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The BitCoin Crash

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The crash in BitCoin losing about 50% of its value since July, has been on the back of concerns that the State of New York would regulate Bitcoins. In a speech at Cardozo Law School in New York on Tuesday night, Benjamin Lawsky, the superintendent of financial services for the state of New York, stated that New York will not require digital-currency software developers to have a license, as it had previously proposed. “To clarify, we do not intend to regulate software as software or software development,” he said, according to Reuters. He went on to say: “For example, a software developer who creates and provides wallet software to customers for their own use will not need a license.”

While these statement have the bulls crying see, this marks a change of heart for New York State regulators, who previously proposed a far-reaching plan for a so-called “BitLicense” back in July. They fail as always to read what is being said very carefully. The regulations were not interested in mere apps that allow use of Bitcoin. What they are after is taxes. New York would not back off of requiring Bitcoin businesses to track their customers’ addresses, as well as the addresses of people who send their customers money. They want taxes. We are not looking at these rules being applied to a wide swath of Bitcoin-related businesses, including online wallet companies like Blockchain and BitGo. Applying this to everything would undermine the fundamental value proposition of Bitcoin as digital currency poised to change the way money is handled both online and off. What people fail to see is government wants money. This is no different than the long-arm reach of FATCA that is destroying the world economy at such an alarming rate it is really scary. The US economy has hardly done more than a dead-cat bounce since FATCA was announced. But government is too greedy to see what damage they are causing.

Lawsky tried to paint a picture of a much less stringent regulatory environment. “The virtual currency industry is at a bit of a crossroads regarding whether it will become an important part of the future financial system,” he said. “We’re committed to proceeding thoughtfully since virtual currency could ultimately have a number of benefits for our financial system.” He is not trying to kill it – just tax it. NY State is being watched closely and other states will follow.

BitCoin is trying to replace the dollar and therein lies the problem. This has falsely made people to think this is a tax-free game that defeats government. Sorry, they can tax whatever they want and the Supreme Count has already upheld Obamacare stating it is a TAX and that is Constitutionally OK whereas forcing people to buy different insurance is unconstitutional. It was upheld because of a broadly interpreted right to tax anything that moves.

White Mary JoMeanwhile, SEC Chair Mary Jo White in a letter she wrote to the Senate Homeland Security Committee committee last year, stated that “interests issued by entities owning virtual currencies or providing returns based on assets such as virtual currencies likely would be securities and therefore subject to our regulation.” BitCoin cannot survive as an alternative to the dollar. It can be regulated and taxed so the idea that this will displace the dollar is just another pipe-dream.

He who has the power makes the rules