The US Regulatory Vice Closes On Bitcoin

Tyler Durden's picture




 

Just six weeks after the US Treasury decided enough-was-enough with this upstart non-fiat, non-controlled-by-TPTB currency (and applied money-laundering reglations), US financial regulators are now looking for supervisory control over Bitcoin. As The FT reports, CFTC's Bart Chilton notes "it's not monopoly money - real people have real risk in these instruments," and  that regulating the controversial cyber-currency "is sure something [CFTC] needs to explore." Chilton's remit to regulate this "shadow currency" is predicated on it becoming a basis for derivative contracts as opposed to purely transactional (akin to the monitoring of physical oil transactions that can influence crude futures.) Since the Treasury's March decision, at least three North American companies have had their accounts seized by the banks but while this attempt to control the virtual currency follows the ECB's 'ponzi attack' last year, the 'regulators' may note that, "even if US regulations make it hard for Bitcoin businesses to operate in the US, that doesn’t mean it will make it difficult for people to use Bitcoin as a currency in the US. Bitcoin is a world currency."

 

 

Via The FT,

Senior officials at a top US financial regulator are discussing whether Bitcoin, the controversial cyber-currency, might fall under their regulatory remit.

 

Bitcoin “is for sure something we need to explore”, Bart Chilton, one of the five commissioners at the Commodity Futures Trading Commission (CFTC) told the Financial Times. A person familiar with the CFTC’s thinking said that the regulator is “seriously” examining the issue.

 

...

 

Since the ruling, at least three companies in North America have reported having their business accounts closed by their banks. Bitfloor, a New York-based Bitcoin exchange, said it was shutting down entirely, and it has not yet been able to return funds to customers.

 

“Even if US regulations make it hard for Bitcoin businesses to operate in the US, that doesn’t mean it will make it difficult for people to use Bitcoin as a currency in the US. Bitcoin is a world currency,”

 

...

 

CFTC jurisdiction generally does not extend to cash markets unless exchanges list derivatives contracts based on them. For example, the agency monitors physical oil transactions insofar as they influence crude futures traded on the New York Mercantile Exchange.

 

...

 

“In essence, we’re talking about a type of shadow currency, and there is more than a colourable argument to be made that derivative products relating to Bitcoin falls squarely in our jurisdiction.”

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Mon, 05/06/2013 - 18:33 | 3535703 Charles Nelson ...
Charles Nelson Reilly's picture

"I work hard, everyday, on getting my hair looking this good. Other than that, I don't really do much" - Bart Chilton

Mon, 05/06/2013 - 18:37 | 3535708 TwoShortPlanks
TwoShortPlanks's picture

Coz the CFTC isn't all that busy right now.

Please don't pull the other one, coz it's my fucking cock!

Mon, 05/06/2013 - 18:39 | 3535721 Precious
Precious's picture

The impartial Schumer must have put a 10,000 volt cattle-prod up Chilton's ass. 

Mon, 05/06/2013 - 18:49 | 3535754 Fredo Corleone
Fredo Corleone's picture

As an aside, Tyler, we observe that the lovely statist from Arizona has again thwarted the legislature -- that is, vetoed the desires of the citizenry.

http://www.reuters.com/article/2013/05/03/us-usa-arizona-gold-idUSBRE942...

Mon, 05/06/2013 - 18:59 | 3535790 nope-1004
nope-1004's picture

Chilton = blonde hot-air bag.  Male bimbo, or "mimbo".

Spineless 'regulators' are the problem, keeping the existing ponzi going in the name of their own bonuses based on printed junk, while the real world, hard working, productive person is stripped of all hope and wealth.

The CFTC can go to hell.  They've done nothing for me, so f'em.

 

 

Mon, 05/06/2013 - 18:59 | 3535798 redpill
redpill's picture

No one could have seen this coming!!

