The story of the German Finance Ministry stating essentially Bitcoin is “legal tender” has been making the rounds all over the virtual currency and technology world. The German government recognizes the digital currency as a “unit of account” that can be used in Germany. This makes them a kind of “private money”, which can be used in multilateral clearing circles.The German Ministry of Finance has issued an official statement recognizing Bitcoin as “Rechnungseinheiten,” a legal designation that translates to “units of account”. This type of money is also referred to as “artificial currency” or “side payments.”“We should have competition in the production of money. I have long been a proponent of Friedrich August von Hayek scheme to denationalize money. Bitcoins are a first step in this direction,” said Frank Schaeffler, a member of the German parliament’s Finance Committee, who has pushed for legal classification of bitcoins.This is a very, very big deal. Not just because some bureaucrat seemingly “legitimizes” the crypto-currency, it is also the first commonsense approach from a major economy to-date. While the U.S. government specifically the New York Department Of Financial Services and the US Senate are putting in place appropriate regulatory safeguards for virtual currencies, Germany is merely accepting the obvious.The USA is not the only country to scrutinize Bitcoin operation; Thailand has also decided that Bitcoin is not a type of currency. Senior members of the Foreign Exchange Administration and Policy Department of Thailand advised that due to lack of existing applicable laws, capital controls and the fact that Bitcoin straddles multiple financial facets, Thai officials believe that Bitcoin transactions must therefore be illegal in Thailand.A positive step?Germany has gone ahead and given legal status to the Bitcoin, as it could become an alternative to the euro if the single currency ever ceased to exist. Schaeffler said “If the euro does go belly up the German authorities could potentially still collect tax if everyone started using the bitcoin” – that’s a good example of German forward-thinking!
Archive for the ‘Alternative Currencies’ Category
The Federal Governments Reaction To Bitcoin Is An Acknowledgement Of The Dollars Vulnerability – Forbes
The term “fiat currencies” is strange and mostly not understood in this modern “progressive” era, where everything is transformed by political “Progressives” into fiat rather than natural forms, which continue to exist as long as so-called “Progressives” have the power to impose them. So instead of Natural Law, we have fiat law, which is whatever those who currently have the political power say it is. And instead of Natural Rights, the world today mostly recognizes only fiat rights, which are only the rights those in power say we have. America was rooted in Natural Rights and Natural Law, which so-called Progressives have been rebelling against for more than 100 years, certain they had better ideas more suited to the modern world.And so today we have fiat money instead of natural money. Fiat money is money with a government declared value, rather than a natural, inherent value. That is how the government takes some paper, slaps some ink on it, and supposedly it has the value the government and the ink says it has. Bitcoins Are Digital Collectibles, Not Real MoneyLouis WoodhillContributorIts Not That Bitcoin Can Be Regulated As Money: Its That Now Bitcoin Will Be Regulated As MoneyTim WorstallContributor Dont Be Silly, The Entitlement State Wont Allow BitcoinHarry BinswangerContributor Bitcoin Is a Junk Currency, But It Lays the Foundation For Better MoneyNathan LewisContributorBut that fiat money also lasts only as long as the ruling class has the power to impose it on us. That means the political power and the market power to do that. At some point, the market power, which is more real and natural, can overcome the political power. And that is the point we are reaching, when the innovation becomes more real and natural.
“So, is Bitcoin actually money?”It’s a fair question and, with the intense scrutiny directed at the “crypto-currency” of late, an increasingly common one. But the real question is not whether Bitcoin functions as money today, nor whether Bitcoins themselves are a good speculative investment. The real question – and the only important question when considering whether Bitcoin could be a viable alternative currency – is, “can Bitcoin ever function well enough as money to matter?”And that answer, I fear, is no.Whether something is “money” has nothing to do with the source of production, whether it’s issued by a government or a private company or spontaneously generated by a community, whether it’s minted or mined or printed or issued electronically.Money is … well, money … to the degree to which it enables transactions, to the degree that you can use it to purchase things. No matter how efficient or liquid a market is, unless it can be used to purchase things, it’s not money; it’s a commodity.By that measure, Bitcoin is unquestionably money.It just happens to be terrible at it.Wheres the marketplace?Even the most vocal supporter of the system acknowledges that the number of merchants accepting Bitcoins is miniscule and the number of large merchants embracing it is almost nil.But is that unfair, or at least premature?Perhaps it’s just a question of time, business development, marketing … of scale. One hears the term “critical mass” a great deal when this question is posed, the implication being that the ecosystem just needs enough merchants to buy in for Bitcoin to become useful as money and to become self-sustaining.But it is not quite so simple.
Everybody needs to calm down about BitCoin. There has been an explosion in the virtual currency’s price in the last few months. Below is the 6 Month price graph as of the USD :: BTC conversion rate. Not featured on this chart are the years 2009 through 2011, on which you would see two more orders of magnitude growth at the very least. Phenomena like this don’t come along that often; charts like these forge millionaires and financial legends. As appealing as the fantasy is, we have not yet seen how this particular instance of virtual currency will pan out. Which is why everybody needs to calm themselves. Virtual currencies (vTC) are not a new thing; far from it. There are quite a lot of them out there, just as there have been many incarnations of the mobile phone, the social networking site, the blogging platform, and almost any other technological advancement that has ever happened.
In recent weeks, Theodoros Mavridis has bought fresh eggs, tsipourou (the local brandy: beware), fruit, olives, olive oil, jam, and soap. He has also had some legal advice, and enjoyed the services of an accountant to help fill in his tax return.
None of it has cost him a euro, because he had previously done a spot of electrical work – repairing a TV, sorting out a dodgy light – for some of the 800-odd members of a fast-growing exchange network in the port town of Volos, midway between Athens and Thessaloniki.
In return for his expert labour, Mavridis received a number of Local Alternative Units (known as tems in Greek) in his online network account. In return for the eggs, olive oil, tax advice and the rest, he transferred tems into other people’s accounts.
“It’s an easier, more direct way of exchanging goods and services,” said Bernhardt Koppold, a German-born homeopathist and acupuncturist in Volos who is an active member of the network. “It’s also a way of showing practical solidarity – of building relationships.”
He had just treated Maria McCarthy, an English teacher who has lived and worked in the town for 20 years. The consultation was her first tem transaction, and she used one of the vouchers available for people who haven’t yet, or can’t, set up an online account.
“I already exchange directly with a couple of families, mainly English teaching for babysitting, and this is a great way to extend that,” said McCarthy. “This is still young, but it’s growing very quickly. Plainly, the more you use it the more useful to you it gets.”
Tems has been up and running for barely 18 months, said Maria Choupis, one of its founder members. Prompted by ever more swingeing salary cuts and tax increases, she reckons there are now around 15 such networks active around Greece, and more planned. “They are as much social structures as economic ones,” she said. “They foster intimacy and mutual support.”