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As Bitcoin Transaction Volume Triples Since October, Europe Prepares To Regulate, Tax The Digital Currency
Representing numbers that would put the adoption curve of Obamacare to shame, the Bitcoin equivalents of Paypal, BitPay, announced last week that it has now processed over $100 million in BTC transactions in 2013, has increased its merchant base to over 15,500 approved merchants in over 200 countries, but most importantly, has seen a surge in the number of merchants using its BTC payment pricing plan, by 50% since October while the volume of transactions has tripled. While the surge in the currency adoption has matched the explosive rise in the USD-value of the currency, the news should comfort any lingering doubts whether Bitcoin is a credible payment system.
From the BitPay press release:
BitPay Inc, the world leader in business solutions for virtual currencies, announces it has processed over $100 million in transactions this year, and has increased its merchant base to over 15,500 approved merchants in 200 countries. Since the announcement of the new All Inclusive Pricing Plan in October, along with the integration with Shopify in November, the number of new merchants has increased over 50% and the transaction volume has tripled.
"This year, the 2013 holiday season was Adafruit's biggest ever. We are delighted to offer bitcoin payments via BitPay to our community and customers. It was fast and easy, hundreds of orders and happy customers getting educational electronics, using bitcoin!" shared Limor Fried, Founder and Engineer with Adafruit.
Bitcoin has "clear potential for growth and could become a major means of payment for online transactions” a Bank of America analyst told CNBC. As the number of Bitcoin users continues to increase, merchants such as Adafruit, BTCTrip, Alliance Virtual Offices, and Clearly Canadian, see the value of working with BitPay to help expand their business.
Which explains why Europe, which over a year was the first entity to cry foul about Bitcoin (recall from November 2012: "The ECB Explains What A Ponzi Scheme Is; Awkward Silence Follows") when the USD-price of one BTC was still in the double digits, is doubling down in its fight against the fiat alternative, this time as the European Union's top banking regulator is preparing to actively supervise the virtual currency. From Bloomberg:
Trading Bitcoins could bleed you dry, the European Union’s top banking regulator said as it weighs whether to regulate virtual currencies. Thefts from digital wallets have exceeded $1 million in some cases and traders aren’t protected against losses if their virtual exchange collapses, the European Banking Authority said today in a report warning consumers about the risks of cybermoney.
Virtual currencies such as Bitcoin have come under increased scrutiny from regulators and prosecutors around the globe. China’s central bank barred financial institutions from handling Bitcoin transactions last week and German police arrested two suspects in a fraud probe into illegally generated Bitcoins worth 700,000 euros ($963,000).
“The technology is still relatively immature and lacks the infrastructure, regulation and understanding of the risks that are taken for granted in conventional financial systems,” Matt Rees, assistant director at Ernst & Young LLP, said in an e-mail. “It is not surprising then that thefts, frauds and other deceptions are currently commonplace.”
Since Bitcoins exist as software, the virtual currency isn’t controlled by any government or central bank. The digital money emerged in 2008, designed by a programmer or group of programmers going under the name of Satoshi Nakamoto, whose real identity remains unknown.
The virtual currency gained credibility last month after law enforcement and securities agencies said in U.S. Senate hearings that it could be a legitimate means of exchange. The price of Bitcoins topped $1,000 as speculators anticipated broader use of digital money.
Because, you see, it is the possibility of theft that has regulators worried, not that alternative currencies could undermine the fiat system (especially in Europe where the artificially common currency is not exactly the world's most admired construct) the world is so hooked on.
So what does Europe propose? Simple: do more of what it truly excels at: tax stuff.
People holding virtual currencies may be subject to value-added or capital gains taxes, the EBA said.
The government of Norway, Scandinavia’s richest nation, said it would treat Bitcoins as an asset and levy capital gains tax on them.
“Bitcoins don’t fall under the usual definition of money or currency,” Hans Christian Holte, director general of taxation in Norway, said in an interview.
For virtual currencies to be regulated in the EU, the EBA would have to get approval from the European Commission, the 28-nation bloc’s executive arm.
We “support the EBA warning to consumers on the risks associated with virtual currencies,” Michel Barnier, the EU’s financial services commissioner, said in an e-mail.
In other words, it is only a matter of time before Europe does all it can to make the use of Bitcoin even more prohibitive, which in a Europe that is flooded with bad debt, with a banking sector whose credibility is non-existent resulting in loan "creation" plunging at a record pace, and a banking union "resolution mechanism" that is as improbable now as it has ever been, means more deposit bail-ins in a form that "fall under the usual definition of money" are just a matter of time.
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Let the Feds have their regulation of Bitcoin. They need to be seen as doing "something". I think we need regulation of Bitcoin in order to acheive deregulation of finance and the fiat money system. During this transitory phase, it is better that Bitcoin be regulated than banned. Through regulation, Bitcoin will do just fine - it still beats all other forms of money and payment systems hands down, and regulation will have no effect on the 6 billion people in the working class who don't pay taxes anyway. Any business worth its salt that deals in Bitcoin will be so profitable due to growth it will be able to handle any reasonable form of regulation. In the end, regulation is a step toward victory for Bitcoin.