Mon, 05/06/2013 - 19:04 | 3535804 kaiserhoff
kaiserhoff's picture

I'm starting to like Bitcoin.  It's bright and shiny, pisses off Washington and New York...,

   and it's not Jewish.  Who knew?

Mon, 05/06/2013 - 19:08 | 3535815 TwoShortPlanks
TwoShortPlanks's picture

And you thought BitCoin had a sell-off before....LOL

Mon, 05/06/2013 - 19:16 | 3535831 Joe Sixpack
Joe Sixpack's picture

If they only worked 1/1000th as fast on silver...

Mon, 05/06/2013 - 19:33 | 3535871 macholatte
macholatte's picture

 

Bitcoin is a world currency....

 

... but gold and silver are not money.

Fascinating.

 

So you think that money is the root of all evil. Have you ever asked what is the root of all money?

Ayn Rand

Mon, 05/06/2013 - 19:41 | 3535893 wintermute
wintermute's picture

TRUST is the root of all money.

Fiat currency is so debased it is losing trust day by day. Bitcoin is gaining trust day by day.

Mon, 05/06/2013 - 20:54 | 3536157 seek
seek's picture

This really is a key point. I've mentioned this previously that people are far more inclined to trust geeks and a rigid monetary system that's programmaticlly enforced (right or wrong) and much less likely to trust governments and regulatory authorities that are consistently using selective enforcement to harm the average citizen. Honestly, I think the government's distrust of bitcoin (and gold, for that matter) just bolsters the percieved value at this point.

The true crisis the world is facing isn't a monetary one, it's a crisis of faith and trust, and sadly it's completely rational today to have neither with respect to national-level governments and corporations across the world.

Tue, 05/07/2013 - 04:03 | 3536770 Capitalist Exploits
Capitalist Exploits's picture

"Seek" I would love to believe you and most zh readers get it. The horrible truth though is that the majority are completely imune from rational thinking, and will only howl when American Idol is pulled. They will continue to believe the unbelievable that comes out of the mouths of politicians and they will continue to let their lives, wealth and freedoms be indecently anally raped.

Tue, 05/07/2013 - 04:02 | 3536771 Capitalist Exploits
Capitalist Exploits's picture

"New Seek" I would love to believe you and most zh readers get it. The horrible truth though is that the majority are completely imune from rational thinking, and will only howl when American Idol is pulled. They will continue to believe the unbelievable that comes out of the mouths of politicians and they will continue to let their lives, wealth and freedoms be indecently anally raped.

Mon, 05/06/2013 - 23:11 | 3536533 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Mervyn King (BOE Head) once said "evil is the root of all money" and he wasn't joking.

But Bart Chilton definitely IS joking. For starters he can't do anything at the currency level, it's peer-to-peer. He can no more "shut down" Bitcoin than he can shut down Bit Torrent. (For those not paying attention, BitTorrent is currently 47% of ALL web traffic, four times the total web surfing traffic. Uh-huh, nice job shutting it down). Now at the exchange level, yes they can make life very difficult for Bitcoin buyers/sellers. But there are more and more peer-to-peer EXCHANGES (like LocalBitcoins.com), and more and more places to exchange fiat currency for Bitcoins that are based OUTSIDE the USA.

Bart Chilton shutting down Bitcoin reminds me of the Soviet Union trying to keep Dallas videotapes out. Once people in the Sov.Union saw how people lived in Dallas, the jig was up.

Mon, 05/06/2013 - 20:24 | 3536039 cynicalskeptic
cynicalskeptic's picture

GOD FORBID we regulate and oversee Weapons of Mass FInancial Destruction like CREDIT DEFAULT SWAPS and other Derivatives accounting for TRILLIONS of exposure.

 

Mon, 05/06/2013 - 20:32 | 3536063 NoDebt
NoDebt's picture

Agreed with your point, but I see this situation in a different light.  If there is a dervative product created tied to BitCoin then the CFTC gains the right to regulate the underlying "real" commodity?

