BoE Governor says that Bitcoin should not be anonymous

[Sunny]

Not true.
A study was only recently published about this.
PDF here: http://www.defenddemocracy.org/content/uploads/documents/MEMO_Bitcoin_Laundering.pdf

It was found that less than 1% of bitcoin transactions were for laundering money.

Not really. Nobody knows for sure.

From the study:

Our data should not be interpreted to assess or estimate the full amount of illicit Bitcoin transactions which may have occurred on the Bitcoin blockchain. The actual volume of illicit Bitcoin transactions is almost surely to be significantly larger than represented in our sample.

 

[TheBigShort]

Not really. Nobody knows for sure.

Exactly, so it makes you wonder why so much ado about bitcoin in the first place? If nobody knows for sure, then considering its makt cap of around $171bn , the chances are that only a small percentage of that is for used for illicit purposes. Even at 10% that amounts to $17bn - this pales into insignificance into the total estimated value of money laundering outside bitcoin.

http://www.fatf-gafi.org/faq/moneylaundering/

"The United Nations Office on Drugs and Crime (UNODC) conducted a study to determine the magnitude of illicit funds generated by drug trafficking and organised crimes and to investigate to what extent these funds are laundered. The report estimates that in 2009, criminal proceeds amounted to 3.6% of global GDP, with 2.7% (or USD 1.6 trillion) being laundered.

This falls within the widely quoted estimate by the International Monetary Fund, who stated in 1998 that the aggregate size of money laundering in the world could be somewhere between two and five percent of the world’s gross domestic product. Using 1998 statistics, these percentages would indicate that money laundering ranged between USD 590 billion and USD 1.5 trillion. At the time, the lower figure was roughly equivalent to the value of the total output of an economy the size of Spain."

How is money laundered?

"In the initial - or placement - stage of money laundering, the launderer introduces his illegal profits into the financial system. This might be done by breaking up large amounts of cash into less conspicuous smaller sums that are then deposited directly into a bank account, or by purchasing a series of monetary instruments (cheques, money orders, etc.) that are then collected and deposited into accounts at another location.

After the funds have entered the financial system, the second – or layering – stage takes place. In this phase, the launderer engages in a series of conversions or movements of the funds to distance them from their source. The funds might be channelled through the purchase and sales of investment instruments, or the launderer might simply wire the funds through a series of accounts at various banks across the globe. This use of widely scattered accounts for laundering is especially prevalent in those jurisdictions that do not co-operate in anti-money laundering investigations. In some instances, the launderer might disguise the transfers as payments for goods or services, thus giving them a legitimate appearance.

Having successfully processed his criminal profits through the first two phases the launderer then moves them to the third stage – integration – in which the funds re-enter the legitimate economy. The launderer might choose to invest the funds into real estate, luxury assets, or business ventures."

Banks, financial instruments, property, luxury assets, business ventures - its all in there. Yet, it may only be my perception, but there is a huge emphasis on bitcoin and crypto. Why?

The reality is, using bitcoin to launder money only really matters when bitcoin is converted back into cash. It is a drop in the ocean compared to other forms of money laundering.

 

[Firefly]

Why do i get the feeling that if one goes to their dealer and buy something illegal using cash that's one thing; but if they buy it using bitcoin then it's a much bigger deal?

I would imagine that the fraudulent transactions conducted with cash as a percentage of total cash transactions is a LOT less than the fraudulent transactions conducted with Bitcoin as a percentage of total Bitcoin transactions.

 

[Firefly]

Not true.
A study was only recently published about this.
PDF here: http://www.defenddemocracy.org/content/uploads/documents/MEMO_Bitcoin_Laundering.pdf

It was found that less than 1% of bitcoin transactions were for laundering money.

Then why has Bitcoin become synonymous with money laundering and illegal trade?

 

[odyssey06]

Then why has Bitcoin become synonymous with money laundering and illegal trade?

Has it?

 

[jman0war]

Then why has Bitcoin become synonymous with money laundering and illegal trade?

Vested interests using hype to protect their monopoly of power

 

[tecate]

Then why has Bitcoin become synonymous with money laundering and illegal trade?

It makes for good copy. Furthermore, the old guard (banksters) have every reason to smear it - so as to suppress it. They've been doing that for 9 years now. I recently gave the example of the banks that have prevented customers from buying cryptocurrency with credit card - suggesting that it's to protect them from all sorts of evil ...when in fact, it's just to protect their own interests (otherwise, there's a whole host of services that should not be possible to buy with a credit card).

 

[Protocol]

AFAIK, Bitcoin transactions are not anonymous, and can be traced.

 

[Firefly]

Furthermore, the old guard (banksters) have every reason to smear it - so as to suppress it.

I agree with you there. But it looks like the governments are now gearing up to crack down on it too. And I can't blame them....after-all it's going to be a lot more difficult to collect much needed taxes to fund public services. Speaking of taxes... I note you made a large gain (and congrats on that). Would you mind outlining how you propose to make a tax return on this?

