Market Watch

Bitcoin Controls and Other Virtual Nonsense

Figured it would happen eventually. There was no way the powers that be would let Bitcoin hang around to long without some measures to assure full circumvention of the banking system did not occur. Step one of course had to be a legitimate, reasonable entry into the regulation process so that steps 2, 3, & infinity could then follow. Lets take a look at step one….

Wall Street Journal Reports HERE

“the U.S. is applying money-laundering rules to “virtual currencies,” amid growing concern that new forms of cash bought on the Internet are being used to fund illicit activities.”

The move means that firms that issue or exchange the increasingly popular online cash will now be regulated in a similar manner as traditional money-order providers such as Western Union Co. WU +0.07% They would have new bookkeeping requirements and mandatory reporting for transactions of more than $10,000.

Moreover, firms that receive legal tender in exchange for online currencies or anyone conducting a transaction on someone else’s behalf would be subject to new scrutiny, said proponents of Internet currencies. The arm of the Treasury Department that fights money laundering said Monday that the standard federal banking rules aimed at suspicious dollar transfers also apply to firms that issue or exchange money that isn’t linked to any government and exists only online.

“We are beyond the stage where this was just funny money and a fun online thing. This is used as a currency,” said Nicolas Christin, associate director of Carnegie Mellon University’s Information Networking Institute.

Bitcoins can be used in a host of legitimate transactions—for example, website Reddit allows users to upgrade services using bitcoins and blog service WordPress.com’s store accepts them as a form of payment. Pizzaforcoins.com also lets bitcoin savers pay for deliveries through Domino’s and other pizzerias.

On the other hand, at least one online service takes bitcoins as payment for illegal drugs, according to a Federal Bureau of Investigation report last year. Bitcoin’s backers point out that criminals will use any currency for money laundering or illegal purchases.

“I think it’s inevitable that just like you have U.S. dollars used by thieves and criminals, it’s sadly inevitable you will have criminals use a virtual currency. We want to work with authorities,” said Jeff Garzik, a Bitcoin developer.

What they are not reporting is this comes at the heels of mass downloads of PtP Bitcoin apps from the web. Ranging from Argentina and now to Spain and the rest of Europe. Mr. Bill Still noted that any currency that is finite and regulated will retain value, even with no physical backing. As people realize they get no return on deposits anyways due to low interest rate policies, and that their money isn’t really “theirs” anymore, why be in the system anyways? As Hedge notes HERE, HERE

And in Argentina….

My friend Sir Charles at PricedinGold.com wrote me this morning from Argentina’s Salta province (near Doug Casey’s lovely property in Cafayate) and told me that TEA Turismo, a local tour operator and rental car agency there has started accepting BITCOINS.

If you’re not familiar, bitcoins are digital currency units that are not controlled by any government. Bitcoins can be exchanged for goods, services, and other currencies, privately and anonymously.

For obvious reasons, Bitcoins are becoming increasingly popular in Argentina as people seek any means necessary to survive the economic destruction.

Needless to say, it would have been a hell of a lot easier to take these steps BEFORE it all hit the fan… not after.