So why don't they hurry up and create a BitCoin deerivative so they can instantly regulate BitCoin?  Why the pretense of discussing this like it might not be possible.  It is and obviously they will.

They are going to "InTrade" this BitCoin shit as sure as I'm sitting here typing this.  I'd be surprised if the playbook hasn't already been written and approved. 

Mon, 05/06/2013 - 21:13 | 3536227 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

Spineless 'regulators' are the problem, keeping the existing ponzi going in the name of their own bonuses based on printed junk, while the real world, hard working, productive person is stripped of all hope and wealth.

This is what makes the article's title such a hilarious double entendre. The US Regulatory Vice Closes On Bitcoin. The imagery is of a workbench vise closing, and at the same time the regulators are putting the squeeze on bitcoin like protection racket mobsters would do to a competitor.

In this case, the vice squad and the racketeers are one and the same.

Mon, 05/06/2013 - 21:25 | 3536263 willwork4food
willwork4food's picture

Their $100k+ salaries justify breaking up neighborhood gifting clubs, the occassional pink sheet brothel that doesn't pay them off and now the most evil and ambitious anti-bit coin project. What would we do without them?

 

Mon, 05/06/2013 - 18:59 | 3535796 xtop23
xtop23's picture

Nice Bart.

You won't do a gd thing about metals manipulation, but bitcoin, now THATS a problem.

Dowse yourself in kerosene and buy a Volt plz.

Mon, 05/06/2013 - 19:21 | 3535839 Lets_Eat_Ben
Lets_Eat_Ben's picture

These MOTHERFUCKERS!

BTC is what a real, un-distorted market looks like. It's like the ONLY asset not manipulated. Look elsewhere you fuckiing motherfuckers! AHHHH!!!!!

Mon, 05/06/2013 - 19:51 | 3535895 wintermute
wintermute's picture

Yes. Bitcoin has the last remaining market which is not manipulated by the government/bankster complex.

A few big traders might manipulate the fx rate a few percent, but this is negligible compared to the powerful fundamentals driving its value upwards. Check out its 3 year log chart 

http://farm9.staticflickr.com/8257/8705727117_15e8d4e2dd_b.jpg

TYLER - Would you mind putting this chart up on ZH? So people can see how Bitcoin is exponentially outperforming ALL asset classes year-on-year

Mon, 05/06/2013 - 20:44 | 3536107 NoDebt
NoDebt's picture

Winter- you realize that's the EXACT reason they want to kill it, right?  BitCoin is dead man walking.  It's a threat to every central bank and major finanical institution everywhere.  The only people who want BitCoin to succeed are people like you and me (people whose opinions don't count and never did) and money launderers (we might stand a chance with them on our side!).

BitCoin has two choices as I see it:  1. Succum and allow itself to be regulated (and by definition, manipulated) or 2. Die.

Mon, 05/06/2013 - 21:00 | 3536176 seek
seek's picture

By its very nature bitcoin can't be regulated.

The only aspect of it that can be is how it interacts with the financial system. They can shut down USD to BTC exchanges, but not a BTC-only economy, nor the individual bitcoin enthusiast's exchanges. I think this is one more reason the financial system is recognizing the potential magnitude of the threat bitcoin represents.

I don't think it will die. My suspicion is that it will be harrassed to slow the adoption while interested parties work on ways to feed off of it (such as VISA or other payment processors inserting itself into the payment processing stream, perhaps by law in the US.)

Mon, 05/06/2013 - 21:38 | 3536294 NoDebt
NoDebt's picture

"By its very nature bitcoin can't be regulated."

How many BitCoins you want to bet me on that?  It can and it will or it will die.  They could go after Mt.Gox (or any exchange) in a similar way to how they shut down InTrade.  They most certainly can and will reach across oceans.  If you kill the exchanges, you kill BitCoin.  Anywhere in the developed world they can reach out and touch.  Unless you feel like dealing with a BitCoin exchange in Afghanistan, our regulators can go shut it down.  Just ask InTrade.

