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You might wonder what Cryptocurrencies are and you can find plenty of information about them on the internet. They are a form of private money, albeit with no intrinsic value, the same as any and all fiat currencies on this planet.
But this is not so much about what cryptocurrencies are. This is more about how governments and their banks are reacting. And yes, at least in the U.S.A., all banks are mere extensions of the government-fiat coercive-monopoly-monetary-system.
Cryptocurrencies like Bitcoin, Litecoin, ShadowCash (now defunct), Monero, DASH, and MaidSafe scare the money-monopolies. Ripples, maybe not so much, because they are "joining" them.
But why? Why would any government and their extensions, the banks, want to maintain the "status quo?"
Because they control all fiat currency and they cannot allow the people to have that control. And certainly, the people should not have the ability to transact in private. So long as you are okay with this, you can stop reading this and go back to your regularly scheduled television show.
When you read the current Banking Industry responses about Bitcoins, these cryptocurrencies, a few years ago, were little more than an annoyance to them...allegedly. A snobbish response was commonplace. They do more business in five minutes than Bitcoin does in 24 hours, they would tell you.
But, in the boardrooms and Senate Offices; and the halls of governments around the globe, you can bet that ears were bent – repeatedly. They were and still are nervous. Money makes them nervous. Especially when some upstarts have found a better money or in this case, a better currency. They must be stopped. If not stopped, then regulated into non-existence.
The call? FinCEN. The Financial Crimes Enforcement Network of the U.S. Treasury Department. They are the Hammers. The guys with handcuffs, Kangaroo-Courtrooms and prison cells. Their job is to make sure they control the money - the currency - and by extension, you. Oh, and they are after the bad guys too.
Quash and Copy
Bitcoin must be quashed, but gently, is no doubt the mantra of FinCEN. But you can kept the blockchain. In other words, quash private cryptocurrencies by copying them, and then make the private ones illegal.
Recently, even the Federal Government of the U.S. was embarrassed when their own agents stole Bitcoins. I'm not saying Bitcoin will fly given its shady history and current secret cabal of payment processors in China with the apparent ability to control the entire network or about 90% of it. That cannot be the question, however. Whether Bitcoin will succeed is immaterial.
The real question is do the people have a right to create a private currency or is that under the control of the "Prince"? The "Prince" being the Government – any government.
Do you have a right to create a thing of value and trade it privately?
Does an individual have a right to create a coded payment network via personal computers, which anyone can use, without having a bank account controlled by the governments? The answer, so far, especially in Russia and China, but that is expected in dictatorial countries, is "heck no!" Well, that would be the political response, but we can imagine what is really being said in Beijing or Moscow. What the citizens are saying, behind closed laptops.
The Chinese citizens are not complete serfs. Even the Russians are not subjects. Yes these governments have unprecedented control over their populations. But ultimately and they know this, the power has always been with the people -- the masses. That is why they tread carefully in the cryptocurrency world. They do not want to rock that boat. Witness Russia's new attempts to control her 'internet' boarders however, which is not unlike China's feeble attempt to create their "Great Firewall." The digital nooses are closing all over the world.
Now, the same can be said for the U.S. Patriots - that we are citizen subjects and we are no longer as free as we once were. But this is not news. If you think otherwise, you have been sold the Swamp Land. You are a hopeful Patriot, not for the cause of freedom, but for the dirt upon which you stand. I hope you are able to dig out all of the dirt and muck, before you build your house. Not to mention the gators and the snakes you will need to worry about. I call them bureaucrats.
Ripple Labs...was laundering money...ludicrous
The allegations that Ripple Labs, which operates the XRP currency system, was laundering money or could have been potentially doing so, since they did not take measures to identify system users, is ludicrous. That is the nature of private money. It is like cash. We do not know the identity of every person using cash, nor should we. We should not know the name, address, phone number, and credit score of everyone who buys a soda - with cash. Even if I buy a car or a new computer, with cash, you have no business knowing my name.
But, in modern semi-controlled societies and yes we are figuratively watched; our bank accounts are monitored, our tax bills are noted – in these times, the piper must be paid.
That Grand Old Piper, the IRS in the U.S., must have knowledge of all transactions or as many transactions as possible. It would seem just a little thing, especially since each cypto-currency system is rooted in code, to simply tag the transaction with a little extra information to notate sender/receiver name information. In fact, it would not be that difficult in the Ripple Labs System, since it is a centralized network. In Bitcoin or ShadowCash or even in DASH, it would not necessarily work, nor should it. Even CloakCoin basically tells all governments to "bugger off" and why not?
Do you think Private Crypto-Currencies will survive the next five years?