 

[jman0war]

I agree with you there. But it looks like the governments are now gearing up to crack down on it too. And I can't blame them....after-all it's going to be a lot more difficult to collect much needed taxes to fund public services. Speaking of taxes... I note you made a large gain (and congrats on that). Would you mind outlining how you propose to make a tax return on this?

From another point of view, can you explain what those public services and government regulation did to accomodate bitcoin and the cypto currency market where those gains were made?
In what jurisdiction did those gains occur?

 

[Firefly]

From another point of view, can you explain what those public services and government regulation did to accomodate bitcoin and the cypto currency market where those gains were made?
In what jurisdiction did those gains occur?

I'm sorry, I don't understand your first question. Regarding the 2nd question, I think by its nature, it will be very difficult for any government to (a) identify any gains and (b) to attach a claim on those gains. Which leads me to think that wide scale adoption of Bitcoin could have serious repercussions for those in most in need of public services (and public sector workers).

I do find it ironic that I seem to be against Bitcoin but am in favour of an openly competitive market in the vast majority of cases, where government "gets out of the way". Bitcoin will only help in this regard, but I still think this is "wrong". Others who have a different viewpoint and are almost against the market are the very ones advocating the virtues of the most libertarian currency experiment I can think of!

 

[tecate]

I agree with you there. But it looks like the governments are now gearing up to crack down on it too. And I can't blame them

I had concerns about regulation and I guess I still do in certain instances. The reason being that there's been a problem with the way that whole thing has been framed in the past few weeks, the language used, etc. For the most part, it's the damned media and the way it's been spun off. I would have concerns that certain government officials/politicians, etc. are taking a sledge to a nut approach to regulation. However, so long as regulation doesn't stymie innovation - instead that it fosters innovation, then that's fine. The Japanese have been the most progressive in this respect. The whole South Korea thing has been blown out of all proportion. At the end of it all, crypto hasn't been banned. They just want to take the anonymity away. Otherwise, it's business as usual.
I remember a BBC journalist interviewing Theresa May on the subject and he opened by saying something along the lines of ..."cryptocurrency - even the name of it infers something" [negative]. Eh - no it doesn't! It's been smeared by prejudiced views.

after-all it's going to be a lot more difficult to collect much needed taxes to fund public services.

So if they have regulation at the on-ramp and off-ramp (via the exchanges), where's the problem? I'm guessing that one cryptocurrency will operate outside of regulation and will cater for illicit activity in the future. However, it's still going to be difficult for the stakeholders in that crypto to operate because of the point of weakness - where it's traded into and out of FIAT.

Would you mind outlining how you propose to make a tax return on this?

Talk to me when my tax return comes due. By the way, you mentioned public services. CGT was raised in 2008 - but not for public service needs - it was raised from 20 to 33% to pay for the god awful mess that the banks were in the thick of. All the bankers attending Davos went on about the need to have hardline regulation for BTC - talk about the kettle calling the pot black - where was the regulation of that set back then?

 

[TheBigShort]

Talk to me when my tax return comes due. By the way, you mentioned public services. CGT was raised in 2008 - but not for public service needs - it was raised from 20 to 33% to pay for the god awful mess that the banks were in the thick of. All the bankers attending Davos went on about the need to have hardline regulation for BTC - talk about the kettle calling the pot black - where was the regulation of that set back then?

This article was posted on RTE yesterday but gained little traction that I can see.

https://www.rte.ie/eile/brainstorm/...ffenders-why-banks-engage-in-illegal-conduct/

Basically outlines the value of fines attributed to banks over the last ten years for fraud and malpractice - €321bn, as distinct the value of the actual fraud itself. This is bigger than bitcoin itself and is only for where banks have been caught.
As we are finding out, the levels of fraud and types of malpractice are varied and continuously emerging all the time.

 

[Sunny]

Vested interests using hype to protect their monopoly of power

It makes for good copy. Furthermore, the old guard (banksters) have every reason to smear it - so as to suppress it. They've been doing that for 9 years now. I recently gave the example of the banks that have prevented customers from buying cryptocurrency with credit card - suggesting that it's to protect them from all sorts of evil ...when in fact, it's just to protect their own interests (otherwise, there's a whole host of services that should not be possible to buy with a credit card).

This type of conspiracy theory does more damage to the whole concept of crypto currencies than most mainstream media. Banks don't fear bitcoin. They have no reason to. Banks are interested in blockchain technology but despite it being around for 10 years, nobody has been able to use to create anything useful that I know about other than crypto currencies. And I still don't know how useful that is. Just because people have concerns doesn't mean they want the technology to fail. Of course there are scams and fraud in mainstream financial services despite regulations but that doesn't mean that regulators should stay away from crypto currencies. Read the story about Tether and Bitfinex to see how this so called non-manipulative currency can be manipulated. If that doesn't set alarm bells ringing, then there is no hope for people.

 

[TheBigShort]

Banks are interested in blockchain technology but despite it being around for 10 years, nobody has been able to use to create anything useful that I know about other than crypto currencies.