BitCoin has very little presence in the real payment world.  You can't pay you bills or buy a tank of gas with it, for instance.  If you could, BitCoin might have a chance.  But that's not the case right now or in the forseeable future.  It is vulnerable at the exchanges- that's where regulators will put the bullseye.  (I would if I was in charge of killing BitCoin).

Agreed, they will try to slow it down to see if they can regulate it (and by definition, manipulate it).  Failing that, they'll kill it.  Frankly, I think killing it is Plan A with regulation being Plan B.  But regulation is most certainly in BitCoin's future if it has one.

I use BitCoin personally and I like it.  It's just that I recognize it's vulnerabilities and shortcomings, which are numerous. 

Mon, 05/06/2013 - 23:24 | 3536553 wintermute
wintermute's picture

NoDebt, I hear you, but Bitcoin is no ordinary technology. It's architecture was inspired by BitTorrent file sharing, which still thrives despite relentless offical attempts to stop it.

There could be a Mt Gox size exchange in any country. What about Costa Rica which hosts Liberty Reserve? No one seems to be able to close down LR.

 

Mon, 05/06/2013 - 23:57 | 3536600 RebelDevil
RebelDevil's picture

The CFTC is bluffing and/or preparing for BTC derivatives!
And that's that.
h/t to BrotherJohn
 http://www.youtube.com/watch?v=nz_1JlykBf0

Mon, 05/06/2013 - 21:50 | 3536323 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

When the bullion dealers back bitcoins with gold and silver it is game over for the banks. As long as there is online transactions you are going to need a 1's and 0's representation of money. Let them become the bank accounts and then worry about washing everything back into government currencies or use another party. the more convoluted the better to keep regulators from being able to deconstruct and blow it up. You want a world currency for the people by the people backed by sound tangible assets outside government control this is the general direction though I'd personally work on building on bitcoin and issuing a new currency or use others in conjunction with to be able to do things like crypto-currency swaps, litecoin would be a consideration. It would serve other purposes but we are probably 5 - 15 minutes ahead of everyone here with this sort of setup. Let the governments, over-regulation and central banks fuck things up even worse then you'll see a concerted push towards this direction.

Mon, 05/06/2013 - 22:33 | 3536447 imbtween
imbtween's picture

BTC could be killed if the gov or banking industrial complex simply bought them all. Then some IT dude will steal the wallet and disappear.

Tue, 05/07/2013 - 06:05 | 3536831 auric1234
auric1234's picture

Impossible. Same reason the gov't can't buy all gold: not all of it is for sale in FIAT.

Perhaps if the gov't used real money (e.g. gold) to buy them. But then, maybe they can't afford them (the Fed is broke when you think in gold terms, and reality is a bitch).

 

Tue, 05/07/2013 - 06:08 | 3536834 Bearwagon
Bearwagon's picture

How about they use real force (e.g. .308 or some of them hollow-points)to confiscate the bitcoins?!

Wed, 05/08/2013 - 12:15 | 3541426 painlord-2k
painlord-2k's picture

Try do do it in China, Russia and other places.

It will not end well for them.

Mon, 05/06/2013 - 20:46 | 3536114 Tango in the Blight
Tango in the Blight's picture

“Like every good American, I don’t like what I don’t understand and I definitely don’t understand what a bitcoin is.”

http://www.thegenesisblock.com/weekend-humor-bitcoins-are-a-scam/

Mon, 05/06/2013 - 20:47 | 3536093 Tango in the Blight
Tango in the Blight's picture

Bitcoin faces the wrath of the boomers, it it certainly finished now! /s

 

Mon, 05/06/2013 - 21:55 | 3536353 Urban Roman
Urban Roman's picture

Precious, that article is two years old. 

It has gone beyond Shumer's ten minute attention span -- means nothing unless and until someone brings up the issue again. 

