Although the case in question (Crawfurd v. The Royal Bank) happened in the mid-1700s, I think it is highly relevant and bears nicely on the recent controversy surrounding Coinvalidation. This post will also be of interest to anyone fascinated by the history and/or theory of money.
While this particular case involved paper banknotes (which arguably are irredeemably flawed) rather than a ‘hard currency’, it still illustrates nicely the rationale behind a decision which impacted a widely used currency at the time. Of primary consideration in this case was how its resolution would affect the usability of the currency (i.e. a facet from which currency largely derives its value).
As we’re probably all aware of by now, CoinValidation’s plan, if successfully implemented, would presumably lead to the blacklisting of some coins based on their past transfer history (e.g. having at some point been sent to/from deep web contraband marketplaces, having been paid as ransom to malware operators like those of CryptoLocker, having been stolen, having been allegedly ‘laundered’, having been associated with scams/ponzis, &c). In effect, this would destroy the fungibility of bitcoins. Some ‘clean’ coins would be easier to spend and transact with, while other ‘less clean’ or downright ‘tainted’ coins would be more difficult to use. Thus we would be left with a difficult-to-navigate and frustrating-to-use system whereby some coins are worth more than others (due to their varying spendability). And this largely defeats the purpose of a currency as a facile medium of exchange in the first place.
Bitcoin exchange TradeHill halts trading after its banking partner experiences “regulatory issues”.
After series of Bitcoin businesses being dropped by their banking partners earlier this year, the Internet Archive Federal Credit Union (IAFCU) came to the rescue. The New Jersey based credit union, run by the Internet Archive, has been very friendly to the Bitcoin industry and has worked with a number of businesses who have had trouble establishing relationships with banks.
One of the businesses the credit union partnered with was the US based TradeHill exchange. Late last week Jered Kenna, Tradehill’s founder and CEO, confirmed via Reddit that the exchange had suspended trading due to “operational and regulatory issues” faced by its bank.
IAFCU posted its own statement on the matter , but was not clear on the nature of the regulatory issues.
As the rupee continues to struggle, Indian officials continue their attempts to curb demand for gold.
India is considering a radical plan to direct commercial banks to buy gold from ordinary citizens and divert it to precious metal refiners in an attempt to curb imports and take some heat off the plunging currency.
The RBI will ask the banks to buy back jewelry, bars and coins for rupees. Lenders will have to offer better rates than pawn shops and jewelers to lure sellers.
“We will start a pilot project among some banks where we will allow them to buy back gold from individual households,” the source, an official familiar with the central bank’s plan, said. “This will start soon, we have discussed (it) with banks.”
From New York to Germany, check out a timeline of August events affecting the crypto-currency community here.
For those following the Bitcoin Foundation’s board elections Bitcoin Magazine has posted transcripts from Let’s Talk Bitcoin’s interviews with the Individual Seat Candidates
Two new seats are being added to the Board of Directors. One representing Individual Members and the other is representing Industry (business) Members. In order to be eligible to vote in this election, you must be a current member of the Bitcoin Foundation.
This week members of the Bitcoin Foundation had a series of meetings with regulators and law makers in DC.
On Monday 5 Foundation members, Marco Santori, Patrick Murck, Peter Vessenes, Brian Klein and Jim Harper, met with representatives from a number of US agencies including FinCEN, IRS, FDIC, Federal Reserve, OCC, FBI, DEA, Secret Service, and the Department of Homeland Security.
Frank Schaeffler, a member of German parliament’s Finance Committee has issued a statement recognizing Bitcoin as “Rechnungseinheiten,” which translates to “units of account”. Many news sources are reporting that this makes Bitcoin ‘private money’ or ‘legal tender’ in Germany.
But what exactly does the designation of “Rechnungseinheiten” mean for German Bitcoin users and businesses?
The German parliament stopped short of granting bitcoin full currency status on August 19, but recognized bitcoins as “units of account” when it formally issued regulations for the popular virtual currency.
First NY, then the House and now the Senate, US regulators are turning their attention to virtual currencies.
On Monday the US Senate Committee on Homeland Security & Governmental Affairs sent a letter to Homeland Security for information on any policies, procedures or guidance they have that pertains to “virtual currencies”.
The letter states the committee has initiated an inquiry into virtual currencies, list recent legal actions involving Bitcoin and contains the usual ‘hey were all for new tech, but we need to look at the threats and risks’.
The letter, which can be read here, ask Homeland Security for 3 things to be provided by the end of the month…
Any policies, procedures, guidance, or advisories related to the treatment or regulation of virtual currencies and any minutes of interagency working groups involved in the development of any such policies, procedures, guidance or advisories;
Information related to any ongoing coordination of your agency with any other federal agencies or state and local governments related to the treatment of virtual currencies; and,
Any plans or strategies regarding virtual currencies and information regarding any ongoing initiatives you have engaged in regarding virtual currencies and the name of the person most knowledgeable about any such plans, strategies or initiatives.
