Bitcoin, the crypto-currency, which exploded last year in trading, consumer embrace, and FBI arrests began the New Year with more arrests and a bankruptcy of the major Bitcoin exchange, Mt.Gox. Now, Warren Buffett speaks out today on CNBC with his opinion of Bitcoin.
Buffett’s response to Becky Quick’s question on Bitcoin status was, ‘It's not a currency,’ he said. ‘I wouldn't be surprised if it wasn't around in the next 10-20 years.’
‘It's being priced off the dollar,’ Buffett added. ‘It is not a durable means of exchange.’
His comments on the crypto-currency come after Federal Reserve Chairwoman, Janet Yellen’s testimony last Thursday before the Senate Banking Committee.
‘The Federal Reserve simply does not have authority to supervise or regulate bitcoin in any way,’ said Ms. Yellen. She further clarified it, ‘this is a payment innovation that is taking place entirely outside the banking industry and to the best of my knowledge there is no’ intersection at all’ between bitcoin and banks that the Fed can oversee.’
'It’s not so easy to regulate bitcoin because there is no central issuer or network operator to regulate,' she said in response to questions by Sen. Joe Manchin (D., W.Va.), who previously called on U.S. regulators to impose stricter limits on bitcoin.
Ms. Yellen’s comments before the Senate Banking Committee open up the question of how Bitcoin can have a form of protection that is similar to how banks protect depositors which is through FDIC, Federal Deposit Insurance Corporation.
Now a proposal of insurance for Bitcoin and its safety on exchanges is offered by entrepreneur, Ryan Selkis. His project, Inscrypto, is in development to privatize Bitcoin by delivering a guaranteed fiat value of bitcoin deposits from professional investors willing to back deposits.
Inscrypto’s website puts out its mission clearly as, ‘Bitcoin’s privately funded, decentralized version of the FDIC. We help you reduce or completely eliminate the risks of owning Bitcoin.’
Ryan Selkis is a blogger under the pseudonym 'Two-bit Idiot'. He also is a freelance contributor to CoinDesk. Inscrypto is a work in progress.
This situation of no regulation and no insurance highlights the loss of investors, mainstream people who are part of over $400 million in bitcoin currency losses after the Mt.Gox bankruptcy was announced last Friday in Tokyo, the location of its headquarters.
As Mt.Gox bankruptcy rippled through the world of Bitcoin, it was once again referred to as mining gold and trading in the ‘Old West’ mentality.
‘A guarantee would be a complete market differentiator,’ says Angela Angelovska-Wilson, a partner at the law firm Reed Smith. ‘My hope would be that the Bitcoin industry would come up with something that is workable.’
Entrepreneur, Barry Silbert, announced last week that he have a start- up sometime this summer of a new exchange modeled after the New York Stock Exchange. It will be part of SecondMarket as a spin off to oversee all the firm's bitcoin crypto- currency activities with an infusion day one of $20million in cash and bitcoin currency. Transactions will be from members only who will include Jeremy Allaire (Circle) and CoinDesk plus money service businesses, banks and other established investors and Bitcoin exchanges.
Another possible solution would be to fit virtual currency firms into the rules for trading regular currencies. The Commodities Future Trading Commission (C.F.T.C.) used authority provided by the Dodd-Frank Act to create a regulated entity called a ‘retail foreign exchange dealer.’ It could be expanded in definition to include a crypto-currency, such as Bitcoin.
Peter J. Henning, a professor at Wayne State University law School, offered in the N.Y. Times today the belief that the crash of Mt.Gox will not diminish the future of Bitcoin ‘but it is pushing governments to take a more active role in overseeing how it is traded.’
Regulation may give it the longevity in question today from Warren Buffett and government officials.
To find more information about Bitcoin see below the list in Author’s suggestions and view the video atop this article with Ms.Yellen's testimony before the Senate Banking Committee.
I am on Twitter Victoria Wagner@victoriaross888