They "banned" software, music, and video piracy. How well has that worked? Oh right-- not at all. Complete fail.
But they will figure out how to ban BitCoin?
Hmmmm. Ok.
And FORGET about "regulation." Its awfully hard to regulate something, if you can't ban it. Your threats become meaningless, you see.
They can't regulate what they can't control...by definition. They can't control Bitcoin,ergo...
Napster - destroyed
Kazaa - destroyed
Limewire, Frostwire, Morpheus, Shareza, Ares - all destroyed.
They actually did a pretty good job of destroying P2P networks, but the tech just kept advancing.
Bitcoin is Napster, it's days are numbered and it will be poisoned. Being first is revolutionary, but it will end up shot like a dog.
The idea will eventually work but after several iterations.
<<it will end up shot like a dog.>>
There is that possiblility. Does that mean you and I should not participate in the coming battles?
The US is calling it money cause they know the dollar is doomed and they have the NSA backdoors to mine free bitcoins like the Fed prints money. In time the little people will only be able to afford micro BTC while the govt mines whole bitcoins to add to their big stash of early bitcoins. If the backdoors become common knowledge and the people manage to root them out - not easy as at least one of them is designed to not be backwards compatible - or move to another virtual currency, JPM can scream patent infringment and takeover entire virtual currency market.
Half of all bitcoins have already been mined. The NSA might scramble to become a player going after the ones that remain to be mined. A backdoor to the hashing algorithm would mean an advantage in solving the next block. It still wouldn't stop me from getting lucky and solving the next block "the honest" way. Finding shortcuts in no way shape or form is limited to the NSA. It makes economic sense for Anybody to find shortcuts and gain an advantage over other miners. I'm sure no smart people have investigated this angle over the past 4 years /sarc. A loss in revenue will be quickly noted by the miners and rooted out.
A big block of those already mined could be the NSA. What would stop a public key backdoor from giving them the ability to solve most puzzles before anyone else?
What smart people are you relying on? The NSA has a history of putting its people to work on open source projects. How long would it take an NSA outsider to break the crytopgraphy to the backdoor? Years? Decades? Would they need a supercomputer?
They will all talk tough about it but in the end will their attempts to control it work? People seem worried about "what do i do IF I make all this money and need to convert back to USD/Euro/whatever?" Well, if you wait it out maybe you'll just keep it in BTC and function within the BTC ecosystem. Whichever contry tries to kill it or regulate it will just drive purchases to companies outside of their homeland thus making them look even less intelligent than they already do. Sounds like this horse is out of the barn . . . . . . . . . . and these whiny little cunts are scared shitless.
If the BTC blockchain size becomes unmanagable for ordinary users (as in terabytes), I can imagine server farms being set up to act as transaction intermediaries. If this happens, then BTC will cease to be truly decentralised and can be targeted and taxed (at least those users that have to go through an intermediary, could be taxed/regulated/incarcerated).
Of course, with advances in telecommunications and data storage, this may not even be an issue.
Current price on 2TB of storage - $67 - $90 USD
As for the "Supernodes" issue, technology advances and bandwidth capabilities will likely match the advance of storage densities, which would reduce that particular worry merely trivial.
It would also benefit the more technological countries to start hosting nodes, once the end-to-end Bitcoin denominated supply chains form. The entire system is set up to provide many benefits to those that play by the rules. It doesn't reward as well when you try to turn it against itself, ala the 51% attack scenario.
I guess what you'd end up arguing is what would the ultimate distribution of these nodes be, and if they weren't all concentrated in one part of the globe, that would still fulfill decentralization and redundancy for the network.
Actually the big problem is network latency. i.e. the speed of light (nobody's solved that one yet.). And distributing all transactions to even more nodes makes the problem worse not better.
While global latency is about 300ms from one antipodal point on the globe to another, the point is well taken in the sense that signals don't travel at the full speed of light in fiber optic cables, or through other equipment at "wire speed" usually.
That's where the confirmation time comes in, and it is a crucial component to prevent double-spend and verify which block is "correct" by the consensus of miners/verifiers before being added to the blockchain. This is also, incidentally, why Litecoin won't scale, because they made a crucial mistake by speeding up confirmation times, which falls prey to the very problem you outline.
As Bitcoin has been functioning on a global basis without massive problems, I'd say the issues are being addressed and technology improvements will assist in this goal.
If the BTC block chain becomes unwieldy, that will be because it has enjoyed huge adoption. That's what we might call a "good problem" to have.
I'm confident that technology will be one step ahead, just as it always has over the last 50 years. And even if it doesn't, there are lots of other crypto currencies that can help pick up the slack.
I'm merely speculating on what form regulatory measures may take. Targeting intermediaries that handle transactions for multiple users would be a lot easier than attempting to regulate individuals.
I want there to be a strong future for cryptocurrencies, but I'm not going to predict a rosy, trouble free future for bitcoin, either. I'll leave the fortune-telling to the Oracles at the Fed.
