhaps should be implemented to simply ensure stability.
ReplyDeleteI like that Bitcoin is taking power away from banks and the government, although I do think Bitcoin could use some regulation to provide a bit more stability and reduce illegal transactions. Of course I do not think this regulation should come from the government as that would give the power back to the government. It seems to me that self regulation or a 3rd party watchdog would be the best means of regulation.
ReplyDelete