The United States House Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies 2014 appropriations bill recommends spending amounts for a number of government agencies including the FBI.
In their 2014 appropriations bill, the subcommittee directs the FBI to report on Bitcoin, specifically what the FBI is doing to address the “challenge” that they see from the “ersatz currency“.
Money laundering. —The Committee understands that Bitcoins and other forms of peer-to-peer digital currency are a potential means for criminal, terrorist or other illegal organizations and individuals to illegally launder and transfer money. News reports indicate that Bitcoins may have been used to help finance the flight and activity of fugitives. The Committee directs the FBI, in consultation with the Department and other Federal partners, to provide a briefing no later 120 days after the enactment of this Act on the nature and scale of the risk posed by such ersatz currency, both in financing illegal enterprises and in undermining financial institutions. The briefing should describe the FBI efforts in the context of a coordinated Federal response to this challenge, and identify staffing and other resources devoted to this effort.Continue reading →
A subpoena doesn’t mean criminal activity has taken place. A person familiar with the matter says the two-year-old department wants to make sure Bitcoin isn’t a conduit for illicit activities and is gathering information in order to decide whether to issue regulation for virtual currencies. The department has the authority to create regulation if there is no other primary regulator.
Critical Vulnerability Found in Bitcoin Android Wallets. The Android software itself has a vulnerability in the way it generates random numbers. Long story short, if you have Bitcoin wallet on an Android phone you’ll want to upgrade your app and/or temporarily move your bitcoins off your phone. Details here.
It looks like Bloomberg is testing a Bitcoin ticker. Abbreviating Bitcoin as XBT, Bloomberg terminal users can now look up Bitcoin’s pricing history. Data comes from Bitcoin exchange service Mt. Gox as well as Tradehill. More details here.
The Bitcoin ATM is now available for pre-order. The makers of the Bitcoin machine, Lamassu, are now accepting orders for the machine. Lamassu will sell the machine with the appropriate software installed and leave regulatory compliance to those operating the ‘ATM’. Customers in the US are required to sign a due diligence questionnaire. Prices start at $5000 via Bitcoin or wire transfers. Order yours here.
Why Libbitcoin matters. Libbitcoin is an advanced alternative implementations of the Bitcoin protocol. While there are other alternative implementations, this one is unique it allows Bitcoin users with some technical skills but not necessarily experienced programmers to “work directly with the underlying [Bitcoin] building blocks.”
This may be a competitor to the current implementation, bitcoind and have the effect of limiting the influence of Bitcoin updates coming from authorities such as the Bitcoin Foundation. This may help to maintain Bitcoin’s decentralized nature and has some political implictions as explained here.
Bitcoin is officially Money. The SEC is suing Trendon Shavers for running a Ponzi scheme, the Bitcoin Savings & Trust. Part of Mr Trendon’s defence was to claim that Bitcoin investments are not securities and Bitcoin is not money; last week a judge disagreed.
Announced this week at the Inside Bitcoins conference the new DATA industry group aims to represent businesses not just in the Bitcoin space but any digital asset including, “emerging payments, virtual currency, and other financial technology innovations”.
DATA, or the Digital Asset Transfer Authority’s founding members include the CEO’s of leading Bitcoin businesses such as BitInstant, BitPay, & BitStamp as well as the CEO’s of other digital currency businesses including Ripple’s OpenCoin and Ven.
However, the groups stated goals seem sure to heat up the regulation debate.
To reach this potential, to inspire confidence in the services we offer, and to ensure fair and responsible treatment of consumers and merchants, we believe our industry must evolve in compliance with law and regulation. We must work proactively with regulators and policymakers to adapt their requirements to our technologies and business models. We must develop and implement common risk management and compliance standards that address the public policy concerns associated with our businesses. And our firms must build risk management and compliance programs that meet those standards.
Exchanges are the link between the old world of banking and the new world of crypto-currencies; they play a vital role in supporting the growing Bitcoin economy. If Bitcoin hopes to continue rapidly gaining new users it needs this bridge between the old and new systems to be up and functioning. While Bitcoin is in no way dependant on a link to the traditional banking system, its smooth transition into mainstream use certainly is.
Unfortunately these bridges which make up the exchange market are concentrated and often broken. This leads to concerns over reliability and security, which can cause market panic and extreme volatility. As Bitcoin enters the mainstream a wave of new businesses, services and software developers have recently dedicated their efforts to solving this problem. Their task will not be easy, and the while the exchange rate has seen some recent stability, there is a long way to go before obtaining bitcoins can be called user friendly and reliable.