Example from a regulated bank, $360 million loss, same ballpark as gox, Citi:
http://www.cnbc.com/id/101449490
So let's have some regulation so savers can feel warm an safe. NOT.
Topic: The Question About Regulation... (Read 1184 times)
The examples of Northern Rock and Lehman, rather show why regulation doesn't work - so whats the point?
On the other hand, another point to make is that regulation doesn't have conflict with decentalisation. Many industries have worthwhile and valuable regulation and are not centralised. Consider Reinheitsgebot for beer, similar rules for Scotch whisky, or how about car safety or fuel standards? These rules dont centralise manufacture or control of making beer, Scotch, cars or fuel. Now, some of these fields *are* less distributed as they require more infrastructure, contrast car manufacture with beer making, but you could start up a car factory with enough capital, as long as you follow some sensible guidance on safety before selling.
So, where i'm going is, the question isn't about regulation but what is it you want to regulate. Calls to regulate Bitcoin will be counter-intuitive (no one controls it) and fall on deaf ears. How about regulation of exchanges though? For example a licence to to show that the holders follow some best practices, observe security, internal auditing etc. That might have some legs.
On the other hand, another point to make is that regulation doesn't have conflict with decentalisation. Many industries have worthwhile and valuable regulation and are not centralised. Consider Reinheitsgebot for beer, similar rules for Scotch whisky, or how about car safety or fuel standards? These rules dont centralise manufacture or control of making beer, Scotch, cars or fuel. Now, some of these fields *are* less distributed as they require more infrastructure, contrast car manufacture with beer making, but you could start up a car factory with enough capital, as long as you follow some sensible guidance on safety before selling.
So, where i'm going is, the question isn't about regulation but what is it you want to regulate. Calls to regulate Bitcoin will be counter-intuitive (no one controls it) and fall on deaf ears. How about regulation of exchanges though? For example a licence to to show that the holders follow some best practices, observe security, internal auditing etc. That might have some legs.
Ding ding ding! Calls to regulate bitcoin are non starters.
Calls to regulate the exchanges that transfers billions of dollars in transactions make a whole lot more sense.
As far as I see from the legal point of view BTC is in a grey area in most of the countries.
That means that if I start any bitcoin only business (e.g. online casino) and at some point decide to take all the coins and leave, it would be very hard for someone to put me on trial (at least in some countries) for this even if my identity is fully known.
Most of the countries have a different legal system than US, where there is zero freedom for the judges. So if there is no law about cryptocurrencies in that jursidiction, you can't really go to a trial, explain all this area nicely and hope that the judge will understand you and apply his justice on the case.
This raises another issue, how could someone (a well-minded entity) start such a business and actually gain credibility? Should it make it's identity known and then issue some sort of legal boundary contract for each bitcoin transfer (so it can be found guilty if breaking the contract in some way)?
That means that if I start any bitcoin only business (e.g. online casino) and at some point decide to take all the coins and leave, it would be very hard for someone to put me on trial (at least in some countries) for this even if my identity is fully known.
Most of the countries have a different legal system than US, where there is zero freedom for the judges. So if there is no law about cryptocurrencies in that jursidiction, you can't really go to a trial, explain all this area nicely and hope that the judge will understand you and apply his justice on the case.
This raises another issue, how could someone (a well-minded entity) start such a business and actually gain credibility? Should it make it's identity known and then issue some sort of legal boundary contract for each bitcoin transfer (so it can be found guilty if breaking the contract in some way)?
This just in to add a little color to the picture:
http://www.zerohedge.com/news/2014-02-27/want-outperform-market-just-trade-alongside-sec
"In other words, in a market in which hedge funds have given up on shorting stock, the best outperformer is none other than the very entity that is supposed to regulate and root out illicit market activity!"
There is no suggestion that the SEC is any worse, and they are probably better, than
regulators in other countries. Just IMHO.
http://www.zerohedge.com/news/2014-02-27/want-outperform-market-just-trade-alongside-sec
"In other words, in a market in which hedge funds have given up on shorting stock, the best outperformer is none other than the very entity that is supposed to regulate and root out illicit market activity!"
