BitInstant CEO Charlie Shrem and Erik Voorhees went down to Rio de Janeiro for the annual Global Payments Forum held by the North American Payments Association (NACHA) to speak about Bitcoin’s niche as “virtual currency.” In a post on BitInstant’s blog Voorhees speaks about the conference’s reaction to them and his reaction to the conference in the context of Bitcoin.
The beginning of the presentation covered how Bitcoin reflects the current case of currency across the world and makes the important point that as a virtual currency its presence is “inevitable as it is disruptive and that disruptive shouldn’t necessarily mean dangerous.” In the presentation, Shrem and Voorhees argued that Bitcoin is avant garde and that although its adoption currently looks slow, there’s a factual economic momentum behind that adoption is because of its inherent superiority to fiat currencies (which currently run the world such as Dollars, Pounds, Pesos, etc.)
Questions from the forum covered how Bitcoin differs from other virtual currencies—such as “what differentiates Bitcoin from things like digicash?”—and a look at the current state of the bitcoin economy and how it’s fluctuations has caught the attention of the global media. In fact, Voorhees went into how the current Bitcoin market is not just another tulip mania; a question that might come to mind looking at last year’s Bitcoin value crash after a sudden value inflation.
Regulation and privacy issues will drive adoption of Bitcoin
Much of the conference caught up on how the economics of currency affects individuals and some commentary could be had about the psudeo-anonymity of Bitcoins themselves. Money itself is the mainstay of the power and control that governments assert over their own economies and people; but bitcoins themselves represent a pool of value that is difficult to regulate, and virtually impossible to stop, anywhere the Internet can slip through the sieve of regulation there too can Bitcoins go.
As a result, governments find the Bitcoin market itself a grim concept because as much as it enables citizens an alternate form of currency transaction, it can also enable less-trackable transactions. As a result, we’ve seen the FBI look at Bitcoin as a way for criminal organizations to operate and money laundering watchdogs have dinged it as a potential source for them to make exchanges.
Voorhees would probably argue that these two functions are merely symptoms of the greater freedom permissible under the protocol provided by Bitcoin’s underlying code.
In the blog post, these concepts come to a head in the discussion of a presentation by a senior legal council of the Federal Reserve about a small provision in a reform act (Dodd-Frank) and government regulations on currency.
My take away from this last session was the revelation that Bitcoin eviscerates entire statutes of law. Bitcoin will result in a number of “legal impotencies,” while simultaneously offering an alternative to the business and money that is being stifled by these same laws in the normal economy. I think Barney Frank may just be, inadvertently, Bitcoin’s new VIP star player. Perhaps he should be BitInstant’s Employee of the Month. Such laws will continue to weigh down Bitcoin’s competitors, inadvertently strengthening the use case for a system which undermines their entire apparatus of monetary control. The irony is beautiful.
In this fashion, Bitcoin replaces the lifeblood of currency for customers of states that either have too-restrictive regulations on the flow of money or poor flow of money. “As you tighten your grip, more transactions will slip through your fingers.” The very lack of regulatory success against a peer-to-peer, decentralized currency that exists not because of government fiat and instead because of code and social value means that it cannot be easily touched (or controlled) by governments.
As a result, competitors to Bitcoin—virtual currencies with central control and fiat currencies themselves—become less useful in comparison not just for criminal organizations, but for consumers in general who want a liquidity and value to their currency.
“The lingering impression we got from this event was a confirmation that the world operated on an inferior monetary system,” Voorhees writes, “and that we were helping (with thousands of others around the globe) to build something superior. It’s a wonderful feeling.”