On Monday, Congress held its first congressional hearing on virtual currencies focusing on bitcoin. As Congress discussed bitcoin, the price of one bitcoin soared to more than $750 apiece. Overlooked was the concern focused on anonymity and lack of regulation.
Personally, it is hard to imagine a world where they will allow bitcoin to survive when they are doing everything in their power to hunt down money. Canada is already looking at taxing it and the concerns expressed by Congress clearly place this within the legal definition of what they call money laundering. What once was real washing of illegal money for legal use like the mob buying old 1930s roadside motels and pretending they were fully booked every night to get illegal cash into the system, is now applied to even storing gold or cash in a safe deposit box. Having an account outside the USA is money laundering hiding untaxed money from the government. So bitcoin can fit into that category and what federal judge would rule against the government? NONE!
The downside of such schemes the government interprets as money laundering is they can wipe you out besides 25 year jail terms. There was the old tax-straddle of the ’70s where you sold December gold in a rising market and bought Feb gold. You could then move money from one year to the next to avoid taxes. When the IRS figured out the play, that gave birth to mark-to-market accounting and then they retroactively applied penalties, taxes, and interest. Brokers got sued over that and these trades, which were in the courts for years.
The IRS can claim you made a profit now just like stocks on a bitcoin. They can demand retroactive taxes and penalties. When you dance with the Devil, keep in mind he can say anything and do anything. If 25% of the population used bitcoin, you can imagine the loss in taxes and the chase would be off like a good old fashion English fox hunt.
There is no alternative to the dollar. They can change the rules at anytime and hiding money to them is now money laundering so they can take that position and confiscate the whole thing. We have to reform the system. These people will never go quietly into the night.
Do not get all excited that bitcoin will replace the dollar. Sorry, they are exploring the idea and allowing it to get press for one single reason – they intend to go to an electronic “virtual” currency so they get 100% of all taxes. In 1934, they printed $10,000 notes when a Cadillac was $600. Today, $100 is the biggest bill. The next phase is no bills. The euro tried to displace the dollar issuing €500 denomination notes. In Britain, they have made them illegal – it is all about taxes. The virtual dollar is coming. I would say after 2015.75 when the Fed has zero power and they will go electronic. So for now, bitcoin serves a purpose to get people use to the idea of a cashless society.
Excerpts from Bernanke’s September 6th letter released on Monday, in response to a letter from the Committee on Homeland Security and Governmental Affairs asking for information on virtual currencies:
“Historically, virtual currencies have been viewed as a form of “electronic money” or area of payment system technology that has been evolving over the past 20 years. Over time, these types of innovations have received attention from Congress as well as U.S. regulators. For example, in 1995, the U.S. House of Representatives held hearings on “the future of money” at which early versions of virtual currencies and other innovations were discussed. Vice Chairman Alan Blinder’s testimony at that time made the key point that while these types of innovations may pose risks related to law enforcement and supervisory matters, there are also areas in which they may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.”
“Although the Federal Reserve generally monitors developments in virtual currencies and other payments system innovations, it does not necessarily have authority to directly supervise or regulate these innovations or the entities that provide them to the market. In general, the Federal Reserve would only have authority to regulate a virtual currency product if it is issued by, or cleared or settled through, a banking organization that we supervise. Given the Federal Reserve”s authority and the manner in which virtual currencies have developed, the Federal Reserve has focused primarily on a supervised banking organization’s role in the products’ sale and distribution, as well as the applicable regulations, such as Bank Secrecy Act (BSA) /anti-money laundering (AML) requirements.”
“The Federal Reserve plans to work with other FFIEC member agencies on electronic cash and related issues such as virtual currencies, as needed, for banking organizations. The Federal Reserve will continue to monitor developments as part of its broad interest in the safety and efficiency of the payment system. We also stand ready to cooperate with other agencies in fulfilling their mandates, as appropriate.”
