Governments Worry That Cryptocurrencies Could Be the ‘Next Swiss Bank Account’
bloomberg.com
bloomberg.com
I guess there are always ways to circumvent these government regulations and put your money in an online casino in Barbados or whereever but it takes a special kind of person to want to go through the hassle.
In very much the same way, governments could choke the flow of real money in and out of cryptocurrencies if they wanted to. They are probably planning to do so but it hasn't been on the top of their priorities just yet, the crypto bubble being more of an annoying mosquito than a threat to the economic stability. A government crackdown won't mean that crypto currencies will go away but it will be obvious to everyone that they'll forever be RPG play money, and only a small amount of enthusiasts will want to hold them. Prices will adjust accordingly.
With countries like Japan or Korea embracing cryptocurrencies, it's unrealistic to think they'll become "RPG play money".
I could imagine, on the other hand, freeloader countries like the Cayman Islands adding cryptos as a supported way of stashing away money. Thus, they could become a gateway between the legit economy and the crypto economy in the same way that they are already a gateway between the legit economy and money raked in by tax evaders, drug lords, and dictators. Thing is, the crypto part doesn't really add any value to their offering. And the real question with respect to Cayman Islands etc. is why we don't simply outlaw bank transfers back and forth from these places.
Here is an article estimating Google (one of the most profitable software companies) hardware expenditure at 5 billion a quarter [0], or 20 billion a year. With their 20 billion in profit a year, a doubling of server costs would make one of the most profitable software companies uneconomical.
Bitcoin and most other cryptocurrencies rely on everyone processing every computation which is insanely cost heavy which is why bitcoin processes a fraction of what visa does but costs the electricity of a small country.
Google's server requirements would obviously be uneconomical with that architecture but can any architecture that relies on untrusted nodes to do the computation be economical when a company such as Google could not run on twice the infrastructure costs?
And thats just one of the downsides with decentralized cryptocurrencies of which there are many.
[0]: http://www.datacenterknowledge.com/archives/2014/07/23/from-...
Instead of needing a healthy profit margin for server operation as in your Google example, blockchain servers can be run much closer to cost or even at a loss. Benefits may be realized elsewhere and do not necessarily have to be financial.
1. With cryptocurrencies now blackhats have a buyer that isn't a corrupt foreign government. A lot of organizations are quietly paying ransoms right now. It's better than the alternative.
2. Who is this Satoshi, really? Colour me a little bit skeptical that someone was able to pull off this level of anonymity for this long. I'm not saying it is likely (<5% chance), but it is at least possible that Bitcoin is the American answer to the declining power of the greenback against the Euro and Yuan over the next couple decades.
3. Map out the crime networks and scoop them all up all at once then ban or regulate cryptocurrencies. Essentially what you said.
But I agree, it doesn't make sense for governments to cede this amount of power, and the small positive value that they enable (like actually being able to reliably send money to friends overseas) is dwarfed by the corruption they enable.
This is pretty much basis of the majority of laws on the books to be honest.
A good part of government's job is to limit risk so that those most at risk don't suffer. Speed limits exist to limit risk. Drug laws exist to limit risk. Bank regulations exist to limit risk. SEC laws exist to limit risk. In a system with safety nets (unemployment laws, bankruptcy laws, welfare, food stamps, subsidized housing programs, etc), there must be some limits to prevent abuse of these programs from undue risk.
>The complaint was filed in Dallas, Texas, on Thursday and unsealed late Monday. The SEC said Dallas-based AriseBank "used social media, a celebrity endorsement, and other wide dissemination tactics to raise what it claims to be $600 million of its $1 billion goal in just two months."
>The court approved an emergency asset freeze over AriseBank and its two co-founders. The SEC said that for the first time in connection to an ICO fraud, it has appointed a third-party custodian, or receiver, to secure the firm's cryptocurrency holdings. Those assets include bitcoin, litecoin, bitshares, dogecoin and bitUSD.
>"The ICO is an illegal offering of securities because there is no registration filed or in effect with the SEC, nor is there an applicable exemption from registration," the complaint said.
Otherwise, zksnarks has very good potential overall.
When i say top, i dont care about marketcaps. Any coin is just couple hundred million tethers away from being the top coin.
Bitcoin is overhyped and not useful for anything at the moment, and far from its original purpose. IF you knew anything about monero, you'd see why it is actually more useful and true to crypto-currency spirit than others.
There are billions being invested into cryptocurrencies in a grassroots manner. This didn't happen because people love fiat. Their speculating on a future where fiat is a minority currency.
That doesn't make sense. Rationally, hiding that money in secret is a reason that the marriage won't work out. Hide that money, tell lies, be a scheming and awful person, and there will be a self-fulfilling prophesy of that marriage not working out.
Open source (this time in the form of full disclosure and a prenup agreement) is the way to go.
At that point, the anonymity starts to matter; it's just as with other kinds of money laundering - IRS doesn't really catch the source and storage of dirty cash, they get the people when they inevitably want to spend it.