Mon, 05/06/2013 - 19:02 | 3535799 FEDbuster
FEDbuster's picture

Fuck Jan Brewer, she is an idiot.  I know of at least three main stream local businesses in our town (in AZ) that accept silver coins and bullion at spot price.  I recently bought some ammo using silver in a private transaction.  There will come a day when Jan's replacement will be demanding people pay their taxes (income and property) in silver and gold, and all they will get is a piece of paper with lots of zeros on it.

Mon, 05/06/2013 - 21:22 | 3536255 tenpanhandle
tenpanhandle's picture

I don't understand your comment.  I prefer to pay my fucked up taxes with the fucked up currency.  When I have to pay my taxes with gold and silver is when I pay them with lead.

Mon, 05/06/2013 - 22:57 | 3536496 FEDbuster
FEDbuster's picture

As I said, there will come a day when they try to demand taxes be paid in real money (gold and silver), but all people will have is worthless paper script (think Zimbabwe).  AZ had a chance to join Utah in the first step back to a gold (or silver) backed economy, just a small step but a step none the less.   Our retarded Governor (who also recently embraced Obamacare) vetoed it.

Currently 1470 Federal Reserve Notes = 1 troy oz of gold  and  24 FRNs = 1 troy oz of silver.   That is the current "spot" backing of fiat FRNs (manipulated value)  The street price for physical is 5-30% higher.  So when you pay in "fucked up currency", you forefit the opportunity to convert FRNs into real money, gold and silver.

Gold and silver (and physical currency) are harder for the government to track, therefore her fear is of missing out on some taxing opportunity.  The "Beast" needs to be fed, and Jan Brewer in no different than Barry Obama when it comes to craving tax revenues.  Up next Internet sales tax, then national VAT taxes.

Wed, 05/08/2013 - 02:46 | 3540157 tr1ck5t3r
tr1ck5t3r's picture

Money is more than tangible elements like Gold, Silver or even your paper or metal token of choice.

Trust is intangible.

When you win the war of words you win the trust of the people.

Bitcoins has its weaknesses as only 21million coins will ever exist making it hard to use in every day life for low value transactions like trying to buy a one penny chew from the sweetshop, although Bitcoins could have a use as a Reserve Currency or measure in which to watch the debasement of all other currencies over time.

The lack of Net Neutrality https://en.wikipedia.org/wiki/Net_neutrality could also effectively censor it or slow it up sufficiently to make it impractical for every day use, and then there is the issue over the regulation of exchanges.

However what is Money?

Its just a medium of exchange.
http://en.wikipedia.org/wiki/Medium_of_exchange

Who ever said it had to be tangible? People are happy to use cards and online banking to live their lives without ever having to use tangible notes and coins, yet the intangible trust is still there.

What makes the concept of an e-currency appealing is that the implementation and operation of the bitcoin system is one that is potentially beyond the influence of any one individual, let alone any Govt, Central Bank, Bank or Trader. Its the ultimate store of wealth.

Thats putting aside any bugs which might be exploited by hackers, but assuming it is secure or at least more secure than the banking systems currently are, the trust will go with the e-currency thats most practical for people because everyone wants to trade. If we dont trade our lives get worse in some sense.

How that ecurrency embeds itself and facilitates every day life is up to the creator of said software.

Govts will be powerless to stop it unless thought crimes become the norm and free speech is censored.

Fighting for Net Neutrality has far bigger implications than most people realise.
https://en.wikipedia.org/wiki/Net_neutrality

However an ecurrency with enough units to satisfy the trade of the most commonly used lowest valued products or services will could also be useful for dealing with the problem that we all live on a planet with finite resources.

It could be just what is required to arrest the growing human population and restore some quality of life.

Mon, 05/06/2013 - 19:02 | 3535802 Pareto
Pareto's picture

What a huge piss-off.  And her reasons, speak directly to that state's inability to confiscate through tax.  "I'm vetoeing this bill because it fucks up my free ride."  So, the people poke, the Bill was passed and Brewer vetoes it.  Well, so, there you go.  Just another day of wasting a whole lot of people's time and commitment to holding their own government in check.  Fuck Jan Brewer!  Trade it anyways.

