Topic: The future of Bitcoin is illegal - page 6. (Read 20070 times)

I think people are totally underestimating the market's need for a safe, reliable payment system that is NOT subject to counter-party risk. Counter-party risk refers to the risk that a borrower will default on any type of debt by failing to make payments which it is obligated to do.

Let me illustrate this with an example from someone, Person A, who has been approaching me about implementing Bitcoin with their business.

Person A has a business with many blue collar employees. Person A is worried about the business's cash balances being kept in various US banks because they do not know which bank will fail next so Person A keeps most cash reserves in banks outside the US which are more solvant. But Person A is even worried about those banks due to the European sovereign debt crisis and would rather be managing their business instead of worrying on a daily basis about whether their cash balances are safe or not in institutions which are very murky with their finances.

About 2 years ago Person A sent wire instructions late Thursday night to the European bank to move $1,000,000 (the actual amount, not hyperbole) for payroll. Friday the funds had still not hit the US bank but this could be normal due to time differences and Person A thought nothing of it. The $1,000,000 was to be wired to Wachovia and Saturday morning Person A woke up and began watching the news that Wachovia had failed.

Because I knew Person A pretty well and know more about finance, or whatever, he called me frantically and asked, "Is my money safe?" I replied, "I don't know. If the wire transfer was sent off and the federal government does not bailout Wachovia then likely your money is not safe and you will have to wait in line at the FDIC to recover a fraction of the $1,000,000 and it may take many weeks to get the cash in your account." He responded, "This could seriously and materially impact my business and I may not be able to make payroll." I responded, "I know. It sucks."

It is important to keep in mind that with Bitcoin there is NO counter-party risk. Additionally, if the wallet is secured properly there is NO performance risk related to a trustee, fiduciary, etc. who may embezzle funds, etc. like MF Global and others.

When deposits are held at US banks the depositer becomes an unsecured creditor. For businesses the FDIC limits are in most cases extremely small relative to the working capital needs of the businesses.

So a question becomes: What is Person A's fiduciary duty to the corporation in the management of cash balances?

In this case, there is now an alternative available that completely eliminates both counter-party and performance risk. The only material issue with using Bitcoin then becomes ease of integration with employees and exchange rate fluctuations.

It is all fun and games until the average Joe doesn't get his paycheck because of failures in the current banking and payment system. If you were an average Joe and your employer were to say they were offering Bitcoin now because the current banking system is not safe and that corporate funds were almost lost due to a bank failure that would have prevented payroll being met then would you agree to take some or all of your paycheck in Bitcoin. Especially if there were an easy integration with the current banking system with a debit card, etc.?

Just some things to think about.

I can't agree with this poster enough.

From that story:

Is that qualifier really necessary?

Gold is illegal, at least in Indiana. (http://www.courierpress.com/news/2007/nov/15/liberty-dollar-office-raided/)

The definition I'm using is pretty standard:

I've already said that I think making Bitcoin illegal would probably reduce its price, but that's because I think the leftward shift in the demand curve would "overpower" the rightward shift in the supply curve. Again, the coins would come to rest somewhere at the time the ban goes into effect. (Of course, to the extent that people DO in fact delete their wallets to comply with the ban, that also reduces supply.) Holding coins (e.g., knowing the passphrase for a brain wallet) is impossible to prevent. But if you're risking criminal sanction by selling those coins, you're going to demand a premium. Otherwise, you'd prefer to just sit on them and hope for a change in the law.


You're addressing the demand for Bitcoin. Again, I agree that the demand curve shifts left. Why is there still any demand at all? Because Bitcoin is still great money because of its properties, e.g., reliable scarcity, anonymity, low transaction fees, etc.
How is that responsive? Yes, cash is legal. I was responding to your hypothetical about the effect of making cash illegal and explaining why it's not particularly instructive when thinking about what would happen if Bitcoin (or gold) were made illegal.

I'd qualify that and argue that Bitcoin IS currently useful to the average Joe at least as a store of value / inflation hedge (the same way that gold is useful to the average Joe). It's just that the average Joe has yet to recognise that fact.

The average joe, if they've ever heard of Bitcoin, have no idea what it is or how to use it.

Well then... Why wait. certainly the bush has been beaten near to death with insinuations.

I would like to officially make the claim that to the average joe bitcoins are highly useful for buying drugs and other illegal items.

I've heard this all before:

1995: "The web will never be safe for commerce. Only geeks and people looking for porn are on the web."

2012: "Bitcoin will never be safe for commerce. Only geeks and people looking for drugs are using Bitcoin."

Which means those who are not visionaries, who can not see the future, will be the ones who try to malign bitcoin.

