US Government Embraces Bitcoin in Hearing on Virtual Currency 233
Daniel_Stuckey writes "Congress held its first-ever hearing on virtual currencies this afternoon, and it may have been the best PR boost bitcoin's had yet. The tone at the hearing held before the Senate Homeland Security and Government Affairs Committee was overwhelmingly positive as the panel weighed the risks of the technology that grew out of the criminal underbelly of the web, with the potential economic value of the now-booming futurist money. The prevailing sentiment over the two-hour deep dive into the pros and cons of the digital coins boils down to this: We need to uphold America's position as center of technical innovation by welcoming the new currency—but that that can't be done without government safeguards and regulations."
SonicSpike wrote in with a link to another report in Bloomberg. The Federal Reserve has no plans to regulate Bitcoin (lacking regulatory authority), but the SEC chair wrote "Regardless of whether an underlying virtual currency is itself a security, interests issued by entities owning virtual currencies or providing returns based on assets such as virtual currencies likely would be securities and therefore subject to our regulation."
Re:Oh look! (Score:3, Informative)
The fact that you think Bitcoin is a Ponzi scheme shows just how little you know about the currency.
Anyone in politics should absoutely love this! (Score:5, Informative)
Bribes, prostitutes, extravagance ... all require anonymous, untraceable forms of money.
If politicians didn't require it, governments would have banned cash long ago.
Re:When is the government actually right? Ever? (Score:4, Informative)
Re:Anyone in politics should absoutely love this! (Score:4, Informative)
Bitcoin is far more traceable than cash - each coin keeps its entire transaction history. Silk Road tried to do something about that with the way it would slice up all the payments and randomly assign them, so the net result was correct but it was unlikely (much of) your bitcoin went to the actual vendor you bought from. You're unlikely to have this kind of protection at a point of sale, so you're far more anonymous paying that hooker with banknotes.
Re:Translation (Score:5, Informative)
Bitcoins have always fallen under the current tax laws. There haven't been any new tax laws designed for e-currency like BTC.
They are subject to government regulation when used as a medium of trade.
However; at other times, there is a great deal of uncertainty -- for instance, the IRS has yet to issue any guidance, as to : whether bitcoins are classified as non-tangible personal property under the tax code, or as a foreign currency/ cash-equivalent/financial instrument.
The difference could be very important to miners and people holding bitcoins as well: if the former, then mining bitcoins may be a non-taxable event, and tax liability might not be incurred, until bitcoins are exchanged, and a capital gain is realized.
On the other hand --- if classified as a currency/cash-equivalent/financial instrument, there could be immediate taxes due whenever bitcoins are mined, and also: for tax purposes, requiring anyone holding them, to mark their bitcoins to market at the end of every year, and report the gain or loss based on the change of fair market value of their bitcoins in USD.
Re:When is the government actually right? Ever? (Score:3, Informative)
Like many people, you fail see that Bitcoin does have an intrinsic value: it is a useful medium of exchange. There is a predictable inflationary curve, it is impossible to counterfeit, and there is a low transaction cost.
It's usefulness as a medium of exchange is the same as it being useful for another purpose (such as copper's use as a conductor).
Re:When is the government actually right? Ever? (Score:5, Informative)
The exchanges I know of thus far provide no shorts yet, but Kraken has the code laid for it (they're brand new and are waiting for volume to increase before they add that along with some other advanced trade options). And yes, this would add market stability, which is part of the reason they're adding it.
Unfortunately, they're only available in a few states as of yet. The regulations in the US that apply to them unfortunately are on a state by state basis, and have significantly slowed the rollout of the exchange (unlike some of the prior exchanges that's gone up, they're A) operating in the US and B) being now scrutinized enough to really need to be fully compliant).
Re:Anyone in politics should absoutely love this! (Score:3, Informative)
A transaction history isn't as useful as it necessarily sounds. I use a $20 to buy scratch tickets at a convenience store, someone else cashes in their tickets, ends up with my $20, and then subsequently uses it to buy crack in a sting operation, and they see that I was formerly in possession of that $20. So? At most, the concern here is that it may get you some unwanted attention, but it's hardly solid evidence if you have the thought to just move it between a wallets on tor exit nodes. Not to mention that "Satoshi Square Meetups" happen in a variety of cities around the world, where people meet in person to relatively anonymously buy and sell bitcoin without going through an exchange at all.
So yes, bitcoin is quite traceable. That doesn't necessarily mean it can't be used as a method of exchange with fairly solid privacy when that is one's planned for goal.
Re:That explains the spike (Score:4, Informative)
Question: If the government regulates, controls, monitors, tracks, and taxes bitcoin, what is the benefit of bitcoin, anymore?
Answer: 'Controls' is the operative word there. Right now they control the dollar -- Well, actually a non-federal owned Federal Reserve does. Would you rather be paid in IOUS redeemable at the company store, or have a real currency? The dollar is the IOU, they can print as much as they want. The same isn't true of bitcoin. The other benefit is decentralized digital transacitons without the high price-fixed cost of wire transfers. True cash exists. However, I can't throw it half way around the planet, nor can I send cash by mail.
Comment: For the price of Bitcoin to really mean anything, you have to be able to exchange it for local currency
Ignorance: Blissfully believing that the price of stock or the dollar really mean anything; It's the exchange rate for GOODS AND SERVICES you fool. These can be transacted with bitcoin or dollars. Except with bitcoin I can exchange them for stuff not in the company store.
Re:Oh look! (Score:1, Informative)
It's not a Ponzi scheme... it's a Poncey scheme!
Source: http://www.urbandictionary.com/define.php?term=poncey [urbandictionary.com]
Re:When is the government actually right? Ever? (Score:5, Informative)
There is a predictable deflationary curve if you want to think of it as a currency - it is consistently going up in value. That makes it a terrible medium of exchange, because it encourages people to shove it under the mattress and wait for its value to go up instead of using it to get real productive work done. A good medium of exchange encourages you to go out and do something useful with it, thus encouraging more economic activity, and increasing the productivity of the people using it. As long as bitcoins' value is going up, it is a speculative investment, not a medium of exchange.
The trick to getting a currency to work, and the reason pretty much every developed country has switched to a fiat currency, is to keep the currency's value relatively steady despite the growth of your country's economy. If your currency's value goes up over the long term, it encourages hoarding and discourages productive economic activity. With a fiat currency it is easy to maintain this balance - print more money as your economy grows. With a currency based on a fixed resource (whether it be gold or bitcoins), this only happens if by sheer luck the rate of mining new gold/bitcoins matches the rate the economy is growing. If the mining rate does not keep up with economic growth, you get deflation and people will try to hoard the currency as a method of getting rich, instead of spending it or investing it to do actual productive work.