Mon, 05/06/2013 - 19:19 | 3535770 Manthong
Manthong's picture

dammit..  Give Bart his props…  after all, he is a close associate and confidant of that renowned  patriot and servant of American freedom .. Tom Daschle

and somebody from  Arkansas has to be close to the heart of our Clintonian market and economy.

http://en.wikipedia.org/wiki/Bart_Chilton

oh,  and he is feverishly working on that issue pertaining to silver manipulation…  still

(if anyone does not understand that a psuedonym of a guy in a thong is a permanent lock on sarc... what do you say?)

 



Tue, 05/07/2013 - 07:55 | 3536975 supafuckinmingster
supafuckinmingster's picture

http://en.wikipedia.org/wiki/Bart_Chilton

 

Fuck me, that hair has to really piss off Donald Trump. What a cranial animal it is, just sitting there.

Mon, 05/06/2013 - 18:42 | 3535735 TwoShortPlanks
TwoShortPlanks's picture

And if I was unsure as to whether 'Gold Confiscation' was coming to Amerika, well, I'm a lot less unsure as of today.

Mon, 05/06/2013 - 18:55 | 3535783 nmewn
nmewn's picture

As a practical matter, its a lot easier to pull the plug on Bitcoin than to go around kicking in doors. Assuming everyone deals with a local dealer, cash only, no reciepts, no on-line credit card purchases ;-)

Mon, 05/06/2013 - 19:02 | 3535803 TwoShortPlanks
TwoShortPlanks's picture

By 'Confiscation' I mean, to make Gold untradable as a commodity and investment asset, unusable as a store of value/wealth, through regulations, and then offer a devalued price for it...of course, Asia will never conform.

This is where we will see the wealth transfer. Asia will do the opposite and allow Gold backing of Treasuries or something.

America has been, is, and will, slit its' own throat.

Mon, 05/06/2013 - 19:11 | 3535823 nmewn
nmewn's picture

Always good points TSP.

I always laugh (not at you of course) at governments final condition/bargaining position on it, to "get our collective minds right".

The offer of a devalued fiat price for it. After forcing everything/everyone underground, through regulation & law, the threats, the liens, the fines, the attempted intimidations and yes the deaths of innocents, they still want to take it off your hands ;-)

Mon, 05/06/2013 - 19:51 | 3535909 TwoShortPlanks
TwoShortPlanks's picture

So, when we stand back and look at the bigger picture, Asia really is becoming more democratic and free market orientated, whereas America and Europe are becoming more Statist (a mix of many evils).

Who needs charts, who needs graphs, and who needs historical patterns when you have Holdren's paper as a road map to the future...and everything is fitting the picture.

BitCoin does not fit into the Holdren picture, therefore it must die.

Mon, 05/06/2013 - 20:16 | 3536000 nmewn
nmewn's picture

Well, in my opinion, "more democratic" is a relative thing regarding Asia.

This one was kinda funny regarding what I'm talking about...

"China Is Censoring Jokes About Its Propaganda Machine's Penis-Shaped HQ"

http://www.theatlanticwire.com/global/2013/05/peoples-daily-building-china-censorship/64845/

Shoulda saved that one for CogD, he loves that stuff, just like me...lol.

But yeah, the west is going socialist/fascist dead-ass broke and the Asians (in general) have always been more "conservative", more sparing, only taking/using what is needed, that is the way I look at them for the most part...as a group.

Any remark I make about Chi-Coms is directed at communist philosophy, not people, who I always think of as free people, who are being subjugated...just like us.

Mon, 05/06/2013 - 22:17 | 3536406 Croesus
Croesus's picture

@ nmewn:

The architect of that building is Mr. Wang. He's famous in China, but not well known in the west. Nice guy, but a bit stiff at times.

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