They sure are interested in blockchain technology. My guess as to why it has not been adopted wide scale by banking industry is that they cannot manipulate it in the way they can the current fiat system.
From my reading of Tether, it is exactly the type of crypto the banks would love to adopt, but as its underlying structure is fundamentally flawed, it will be exposed and return to zero.

The problem the banks have with bitcoin is that, if they were ever to adopt it, is that they would no longer be able to manipulate markets they way they can now. Hence, no uniform agreement in that sector to blockchain.

 

[tecate]

This type of conspiracy theory does more damage to the whole concept of crypto currencies than most mainstream media. Banks don't fear bitcoin.

It's not a conspiracy theory - it's confirmed. The evidence is there to prove it in spades. They are quite literally hostile to it.

Banks are interested in blockchain technology but despite it being around for 10 years, nobody has been able to use to create anything useful that I know about other than crypto currencies.

Well clearly there is something useful or else we wouldn't even be having this discussion. There's an acceptance that there's a merit in the underlying technology. However, this nonsense about blockchain = good, cryptocurrencies = evil - I don't buy. They run with this as they want to maintain control in a totally centralised manner. There's nothing altruistic in their approach here.

As regards nothing to show after 10 years, you're talking about something that was presented by some faceless geek as a whitepaper 9 years ago with the intention of disrupting one of the most fundamental aspects of society i.e. exchange of value. It took 200 years to move from coin to paper; it took 40 years to move from paper to plastic. It will be good going if we see a shift towards practical cryptocurrency use in 20. Look back at the development of the internet. How long did that take? How useful was it to society in it's earlier phases? That was the internet of information. This potentially is the internet of value/money.

Just because people have concerns doesn't mean they want the technology to fail.

True of most but not the banks - we can agree to disagree on that.

Of course there are scams and fraud in mainstream financial services despite regulations but that doesn't mean that regulators should stay away from crypto currencies.

No - you're misinterpreting the point I was making. I didn't say that I was averse to regulation. I'm saying that I'm averse to regulation that will smother cryptocurrency innovation. As regards 'despite regulations' - they were NOT being properly regulated in 2008 - so the point stands - pot calling kettle black.

Read the story about Tether and Bitfinex to see how this so called non-manipulative currency can be manipulated. If that doesn't set alarm bells ringing, then there is no hope for people.

I'm well aware of it - it's the no.1 reason I closed my position in cryptocurrency yesterday. Like I said, I'm not averse to regulation - just regulation that will smother the innovation of cryptocurrencies and applications that are in an evolutionary phase.
With regard to the jibe at the 'non-manipulative currency', bitcoin in and of itself primarily was not compromised here. It was compromised by way of a centralised token/coin - that's been printing it's own money (still to be confirmed but it's looking ominous). I mean that's never happened before - printing money to prop things up, has it? :-D

 

[Leo]

I remember a BBC journalist interviewing Theresa May on the subject and he opened by saying something along the lines of ..."cryptocurrency - even the name of it infers something" [negative]. Eh - no it doesn't! It's been smeared by prejudiced views.

Well, in fairness the origin of 'crypto' is secret / hidden, so you can imagine a government or politician not seeing that as a good thing.

 

[Duke of Marmalade]

However, this nonsense about blockchain = good, cryptocurrencies = evil - I don't buy.

I've been guilty myself and I am going to stop.

Blockchain is an exploitation of antisymmetric cryptography. This latter is a modest mathematical achievement which is in any case used by mainstream banking. As to the potential utility of blockchain the examples I have read about would put it on a par, say, with the invention of the arch lever file. To compare it with the internet is like comparing the paper darts I used to throw with a modern passenger airliner.

As to defamation of bitcoin as evil I subscribe to the old adage, and more recently as trumpeted by B/S, that money is the root of all evil and it would be quite unfair to single out poor bitcoin; besides hardly anybody uses it as money.

 

[tecate]

As to the potential utility of blockchain the examples I have read about would put it on a par, say, with the invention of the arch lever file. To compare it with the internet is like comparing the paper darts I used to throw with a modern passenger airliner.

LINK . That statement above is pure gold. You should keep that for reference in years to come.

besides hardly anybody uses it as money.

Yes, and you want to judge a developing technology in transition on it's status today. You could have judged Arpanet in the same way back in the day.

 

[TheBigShort]

Blockchain is an exploitation of antisymmetric cryptography. This latter is a modest mathematical achievement which is in any case used by mainstream banking.

I'm not very good with maths outside the basic requirements but from reading the bitcoin whitepaper I would agree that it would not appear to hold any real significance in terms of mathematical output.

But then again, E=mc^2 , doesn't really have a jaw-dropping effect to it either does it?

Its the potential possibilities released in the mathematical equation is what is intriguing.

As to the potential utility of blockchain the examples I have read about would put it on a par, say, with the invention of the arch lever file. To compare it with the internet is like comparing the paper darts I used to throw with a modern passenger airliner.

I hope this isn't your Krugman "internet/fax machine" moment.