What can of worms has the US Fed opened in appearing to support Bitcoin?
Bitcoin is something I have been sceptical about. I appreciate the mathematical and security wizardry involved but it still feels like a solution seeking a problem at this point.
Today Bitcoin received, from of all places, support from Bernanke and potentially from the US Senate with specific mention of Bitcoin as a future method of money transfer. What?
I cannot for the life of me think why they would even hint at such support for Bitcoin when they cannot even agree on something as mundane as converting to chip cards. I makes one wonder if there is not some serious and expensive lobbying going on somewhere in Washington.
Bitcoin leaps ahead of Senate boost | ft.com
A US Senate hearing on the “risks, threats and promises” of virtual currencies sparked a new leg up in the price of Bitcoin, the experimental currency which has risen by more than 4,700 per cent in value this year.
An intervention by Ben Bernanke, chairman of the Federal Reserve, enabled Bitcoin enthusiasts to put the spotlight where they believe its potential value lies: as a cheaper alternative to the current system for transferring money around the world.
Mr Bernanke, in a letter to the Homeland Security committee, pointed out the Fed’s longstanding view that while virtual currencies pose money laundering and other risks, “there are also areas where they may hold long-term promise”.
Now the article goes on to note the concerns of law enforcement following the revelations of Bitcoin as a currency on the anonymous marketplace, Silk Road, to purchase drugs and other highly illegal activities that I won’t even mention here for fear of tarnishing my poor little blog for in the search engines. But thsi background makes the above comments from the Fed all the odder.
The Department of Homeland Security took a tougher line, saying in a letter dated November 12 that the ease with which criminal organisations could exploit virtual currencies made its “aggressive posture” necessary
Don’t get me wrong – I am all in favour of break-out thinking in the payments world and it needs that. I spend a fair bit of time thinking and writing about trends there. However the timing of this on the heels of the Silk Road revelations along with the known speculation which Bitcoin attracts just feels odd.
I spent some time with a P2P Startup in Canada and our largest hurdle was to convince the Securities regulator that investing in properly adjudicated retail loans with diversified risk was a reasonable investment. We failed. The regulator would never allow anyone who was not an Accredited Investor to participate.
Now compare that experience to Bitcoin. Are people purchasing a virtual currency or a speculative investment? I would love to be fly on the wall overhearing that debate in the SEC boardrooms.
This will be an interesting theme to follow. i am curious what others may think.