Clueless1,
12Gb is already too big for your average user, so Bitcoin isn't even truly decentralised today... and the size of the blockchain itself isn't actually the problem, though it is a symptom of the real problem. The real problem with Bitcoin is the flood fill distribution algorithm.
All nodes have to be able to handle all transactions. (That is the nature of the flood fill).
What it means is Bitcoin doesn't scale. As transaction rates speed up wth more users, only the larger computing services will be able to cope... Because they all have to cope with all transactions, world wide. This is guaranteed to centralise all Bitcoin nodes to a relatively few big players as the smaller guys quit.
The last ones standing will obviously be bought out by the banks and regulated to death by every government on the planet.
Thank you for the clarification. I'm not a code monkey, or particularly tech savvy, so I have only a limited grasp of how BTC works. I appreciate the correction.
Legitimize that BITch.
Bitchez.
$1,000,000 per bitcoin.
Here we go.
I thought the genius of bitcoin is that it's decentrialized and couldn't be tracked. How can you tax something that the government can't find? Oh wait...
Very shortly we shall see wallets seamlessly connect through an ecrypted anonymizing cloud and the governments will be able to tax sweet F.A.
@The Abstraction of Justice
Sure, here's my GOVERNMENT APPROVED WALLET BALANCE of 0.00000001
What's the tax on less than a penny? Sure, don't mention it. Have a nice day, Mr. Tax Man!
A tax on zero voluntarily given is a number that is also very similar to zero. Good luck in that scenario collecting revenue, sovereigns. Your dirty tricks are about to be repaid, with interest.
devo,
Bitcoin is designed to be centralised. And therefore ownable (by the banks) and taxable by governments.
False sock puppet is false. Anyways who cares? The people who might believe your FUD don't deserve bitcoin in the first place. Weeding them out makes the bitcoin economy stronger. Thanks.
For the good of humanity they must find a way to tax the inhaling and exhaling of the precious air we breath. Do it for the kids and beaches
They already have a tax for the air you breath out.
The tax is called a CO2 Credit.
I have bet $2k on bitcoin and few other cryptos. I expect my investment to be worth....$1.5k in two years. Here is my point: no one knows sh*t about sh*t. For 5 years people have predicted global financial armageddon, and yet here we are. All of the gloom-and-doom crowd have, for 5 years, passionately and confidently predicted the impending great collapse...and yet here we are. The seld-proclaimed experts say things like, "in 5-10 years you won't recognize the world." Whatever. None of you, no one, knows what the world will look like tomorrow, let alone in 2023. I see THREE truths, however: (1) There are 7.5 billion people on the planet, and most of them are really poor. (2) Rich people could care less about what happens to poor people. (3) Someday there will be a big war between these two groups, and billions will die.
Lets say Bitcoin is more like a virtual commodity than a currency. Most discussion like to put out that bitcoin is anonymous which is half true. The accounts creation are decentralized/distributed and owner of account is anonymous but the actual flow in the system is 100% transparant. To some extent it is the reciprocal of the current financial system. So lets say there is a 1% theft cumulative y/y and lets say bitcoin is classified by governments as a commodity. If the law says there is a FIFO or LIFO rule on the account. Then the 1% theft example is just growing and newer washed out of the system, ever.
So you could try to buy a book online and suddenly cops storms your apartment you because you had a fractional part and tried to trade a stolen commodity.
Adding in the latest NDRAND and Padlock issues all random based protocols (Bitcoin etc) should be reclassed as not safe. As soon as public knows there is a flaw the flaw will be exploited, as always.
So from being 100% fan of bitcoin for years, bitcoin now is a bit ahead of itself. To many unknown bits.
This thing apppears increasingly anti-fragile.
Bitcoin doesn't care.
Can't tax what you can't control.
...it is the impossibility of confiscation that has regulators worried ...
fixed that for you
government regulation and taxation: The most reliable indicators you own a credible profitable entity.
Bitcoin can be easily regulated even outlawed at point of sale....just making it law that sales must record keep Proof method of payment. ..have a hefty fine for not maintaining this. ..TPTB if they want to ruin BC can do it without regulating BC itself.
Sounds like how they stamped out marijuana once and for all.
It doesn't destroy bitcoin, but relegates it from mainstream finances which would be the point.
Blackmarket trading in goods paid for by bitcoin is fine... but people will be most reluctant to paid in bitcoin in the blackmarket if it cant be spent except in a blackmarket....
The bitcoin system is a real pain for the regulators. It is an electronic network which allows for rapid financial transactions. It is anonymous the same way that cash is. It is also distributed so there is no network provider or central server the feds can shut down. Larger companies will not be able to take advantage of it because of the tight regulation, but trying to keep small companies from moving to BTC will be sisyphean.
OK, so who is going all in?!?!?!?
For example.....
So come tax time, if I tell the fed that all of my money is in bitcoins. I don't have a credit card or a bank account. and that because they have blocked all Americans from exchanging into fiat, I can't pay my taxes in dollars. So where shall I send the bitcoins to pay my taxes?
"Noo, that's not true; that's impossible!"