There is no suggestion that the SEC is any worse, and they are probably better, than
regulators in other countries. Just IMHO.
Regulation:
I'm going to refer back to a point made in the beginning of the blockchain - that insolvent
banks were going to be bailed out - for a second time. Regulation had failed, and bitcoin
was a way of telling governments that they should fix the problem. With hindsight,
there were plenty of regulations, the problems were with the regulators, and with
lobbying by special interests altering the regulations to weaken the public interest,
and to provide barriers to entry.
Bitcoin will continue to grow until governments provide sound money and that means
measurement and credibility.
The problem with regulators are that there are too few, they are often inexperienced
and too trusting of the banking industry, and inevitably when challenged by retail
investors, they are placed in a position of a) defending the industry and b) restricting
access to relevant information.
Add to that, the track record of all governments of suppressing alternatives to,
particularly, fiat money. Further, bureaucracies love problems. More problems mean
more resources, more pay, more prestige, more meetings, more free lunches, you
get the picture?
Currently, regulation seems to be proceeding on a presumption of guilt: that bitcoin
has to prove innocence before being allowed to function. That is contrary to the
basis for most law and a dangerous road to go down.
There are some things that bitcoin needs. Disclosures by exchanges and the same
transparency that the blockchain provides. Much of the regulation needed for
fiat currency is inapplicable for bitcoin because safeguards are already in place.
For example, there are no counterfeit bitcoin. Most important are discussions on
good practice, and participation by the community in highlighting bad practices.
It is worth pointing out that that efforts to regulate bitcoin to date have, in my
humble opinion, made things worse, increased risk, not better.
I'm going to refer back to a point made in the beginning of the blockchain - that insolvent
banks were going to be bailed out - for a second time. Regulation had failed, and bitcoin
was a way of telling governments that they should fix the problem. With hindsight,
there were plenty of regulations, the problems were with the regulators, and with
lobbying by special interests altering the regulations to weaken the public interest,
and to provide barriers to entry.
Bitcoin will continue to grow until governments provide sound money and that means
measurement and credibility.
The problem with regulators are that there are too few, they are often inexperienced
and too trusting of the banking industry, and inevitably when challenged by retail
investors, they are placed in a position of a) defending the industry and b) restricting
access to relevant information.
Add to that, the track record of all governments of suppressing alternatives to,
particularly, fiat money. Further, bureaucracies love problems. More problems mean
more resources, more pay, more prestige, more meetings, more free lunches, you
get the picture?
Currently, regulation seems to be proceeding on a presumption of guilt: that bitcoin
has to prove innocence before being allowed to function. That is contrary to the
basis for most law and a dangerous road to go down.
There are some things that bitcoin needs. Disclosures by exchanges and the same
transparency that the blockchain provides. Much of the regulation needed for
fiat currency is inapplicable for bitcoin because safeguards are already in place.
For example, there are no counterfeit bitcoin. Most important are discussions on
good practice, and participation by the community in highlighting bad practices.
It is worth pointing out that that efforts to regulate bitcoin to date have, in my
humble opinion, made things worse, increased risk, not better.
So...
BTC will remain decentralised. We need to find a method to regulate it to an extent which will only expand its use and acceptance.
BTC is here to stay... We just need to find a way of improving it!
Any suggestions?
P.S I'm half asleep so I haven't managed to include all aspects and give either argument to its full. My sincere apologies.
BTC will remain decentralised. We need to find a method to regulate it to an extent which will only expand its use and acceptance.
BTC is here to stay... We just need to find a way of improving it!
Any suggestions?
P.S I'm half asleep so I haven't managed to include all aspects and give either argument to its full. My sincere apologies.
Bitcoin is not decentralized. It should be but the hashing power is centralized around the Asic producers and mining pools. P2Pool is one option, but sha-256 is centralizing as a hashing algorithm compared to Scrypt.
What technology do you think we would need to decentralize Bitcoin and Bitcoin exchanges so that what happened to Mt Gox can never happen again?
