Paul Krugman Doesn’t Like BitCoin

Happy New Year everyone in the Bitcoin community! This little cryptocurrency that could has racked up yet-another-year of the interesting and the strange and has 2014 ahead of it.

These past few weeks have seen something strange from the market in India where the Reserve Bank of India put out an advisory warning about Bitcoin, raided two exchanges, and then near the end of the year the RBI came out and said it doesn’t intend to regulate BTC. In the rest of the world, Overstock.com has mentioned that it will begin taking bitcoins for inexpensive stuff in a few months. And the novelist Charles Stross as well as economic opinion-writer Paul Krugman have come out swinging as naysayers of Bitcoin and all it represents.

BTC and India, raids and market fluctuations

Recently Bitcoin prices have seen a huge boost because of the introduction of investors across China getting into the business of trading BTC. Other untapped markets still exist in places such as India, and it seemed for a while new exchanges were opening up across India—but that came to an abrupt halt when the Reserve Bank of India issued an advisory against Bitcoin and then a raid was prompted against two operations buying and selling bitcoins.

“Acting on a tip-off, 15 ED officials raided the offices of buysellbitco.in and rbitco.in which were trading in bitcoins for the last three months.” According to India’s media on the subject, the bitcoin trade operations were in violation of the Foreign Exchange Management Act (FEMA) a series of laws and policies proscribing how money can be exchanged internationally.

Buysellbitco.in happened to be claimed as India’s largest Bitcoin exchange, shut down operations before the raid due to the advisory from the Reserve Bank of India and left this message on their website:

Post the [Reserve Bank of India] circular, we are suspending buy and sell operations until we can outline a clearer framework with which to work. This is being done to protect the interest of our customers and in no way is a reflection of Bitcoin’s true potential or price.

The advisory, the shutdown of buysellbitco.in and other sites as well as the raid caused a brief dip in BTC market value; but even by Sunday it had recovered back to the high $700s.

But India doesn’t intend to regulate Bitcoin

The Reverse Bank of India doesn’t intend to regulate Bitcoin, however, as the community recently discovered after raids and warnings pealed out like thunder. Even with the shutdowns of the two exchanges, localbitcoins.com and in India thereof has continued to truck along as if nothing happened.

“Regulation comes only when people are doing certain business and we come to understand that something wrong is happening. First of all we don’t understand this subject,” RBI deputy governor KC Chakrabarty said.

“But at present what we are saying is neither we regulate them nor we support them,” he explained while pointing out that neither Chakrabarty nor the RBI fully understand Bitcoin yet and therefore don’t want to try their hand yet. “Whether it is… legal or illegal, we don’t know. If it crosses the limit of legality then people may face a problem. So people should be cautious, should understand,” he added.

Overstock.com joins the Bitcoin community

As website best known for bringing discount merchandise to customers at extremely low prices may be able to make those prices even lower with Bitcoin. Overstock’s CEO Patrick Byrne revealed in recent interviews that the website will soon start accepting the most popular cryptocurrency sometime in 2014.

Combining the next-to-no-cost of accepting BTC (as opposed to being part of a credit network) Overstock.com should be able to pass on those savings to customers who want to trade using the cryptocurrency rather than credit.

So far, Overstock.com is probably the first major retailer (albeit an online retailer) to show immediate interest in accepting Bitcoin—but it’s more than likely that any success by Overstock in using a cryptocurrency will lead to other retailers to try the same. We’ve already seen online retailers appear that accept only Bitcoin such as Roger Ver’s BitcoinStore.com.

Charles Stross and Paul Krugman just don’t like Bitcoin

These past few weeks have seen some celebrity detractors to the Bitcoin ecology bubble up through the mirth and effervescence of tilting markets, rising services, and open source projects. Amid them Paul Krugman and Charles Stross have spoken up. Krugman is a Professor of Economics and Stross is a much-loved science fiction writer with many best selling novels under his belt.

According to Krugman “Bitcoin Is Evil,” this is the actual title of an op-ed published in the New York Times Opinion Pages. In his op-ed, Krugman opines that Bitcoin exists in a quasi-space of an immoral agenda, which he cites Stross on “as a weapon intended to damage central banking and money issuing banks.”

The essay which Krugman cites by Stross is entitled: “Why I want Bitcoin to die in a fire.”

Why is Bitcoin evil and should, therefore, die in a fire? Apparently Stross and Krugman see the very technology that makes BTC such a powerful tool—the theory of the Blockchain—to be a sort of castle in the sky with an implicit political agenda and that agenda is one that means participants intend to destroy the world. Both Stross and Krugman enjoy an argument that calls upon the encoded behaviors of Bitcoin to be inherently problematic.

Stross cites the carbon footprint of Bitcoin (something refuted by pointing to the carbon footprint of any other financial system.) Both Stross and Krugman note that Bitcoin is a poor store of value, but prodding an infant technology for its baby steps seems a little bit unfair. Stross goes into the lack of regulation of bitcoins and black markets—but the problem here is that the US Dollar has the scariest markets of them all and since bitcoins generally exchange into regulated monies it does get regulated there. The arguments boil on.

Like it or hate it, the Blockchain represents an amazing technological concept that may not contain a currency or a store of value in the future—who knows—or it might represent the next evolution of exchange of value entirely.

If anything Stross’s essay brought Mark “Rizzn” Hopkins into full form with a whole bevy of tweets (1, 2, 3, 4, 5, 6) outlining the merits of Bitcoin and where to learn more. The conversation may be days old; but it’s certainly not over yet. Bitcoin will probably see more detractors as hype continues to build. If you have an opinion, it’s a very good time to join in.

[Photo: Jason Benjamin, CC0 License]