the real question then is how big will the premium be, and secondarily what will the world consider the real price to be---the set cartel price, or the unregulated spot price?
That would be extremely intriguing to observe. A price based on a market that most people can't or won't access won't make any sense for any real world usage when there's a likely bigger one in the real world.
that could easily end up like the situation the actual LBMA market is operating under: 5% (likely less) of gold supply is traded on the "clean" market.
The incentive for corruption would be quite high, the LBMA has had issues with their certification licensees standing accused of approving 'dirty' gold for trading, and were recently accused themselves of fudging the inventory numbers for another of their gold mint franchisees/subsdiaries (the bank of england, no less). In the latter case, it is entirely impossible to verify whether BoE are either innocent or guilty, as a key part of the surrounding issues is that the gold deposits that LBMA uses (e.g. BoE) have an explicit clause in their contracts that physical audits of their gold inventory cannot be conducted. "Clean" is not the word that most readily springs to mind (at least not as a noun
).This sort of behavior (within the model system that the article suggests be adapted for Bitcoin) questions the motives and the need for any such system. I would expect such a system to get starved of liquidity, and also to be used as a way of manipulating the "official" BTC exchange rate. It would quite likely end in a multiple farce;
- Huge profits made from using Bitcoin's flexibility to get BTC both into and out of the cleancoins market without the cleancoins system or the blockchain recording these events
- Eventual loss of confidence in the cleancoins market, either because of the questionable exchange rate or dirty coins being washed on the market
- The open (i.e. black) market (in all it's guises) becomes the legitimate arbiter of the exchange rate
) 