I read one idea that ATM networks could allow a decentralized exchange through them. Feasible?
Minimum level of regulation inevitable
Cost of widespread and easy adoption
Cost of widespread and easy adoption
"Be your own bank" - yes, I can see the attraction to this. But I think that people today are more attracted to the idea in the aftermath of fiat banks having been found so lacking.
Not that they have really been found lacking in terms of security of deposits mind you - I mean, if you were just looking at the problem in terms of security of deposits I reckon the fiat banks are looking a pretty good bet. Even if they totally mismanage and become bankrupt (as indeed some have), in the UK at least, deposits are guaranteed up to £85000 for each seperate account by the Government.
Rather, they have been found lacking in other areas (FRB etc)
How am I gonna talk my pensioner Dad into putting money into BTC when he has absolutely no statutory protection ? Explain to him how to cold store his wallet with Truecrypt and Armory ? He's just watched a BBC report on the News at 10 about BTC's largest exchange having gone bust owing millions
- and he knows nothing about cold storage - thats why his money is in the bank. Its a hard sell - and not one that I really want to push on him ATM.
But it isn't just my Dad - what if you live in shared accomodation/insecure rented property ? Being your own bank then presents real practical problems - that is, if you aren't a computer buff - which the vast majority of people aren't
The least that we can offer the likes of my Dad - or anyone else who isn't confident in being their own bank (and we all know many such people)- is to say that if you authorise a third party to hold your BTC then that third party will be subject to financial law/regulation in the same way they would if they held your fiat currency. In this way at least your funds will have some security. You may have to pay a fee for this security (insured against loss/theft) - but for some it will be a price worth paying.
If we can't offer them this then BTC is going to struggle to achieve widespread adoption IMHO
Not that they have really been found lacking in terms of security of deposits mind you - I mean, if you were just looking at the problem in terms of security of deposits I reckon the fiat banks are looking a pretty good bet. Even if they totally mismanage and become bankrupt (as indeed some have), in the UK at least, deposits are guaranteed up to £85000 for each seperate account by the Government.
Rather, they have been found lacking in other areas (FRB etc)
How am I gonna talk my pensioner Dad into putting money into BTC when he has absolutely no statutory protection ? Explain to him how to cold store his wallet with Truecrypt and Armory ? He's just watched a BBC report on the News at 10 about BTC's largest exchange having gone bust owing millions
- and he knows nothing about cold storage - thats why his money is in the bank. Its a hard sell - and not one that I really want to push on him ATM.But it isn't just my Dad - what if you live in shared accomodation/insecure rented property ? Being your own bank then presents real practical problems - that is, if you aren't a computer buff - which the vast majority of people aren't
The least that we can offer the likes of my Dad - or anyone else who isn't confident in being their own bank (and we all know many such people)- is to say that if you authorise a third party to hold your BTC then that third party will be subject to financial law/regulation in the same way they would if they held your fiat currency. In this way at least your funds will have some security. You may have to pay a fee for this security (insured against loss/theft) - but for some it will be a price worth paying.
If we can't offer them this then BTC is going to struggle to achieve widespread adoption IMHO
The examples of Northern Rock and Lehman, rather show why regulation doesn't work - so whats the point?
On the other hand, another point to make is that regulation doesn't have conflict with decentalisation. Many industries have worthwhile and valuable regulation and are not centralised. Consider Reinheitsgebot for beer, similar rules for Scotch whisky, or how about car safety or fuel standards? These rules dont centralise manufacture or control of making beer, Scotch, cars or fuel. Now, some of these fields *are* less distributed as they require more infrastructure, contrast car manufacture with beer making, but you could start up a car factory with enough capital, as long as you follow some sensible guidance on safety before selling.
So, where i'm going is, the question isn't about regulation but what is it you want to regulate. Calls to regulate Bitcoin will be counter-intuitive (no one controls it) and fall on deaf ears. How about regulation of exchanges though? For example a licence to to show that the holders follow some best practices, observe security, internal auditing etc. That might have some legs.