Taxable events need to happen in fiat, there is too much incentive to obfuscate these events on blockchains.
Transactions in cryptocurrencies will become increasingly hard to trace.
I'm not sure governments know what they're up against.
Oh, they know. Bunch of idealists who are also pretty bad programmers with delusions of understanding finance. Plus a lot of scammers, and even more gullible people who just want to get rich quickly. Nothing governments can't handle when they eventually start caring.
Governments aren't facing any new problems here... while crypto can be moved faster than cash, I suspect that in the end governments may end up with even tighter control of crypto than they ever had with cash.
I'd LOVE to see a govt try to control cryptocurrencies, the thought is laughable.
For example, it seems that currently USA sellers are allowed to interpret sales in Bitcoin as "barter events" and not submit the usual cash payment form 8300 for such sales, but (as you say) laws can be changed and I expect that this won't be the case soon, and the changed laws would be likely to require any legitimate seller to report such transactions (for non-small amounts, like the form 8300 limit of $10000 USD) and refuse them at all if the buyer wishes to remain anonymous. All it takes is a tiny change in the laws, extending the sentence "Cash may also include cashier’s checks, bank drafts, traveler’s checks, and money orders" by adding a definition of cryptocurrency. It's not done yet simply because the gov't is slow to react.
Anyone considering the future of cryptocurrencies should consider not only the current laws, but how the laws are likely to be changed to extend the current regulation principles to cover cryptocurrencies - the governments around the world have a rather clear and long-term consensus about the goals and principles of that regulation, and changes in technology simply mean that the written law will lag a few years while that consensus is (re-)implemented in laws covering the New Thing.
On a side note, I've noticed that a lot of crypto people are pretty obsessed with the USD value of whichever cryptos that they may own. "Make fun all you want, my ROI in 2017 was xx%". Well, good for you, and happy that we have now established that you still use real money to measure value, and that you are in it for the short term profit, not for some abstract, idealistic purpose.
Buy FOOCOIN, spend FOOCOIN on asset, don't report to the IRS, repeat.
Other direction:
Sell asset for FOOCOIN, buy $ with FOOCOIN, don't report to the IRS, repeat.
Nothing's impossible but I can't figure out for the life of me how exactly anyone including governments could de-anonymize LocalBitcoins.
The IRS doesn't care if you deanonymize tiny amounts (say, a few thousand dollars) but de-anonymizing LocalBitcoins for large operations can be easily done in the classic manner with sting operations since doing it regularly in large amounts generally is a crime even if the money is legitimately obtained.
Since the major traders in LocalBitcoin inevitably are violating money laundering laws if they don't report the large cash transactions, you should expect that they can be pressured to cooperate and report on their customers in exchange for immunity or reduced penalties.
So either you're limited to small amounts, or you have to buy the assets under the table with the usual laundering problems.
I mean yes, you still have to pay your taxes. But you’re not subject to suspicious activity reporting requirements.
Its ok to sell used furniture or drugs - but doesn’t make sense to sell house or car.
Uhhh its already grown by leaps and bounds. Control for the sake of control. That's all they want.
You may not agree with it but there IS a rationale behind this.
It is trivial for a defender to 1) enforce whitelists, 2) defeat analysis with arbitrary use of Nagle's algo, 3) put bitcoind or other node services on non-standard ports with non-standard sender-receiver behavior, 4) enable other services with similarly non-standard configurations, 5) setup multi-homed constellations, where nodes transmit on one channel and receive on another, 6) do I really need to go on? There are dozens of things that can be done here to defeat traffic analysis.
There's billions of USD-equivalents invested in this thing. Hand-wavey claims like 'Cryptanalysis has been able to reliably identify traffic despite encryption for quite some time' evidently do not take into account competent defenders. Bitcoiners will buy time on, or even launch, their own satellites, if public nodes begin getting stomped on and there is in fact some usability issue preventing miners from relaying transactions.
Governments will hopefully be forward thinking about this and accept the changes that technology brings. Ultimately it's government's responsibility to accommodate social and technological trends, not vice versa.
Some of the worst chapters in human history came about when political authorities tried to resist the tide of change, like President Franklin Pierce who pushed back against the abolitionist movement pre-Civil-War by approving the expansion of slavery westward, and thus setting the stage for the war to come.
In recent decades Western governments have been reasonably enlightened when it comes to technological change, as in the case of abandoning export control laws barring wide dissemination of strong cryptography in the 1990s, and the institution of safe harbor laws, both of which facilitated the growth of the internet. I hope they carry that philosophy toward cryptocurrency.
Hopefully they'll be able to stop this and other problems with emission taxes.
But then again, it might only delay the inevitable...
(And to be clear - I don't mind innovations in finance, new kinds of money, new mechanisms of social consensus, etc. I only dislike systems with huge energy waste, especially one unsustainable in long-term, as such systems grow.)
Crypto currencies are ideal if you want to launder money.
Not to mention the volatility of it might keep doing damages.