Yes, the OP claim was silly, because it stated that the ONLY reason to use BTC is for illegal uses. I then countered with the point that I've bought services from people which were not illegal (or anything close to it). Unless I am lying, this invalidates the OP's point completely. Perhaps he could change his statement to say a large use is for illegal items, but saying the "only use" is hyperbole BS.

And the claim has NOT been made that BTC is currently useful for the "average joe".  It is not useful for him... today. Just as the internet was not useful to the average joe in 1995.

It's not all that silly.

evoorhees has purchased very geek centric services I suspect. Bitcoin being geek centric currency, it wasn't hard to find a willing seller of geek services.

But, your average joe... what is he going to buy? Computer parts? probably not.. Speculation investments? probably not.... Drugs... More likely than not.

I think what Charlie means is that your average joe who is not a geek has no use for bit coins except to buy drugs or other black market items.

Did evoorhees benefit in any way by paying in bit coins over fiat funds? Avoiding taxes perhaps? I would speculate that even innocent sounding transactions are in someway illegal or are a benefit for avoiding legal issues that might otherwise be applied if paid in fiat currency.

 

This is a very silly statement.

I've spent probably $10k worth of Bitcoins over the past year and a half. Not once have I bought drugs. Most of this has been spent paying other individuals for various things (typically freelance contractor work from people in other countries). I find Bitcoin amazing useful for this.

I'm sorry that you have not found a way to use a frictionless international payment system to your benefit other than to speculate on price movements. But if you have as many bitcoins as you claim, I suggest you dig a bit deeper into the utility of this technology instead of fostering this notion that the only things people use it for are drugs.

But then there are people like me. I will continue to buy and sell in BTC no matter what the rest of you do.

At this point BTC doesn't have enough traction to withstand the closure of its main exchange without a collapse in value. If Bitcoin was made illegal right now it would be set back very very strongly at this point.

How can you do anything illegal with a currency that today as a total value of ~$125-130 million again? This is peanuts, worth maybe one minuscule money laundering operation, if at all.

To put it back in context, Wall Street alone got ~$75 billion worth of bonuses last year. The Fed is printing $40 billion each month.

Obviously nobody is bothering doing the math and do a reality check.

Typical negative propaganda from the uninformed.

That is very funny statement. The worthiness of something doesn't depend on its legal status. You can outlaw the Moon or the Sun but they still will be used by humans.

No, you are redefining supply to mean something completely different, as it suits you.  The coins are still there, and people will work hard to get any money from them at all, because noone are going to want them.  Do you think Bitcoin would be more valuable if it were much harder to buy them?  Because that's what you are writing.  So far every new exchange and service has made the price go up.  Demand increases as the coins get more liquid and easier to buy and sell.  You seem to think the value will increase if all exchanges close, and you have to find a miner on the street to buy a coin.  And when you get it, you can only use it to buy something illegal.  This does not make sense anywhere but in your own head.  Back in the time when this forum was the only exchange for Bitcoin, a pizza would cost 10,000 BTC.

You finally hit the nail.  People aren't going to use bitcoins if bitcoins are outlawed.  There is no reason to do so.  There are plenty legal payment methods, so why risk using an illegal one?  Or go through any kind of hassle to buy it?  There will be no demand for it, and plenty supply.  You could just as well switch to NMC, in case they forgot to outlaw NMC at the same time.

You speculate a lot and don't concern yourself much with reality.  First of all you are now concerned about legality after all, but you think it will be OK as long as it is legal somewhere.  Laws spread fast.  If the USA or EU outlaw Bitcoin, the rest will come fairly quickly.  The result?  Bitcoins become worthless very fast, and the demand is gone as well.  People will use LR or something instead.  Easier to buy, quite anonymous and irreversible.  More expensive and higher transaction costs, but legal.

But cash is legal, and owning or using cash will not get you arrested.  The same applies to Bitcoin, and Bitcoin is doomed as a currency unless it stays this way.  If the future of Bitcoin is illegal, Bitcoin will become worthless in the future.

OP, you are a bit short sighted.

I have bought completely legal items with my Bitcoins. There are many legal items that can be bought with Bitcoin. As time passes, more and more items will be available.

Yes, you can.  And it is done.  Many kinds of knives are outlawed in a lot of countries.  You can outlaw a tool which has certain properties.  E.g. certain kinds of knives, weapons or tools.  Exchanging western currencies used to be forbidden east of the Iron Curtain.  In my country balisong knives, switchblade knives and stilettos are forbidden.  Usefulness as a tool is not enough.

I agree it will be hard to forbid Bitcoin, and I can't understand why most of the people posting in this thread wants it to be forbidden.
No.  Reserve banking means that some real money has to be kept in reserve.  This is normally money in a central bank or similar, not cash in a vault.  Not in 2012.