The US Regulatory Vice Closes On Bitcoin

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.”

Comments

[MarcusLCrassus]

A good way to beat regulation is to have a second digital currency.  Call it "Bitcoin 2.0" or something, and operates very similarly to regular Bitcoin, but with a different type of encryption.  And so if the Feds start regulating Bitcoin, this Bitcoin 2.0 could kick in and be exchangeable for regular Bitcoins. 

That way, you retain the original Bitcoin infrastructure, people can keep mining for them etc with the regular system, but then just exchange them into Bitcoin 2.0 and poof, it is anonymous again. 

Then, if TPTB then start regulating Bitcoin 2.0, just fire up Bitcoin 3.0, which is exchangeable into Bitcoin 2.0 or regular Bitcoin.  If TPTB go after Bitcoin 3.0, just fire up Bitcoin 4.0, etc etc.  

Turn it into an unwinnable game of whack a mole for TPTB  Unstoppable the same way filesharing is unstoppable.