May 11, 2015 by Liberty
The regulation of bitcoin has been a relatively hot topic for the last year or two. Government officials are trying to pool their marbles together to try and find an effective way to regulate bitcoin. Some major bitcoin participants going out of their way to help in this process. Despite this help, there isn’t all that much anyone can do to regulate bitcoin at this time (short of major structural changes.)
Bitcoin is virtually mainstream now. Sure, it hasn’t come into mainstream use yet. It’s just in the mainstream vocabulary. Businesses absolutely love it. While it can end up costing huge sums of money to just move money around in the traditional banking system, bitcoin can cost virtually nothing for the same transaction. Over 100,000 merchants around the world accept bitcoin. Currently bitcoin has a market cap of over 3 billion dollars.
As you can imagine, banking executives aren’t bitcoin’s biggest fans. It can cost them a fortune. (Assuming they don’t have the good sense to embrace it.) I’d be remiss if I said politicians didn’t like it either because quite frankly, based on many of their testimonies, I think it’s pretty fair to assume the politicians couldn’t even put their bitcoin pants on the right way. That being said, politicians shouldn’t like bitcoin all that much.
Bitcoin And The Federal Reserve
One of the driving factors in Bitcoin’s early adoption was an anti-usd attitude. For the last hundred years, people have watched the US dollars value crumble into pennies of what it used to be (over 95%.) That’s according to the United States government’s own calculations. All of this loss in value was a concentrated effort of the US government.
With the wild increases in debt and unpaid liabilities, it’s become clear that this destruction of the value of the dollar is intended to continue. (Of course, Keynesian economics is their rationalization. Whether their rationalization is valid or not, (it’s not) it doesn’t help the couple in retirement that can’t afford their groceries anymore.)
The federal reserve is in control of the money supply in the United States. It has the power to do whatever it likes with the money. Of course, when that money gets printed, it’s not the average American the reaps the benefits. It’s the politically connected.
Bitcoin, structurally, just doesn’t allow that. No one is in control of the currencies printing. No one can chose when to inflate the currency and when the deflate it. It just exists. In many ways it’s comparable to electrical pulses of gold. The free market completely manages the value of the currency. (While that can lead to a bumpy ride with a small market cap, it virtually completely eliminates manipulation from its value.)
If, theoretically, bitcoin went mainstream then every dollar invested in bitcoin would be a dollar that’s not invested in the USD. Since it’s not invested in the USD, it gives the government even less ability to manage and manipulate their currency. Considering how currency management has been directed recently, that could lead to some major USD problems.
Of course, that’s unlikely. As with any new technology, who knows if it will thrive or flounder.
The Invisible Gun Of Regulation
Bitcoin will be heavily regulated eventually.
It’s a currency that can be used for bad things. That would be the justification. (IT FUNDS TERROR!) Of course, the real driving force behind it’s regulation would likely be the banks. Considering how much business bitcoin can steal from them, they’re going to be the ones fighting for it.
That being said, no one has any idea how the US government is going to regulate it. And… the US government is not giving away too many hints about it’s long term plan.
Why is that?
As you read this, someone is probably getting funded to do some evil thing using bitcoin. By this sentence, I’m willing to bet that their is another bad person doing something. Time, if government’s motivation was sincere, would be of the essence.
Perhaps I’m just being paranoid but I have a feeling the poor regulation of bitcoin is a conscious decision to leave bitcoin in limbo. One of the number one hurdles people and businesses in particular have in deciding to use bitcoin is the legal limbo that it’s still in. Sure, some of it has been “resolved” but it was left with such open language that virtually no one knows what the hell is going to happen. That leaves smart businessmen and women saying, “wait and see.”
Bitcoin cannot grow significantly with this invisible gun of regulation in the room. Anyone that decides to use bitcoin needs to know what they’re allowed to do and what they’re not allowed to do. Without that visible gun in the room (or no gun in the room,) decisions cannot be made.
On Criminals And Bitcoin
It doesn’t matter what politicians do to try and catch criminals though.
It’s not going to work.
It’s completely impossible because it has absolutely nothing to do with bitcoin. It has everything to do with cryptocurrencies and block chain technology. Even with major structural changes to bitcoin, there are so many other cryptocurrencies already around (and that could be created) that criminals could use them to do their business.
Bitcoin is just the current tool being used. At any point, that cryptocurrency could become obsolete and get replaced by a new one. Considering the combination of anti-fed early adopters, and downright criminals. After heavy regulation of bitcoin, a new (albeit smaller) cryptocurrency can take bitcoins place to some extent. (I don’t bitcoin would leave the number one crypto but the market would still be there for anyone wanting an alternative.)
Wait And See – Slow Death
Government is trying the wait and see approach with the invisible gun in the room. They’re hoping that their delaying tactics improve their position. They’re pretty much blockading bitcoin and hoping general boredom of the currency will kill it. At the very least, they’re putting off the tough decisions until they’re out of office.
That strategy won’t work. No strategy will work in the way intended. Best case scenario government will have it’s own utilization of the technology. That could steal a large percentage of the mainstream businesses from bitcoin. It would still, likely, limit government’s ability to manipulate their own currency. (With those limitations, they’d have to explain why their non-keynesian currency thrives while their keynesian currency falters.)
That being said, despite this gun in the room, businesses are still starting to accept bitcoin. The monetary reward is just too great for some business owners to avoid. The greater the financial reward, the greater harm their move to Bitcoin will cause the US government and mainstream banking. Businesses are still coming into accepting bitcoin. Invisible regulation can only slow down so much productivity. Eventually, the dam could break.
So, quite frankly, I’m a CRRRAAAZzzYYYY libertarian so this may be political dreams talking but… I think the US government THINKS it’s blockading bitcoin but they honestly have no idea who’s blockading who.
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