The idea that we must all give up our privacy, our personal information, to a government or anyone, because a criminal might spend money using a Crypto is to say that everyone is a criminal. It is the easy way for a government to investigate, without having to work at it. Without having to get up from their desks to actually interview bad guys.
If you do not hand over your data, the fact that you traded 6 XRP's or 100 BTC's (Bitcoins) for 47,000 SDC's (ShadowCash) makes you a felon. Look over your shoulder. Don't worry, though, you are small potatoes.
FinCEN is looking at these Exchanges pulling in millions a day. The IRS is wondering where all the income taxes are – from these big Exchanges. Heck, first they need to find these Exchanges – since some are hidden. But, remember how these Hammers work. Pound the little guy in order to find the big guys.
Now BCExchange.org is working on a decentralized crypto-currency exchange. No single point of failure. No 'Exchanges' for the hammers to hammer. This is one in several such projects in this direction. The point? Privacy and security.
The "Ripple Rape" was just that. Like the Google shakedown by the U.S. Justice Department and the EU's current shakedown of Google, Ripple Labs must pay to play. To pay $700,000 was nothing. They know this. It probably keeps them out of jail and Western Union is wooing them; and they want the business. But it looks like Western Union may not make it.
Ripples (XRP's) were never destined to be a real cryptocurrency. Many of us knew this. Ripple Labs sees dollar signs and there is nothing wrong with making a profit. Making a profit by lowering transaction costs will enable Ripple Labs to earn a healthy income and save users money. So be it. They've paid-off the appropriate people and notice that they are now beginning to thrive.
Ripple Labs was never a serious Crypto-contender
But Ripple Labs has "joined them", since they always knew that they would never "beat them". In this sense, Ripple Labs was never a serious Crypto-contender. The argument, across many a discussion board, was repeatedly – that Ripple Labs was a centrally controlled business and not a true crypto. True Crypto's are decentralized -- in theory.
Still, Ripple Labs might actually save people money, but I'll bet that transaction costs will now increase and gateways, those third parties doing business with Ripple Labs, will fade. What do I mean by fading?
As Ripple Labs emerges into the controlled economy, they will need to hire more compliance officers to make certain that all appropriate taxes are paid. All legal guidelines must be followed. Customers who trade on the network will also need to know the numbers. How much did they lose on that trade? How much did they gain? They will need all of that information for tax records.
Currently, the ability to determine losses and gains and tax information is a mess in the Ripple Labs system or even the Bitcoin system. They simply give you a long list of confusing trades, conversions and in the case of Ripple, IOU currency information. But you must decipher it. You must track it. Why bother, as an individual? Unless you are an accountant with a love of lists and figures. Or if you are a big company, with loads of compliance folks – then there is no problem. Enter banks. Enter Western Union. Exit Ripple Labs. It was fun while it lasted.
Ripple Labs – to be Western Unionized
Perhaps the most troubling weakness with Ripple Labs is their reliance on third parties. You see, the XRP is a non-monetary unit, as they sometimes explain. Not "M1" or even "M2" but "M0." You trade an XRP for a cash IOU or a Bitcoin IOU or a Yen IOU and the list goes on. You only control the various IOU's via the Third Party Exchanges so long as the Third Party allows it. The XRP's or Ripples remain in the Ripple Network. The actual money remains in the various Exchanges (Third Parties), hence they can control it.
If I was an Bitcoin Exchange in Panama or even in Australia, if they still exist, and I was told that Ripple Labs now requires my customer information, which I do not track, then I will disconnect from Ripple Labs. But this may only be the Exchanges offering Crypto's. The ones offering cash, might remain. This appears to be the direction of Ripple Labs – to be Western Unionized. A low cost money transmitter. Good for them, but the Crypto IOU's and their unregulated exchanges might be jettisoned or leave Ripple Labs altogether. If they don't, they are not looking out for the privacy of their customers. And that is the rub. But they are stuck.
The trend, for many Crypto-currency Exchanges is to follow the rules regarding money transmission in their various countries. Some have been holding out, but the game has changed. The warning bell was just rung.
With the FinCEN edict, many will now either disappear or comply – at least in the U.S. Can you guess why many such Exchanges are moving abroad? Will FinCEN issue a new edict stating that no U.S. Citizen will trade for Crypto-currencies in non-approved countries?
Virtual currency exchangers...comply
According to FinCEN Director Jennifer Shasky Calvery “Virtual currency exchangers must bring products to market that comply with our anti-money laundering laws." She also advised that "Innovation is laudable but only as long as it does not unreasonably expose our financial system to tech-smart criminals eager to abuse the latest and most complex products.” (See: FinCEN Fines Ripple Labs Inc. in First Civil Enforcement Action Against a Virtual Currency Exchanger dated May 5, 2015.)