On the other hand, another point to make is that regulation doesn't have conflict with decentalisation. Many industries have worthwhile and valuable regulation and are not centralised. Consider Reinheitsgebot for beer, similar rules for Scotch whisky, or how about car safety or fuel standards? These rules dont centralise manufacture or control of making beer, Scotch, cars or fuel. Now, some of these fields *are* less distributed as they require more infrastructure, contrast car manufacture with beer making, but you could start up a car factory with enough capital, as long as you follow some sensible guidance on safety before selling.
So, where i'm going is, the question isn't about regulation but what is it you want to regulate. Calls to regulate Bitcoin will be counter-intuitive (no one controls it) and fall on deaf ears. How about regulation of exchanges though? For example a licence to to show that the holders follow some best practices, observe security, internal auditing etc. That might have some legs.
So...
After this MtGox fiasco (can't be put in any other way) many people are asking for the regulation of Bitcoin.
This can be looked at from a number of perspectives.
Should we go down the non regulation route, Bitcoin would continue as it has done. Obviously we can't predict the long term performance of it, but we can say this. If Bitcoin remains unregulated, we can assume and almost be certain that it won't be long before something similar to the MtGox fiasco happens again. We've seen endless cases where Bitcoins have been stollen and lost be it on the dark web or not. If BTC was regulated, it would put a stop to such occurrences and it would increase the confidence in Bitcoins and remove any doubt of people losing their savings as has happened in the past. Of course there is always a possibility that even with regulation similar occurrences can happen. We've seen it with Northern Rock and Lehman Bros etc. These are examples that even with regulation and centralisation, all commodities are prone to disaster.
This presents a strong argument for the regulation of BTC.
However, one of the attractions of BTC is its decentralisation and lack of regulation. If it were to be regulated, I'm sure a number of people would cash out and convert to gold/silver. It is true that BTC has been used for crime, money laundering and other shady business, but now as it becomes more accepted, its clientele is changing and perhaps regulation may drive away a small percentage of its users whilst attracting a larger user base.
The fact remains that this can't go on. Something must be done. BTC doesn't need to be completely regulated, rather it has to have a form of regulation. The only question is, what kind of regulation does it need? BTC will remain decentralised. We need to find a method to regulate it to an extent which will only expand its use and acceptance.
BTC is here to stay... We just need to find a way of improving it!
Any suggestions?
P.S I'm half asleep so I haven't managed to include all aspects and give either argument to its full. My sincere apologies.
After this MtGox fiasco (can't be put in any other way) many people are asking for the regulation of Bitcoin.
This can be looked at from a number of perspectives.
Should we go down the non regulation route, Bitcoin would continue as it has done. Obviously we can't predict the long term performance of it, but we can say this. If Bitcoin remains unregulated, we can assume and almost be certain that it won't be long before something similar to the MtGox fiasco happens again. We've seen endless cases where Bitcoins have been stollen and lost be it on the dark web or not. If BTC was regulated, it would put a stop to such occurrences and it would increase the confidence in Bitcoins and remove any doubt of people losing their savings as has happened in the past. Of course there is always a possibility that even with regulation similar occurrences can happen. We've seen it with Northern Rock and Lehman Bros etc. These are examples that even with regulation and centralisation, all commodities are prone to disaster.
This presents a strong argument for the regulation of BTC.
However, one of the attractions of BTC is its decentralisation and lack of regulation. If it were to be regulated, I'm sure a number of people would cash out and convert to gold/silver. It is true that BTC has been used for crime, money laundering and other shady business, but now as it becomes more accepted, its clientele is changing and perhaps regulation may drive away a small percentage of its users whilst attracting a larger user base.
The fact remains that this can't go on. Something must be done. BTC doesn't need to be completely regulated, rather it has to have a form of regulation. The only question is, what kind of regulation does it need? BTC will remain decentralised. We need to find a method to regulate it to an extent which will only expand its use and acceptance.
BTC is here to stay... We just need to find a way of improving it!
Any suggestions?
P.S I'm half asleep so I haven't managed to include all aspects and give either argument to its full. My sincere apologies.
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