Next week, the New York State Department of Financial Services will hold an important hearing to further help clarify the role that Bitcoin should or should not play as it relates to our financial system, reports The N.Y. Times.
Due to growing regulatory concerns, U.S. banks are reluctant to accept Bitcoins. China has refused it in its banking system and there are a growing number of nations that have begun to debunk the idea it could serve as a real currency.
Due to its instability and lack of regulation, banking systems are reluctant to deal with Bitcoin. When China, the second-largest economy in the world, announced in December that it would not accept Bitcoin, its price within 48 hours dropped as much as 50 percent. Other influential nations and authorities have also spoken out against Bitcoin, including Denmark, Finland, France, India, Norway, Sweden, Thailand and the European Banking Authority.
Since its beginning in 2009, from its developer, the pseudo name of Satoshi Nakamoto, has been used to symbolize the innovative genius (or team) behind Bitcoin. This was an easy straw to grasp as an answer to the global meltdown of 2008 and irresponsible, greedy behavior of bankers. Hence, Bitcoin was created.
The question has been raised by Mark R. Williams, a former commodities trading floor senior executive and Federal Reserve Bank examiner, is Bitcoin the work of this coding genius who is enjoying computer-manufactured riches on some remote, tax-free island, or is he a cyber-terrorist who upon Bitcoin adoption will activate a Trojan-horse virus to bring world commerce back to the Stone Age?
It is very valid to consider these questions as Bitcoin has already been the subject of an F.B.I. arrest on a young Bitcoin website owner, exposing a deep web of drugs, guns, prostitution, murder for hire and a ready tool for tax evasion and money laundering. Bitcoins retrieved from that Oct. 2013 arrest have Bitcoins forfeited to the Dept. of Justice while other Bitcoins remain unclaimed.
The speculative mania generated around Bitcoin has created a hyper asset bubble that is ready to pop. Since 2013, Bitcoin has risen from $13 to as high as $1,200 with price appreciation of more than 9,000 percent. There are 12.3 million coins outstanding, over 90 percent are hoarded, which helps to artificially inflate values.
It requires an extremely complicated algorithm to ‘mine’ or produce Bitcoin which requires special computer hardware and a secured location. This has caused Bitcoin mine sites to appear in Iceland, Washington state, and international locations on islands around the world. You can go to the ‘Fiatleak’ website and watch the ping pong around the world of Bitcoin transactions in real time updated every ten minutes.
Bitcoin is built around these unregulated, decentralized and untraceable coins. No legal protection is in place to assist consumers or investors, if a consumer were to send a Bitcoin to the wrong e-wallet, if a hard drive storing coins were corrupted (intentionally or unintentionally), or an e-wallet picked, coin value is lost forever. The chance of counterfeiting increases as the profit potential has risen. Already, of the e-coins outstanding, an estimated 4 percent, or $400 million, have been permanently lost.
Bitcoin is neither a legal entity, nor a start-up, and no stock is available for investors to purchase. It has no management team, board, balance sheet, business plan or even a coherent vision on how to commercialize technology that has been given away in the market for free.
Alan Greenspan told Bloomberg News that Bitcoin is a bubble without intrinsic value.
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