Do you see the words? "Must comply" and "our financial system". In other words, in the U.S. you have no choice and the financial system does not belong to you. It belongs to everyone and as such and FinCEN, a self-anointed, un-elected public representative will say what can and cannot be used.
You have been instructed. Now comply. Report all cash transactions while you are at it. Same to you, drug dealers and Terrorists. Now this is laughable, not laudable. Do the bureaucrats not amaze you with their audacity?
My money, my personal finances, belong to me - not everyone. But that's not really what is meant by a financial system belonging to 'everyone.' What it really means is: it belongs to the government. It belongs to FinCen, the IRS and the FED, not you. If you doubt it, read your dollar bill. It's a Federal Reserve Note.
criminals...anonymously conduct illegal activities online
Here is more from the same source: “Federal laws that regulate the reporting of financial transactions are in place to detect and stop illegal activities, including those in the virtual currency arena,” said Richard Weber, Chief, IRS Criminal Investigation. “Unregulated, virtual currency opens the door for criminals to anonymously conduct illegal activities online, eroding our financial systems and creating a Wild West environment where following the law is a choice rather than a requirement.”
Clearly, Chief Weber, whether under orders or of his own free will, is spinning the story.
Treat everyone as a potential criminal or a tax evader and erase all privacy of property. Since criminals might use Ripple Labs as they might use cash, all transactions must be recorded and reported. The end. Welcome to America. The IRS will see you now.
It comes to this. Do you or do you not have a right to conduct an economic transaction in private, without the knowledge of your government? If you think the answer is yes, then you are watching an interesting thing unfold. Just ask Coinbase.
Bitcoins can be tracked
Bitcoin was the knowledge. It is the forbidden fruit of our time. It taught many about how to program a trust-less 'blockchain' (ledger) across many private computers. The 'coins' have no intrinsic value, just like the paper currency in your wallet or e-wallet (your bankcard) is valueless in this sense. Bitcoin has subjective value, however.
Bitcoins and crypto's rely on the internet and the government watches that very carefully. Bitcoins can be tracked. For some reason, maybe it's the trust we have in math and privacy, Bitcoins have a value. They shouldn't be worth anything, but under our current circumstances, the fact that most money (I mean currency) on earth is highly controlled and not private, Bitcoins, a series of codes, trade for hundreds of dollars each.
In a sense, gold has subjective value, just like bitcoin. Gold has few uses. Jewelry and money. Bitcoin has few uses, but it is not physical. Hence its volatility.
The next stage in the evolution of money (currency) has already begun. It is a worry for world governments and you can bet, many laws will be passed against them, such as S.1241. The crime you will commit for sending secret coin codes back and forth over the internet, without the permission of your government, might become severe. It will become a black market of sorts, but also will hold the promise to lift the fiscal jackboot from our throats and once again allow the people to control their own financial destinies.
Like it was been written..."it was the best of times...it was the worst of times..."
This next evolution or revolution, might just be things like Monero, CloakCoin or ShadowCash or even Namecoin. There is even one called MaidSafeCoin.
These coins and systems function over the open networks and are difficult if not impossible to stop or detect. What is more, some of the newer 'coins' are geared to work over the TOR Network or other person to person channels. But TOR is centralized and iffy.
Many cryptocurrency "makers" are keeping their locations secret...
Can these newer Crypto-Networks be stopped? Probably not. Will governments try? You bet.
What is most concerning, is the move of computer programmers and Crypto-currency enthusiasts to other countries, from the alleged freest country on earth.
And you can read just how free they are...which in the case of crypto...is a lie.
Will America see a Crypto Brain-Drain now that is seeks to destroy the newest and most efficient system for transmitting value in the last – well -- since time began? Can these Crypto's evolve further and actually acquire intrinsic or cash value? They were doing just that – then FinCEN stepped in. Too close for comfort, I guess.
Welcome to the "Darknet Ages of Crypto-currencies" in the United States. Please make sure that you do not trade Bitcoin or XRP's in my country (the U.S.), lest they report you to yours. This would be bad if you are a Chinese Serf or Russian Subject. I suggest CloakCoin or ShadowCash, but be careful of DASH, since some of their creators, if memory serves, have come forward. Now FinCEN can squeeze them.
(Upadate: I no longer suggest Cloakcoin and ShadowCash. For some time now I have been interested in Monero and AEON.)
And remember you (and I) may soon be labeled "Crypto-Terrorists."
What is Money?
Next Up: Can Bitcion function as a Bridge Currency?
© 2015 Jack Shorebird