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Bitcoin suffered a major blow to its international reputation on Monday after Thailand became the first country to outlaw the virtual currency outright. The online-only currency biz had been trying to operate lawfully in the Southeast Asian country, requesting guidance from the Bank of Thailand about which licenses it needed to …

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The sort of miss the point.

Bitcoin is very hard to regulate. That's the whole point - the currency was designed by libertarian ideologists who dislike all regulation. It runs on maths.

You could catch a few people using bitcoins too openly. But that's all. You can't search for them at the border, there are no companies to subject to regulations.

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Anonymous Coward

Re: The sort of miss the point.

Also Bitcoin isn't the only online crypto-currancy in operation

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Anonymous Coward

"The online-only currency biz"

The online currency biz you refer to isn't Bitcoin, it is a currency trading company (or attempting to be) that is trying to set up a currency exchange.

The last time I looked, the Bank of Thailand had no legislative power.

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JDX
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When exactly did you (or anyone) look at what powers the Bank of Thailand has?

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Anonymous Coward

The last time I looked, the Bank of Thailand had no legislative power.

From the article: The bank, which acts as the governing body of Thailand’s financial services industry

Which part of "governing" do you need help with? The Bank of Thailand is incredibly powerful in Thailand. If they say "no" you can pretty much pack your bags.

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We'll see more of this

This is just a test of how well Bitcoin can function and will end up actually strengthening its reputation in the long run.

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I think Bitcoin, or moreover the principle of Bitcoin, terrifies the banks and challenges their monopoly over the world's economy. For this reason, they will lose their battle regrettably, but the show should be interesting...

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JDX
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How can banks have a monopoly? A monopoly means one company/organisation, and there are thousands of banks who are independent of each other.

Saying banks have a monopoly on money is like saying shops have a monopoly on selling things.

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Not surprising since avoiding central financial control is one of Bitcoin's principal raisons d'etre. See the very first sentence in:

http://bitcoin.org/bitcoin.pdf

"A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution"

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Headmaster

First of all, the OP said they have a monopoly over the world's economy, not money. Money and the economy are two different things. Not that I agree with OP. Just sayin'.

In context of OP's comment, I understood it to mean the banks that are licensed and regulated by governments have a monopoly on the world's economy. A monopoly isn't about one company/organization. It's about power. Most banks have the same business model, so even if they are separate entities, they are going to do what they can to protect the business model. If thousands of banks are protecting the same business model, they can collectively act like a monopoly.

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Drug dealers ?

I seriously doubt that drug dealers waste their time with a few Bitcoins. There aren't enough of those virtual coins and drugs are a multi-billion-dollar business.

Of course, not being a drug dealer, I may be wrong.

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Anonymous Coward

Re: Drug dealers ?

The issue is money laundering. If you can convert illegal cash into goods or a legitimate business, at the end of the process you have "clean" funds.

The fact that bitcoin operates away from financial controls suggest there is potential for abuse.

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Facepalm

Re: Drug dealers ?

potential? *snigger*

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Re: Drug dealers ?

Most drug deals are done using traditional paper/metal money. I don't think anyone is disputing that.

However, if you look at things you can actually buy with bitcoin, drugs from Silk Road form a reasonably large proportion of the market. The biggest proportion of the market is traditional currency, and you can also get things like web-hosting, and pizza / coffee / beer from a few places, but you can't ignore the existence of Silk Road.

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until the tax mechanism is worked out...

At the moment there is no common legislative framework which can account for taxes due. Governments need taxes to pay the bills for services we all use, therefore are obviously not going to get behind a 'currency' that helps people launder money and dodge taxes.

If bitcoins don't have their own government to underpin them, who can you turn to if someone steals yours? The society we have is paid for through taxes. Also, the exchange rate is entirely and solely based on trust and expectation. At least my pound is backed by the interests of 70M people and a shit load of guns and tanks and a navy etc. Bitcoin could vanish overnight and only a few people would do more than shrug.

Bitcoins are a clever idea, there are plenty of clever ideas that fall by the wayside because there isn't the right ecosystem to encourage them. If people are really behind bitcoin, start working out how to integrate them into the tax system, otherwise they're really just a money laundering platform.

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Re: Tax mechanism?

And just what's wrong with the current mechanism of, "Give us your money, or we'll put you in prison?"

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Anonymous Coward

Re: Tax mechanism?

The tax mechanism is fully applicable to bit coin. Tax doesn't care what the currency is, just that some proportion of value must be paid to the government. My employer gives me private health care. No money changes hands, but the benefit is deemed to be worth something, thus I must pay the government the tax due on that benefit value in a currency that the government accepts. In this case Pounds Stirling.

The thing that scares government is regulation, and traceability. At the moment all banks keep logs of transactions between accounts, and those accounts have (ideally) verified account holder details. The same is not true of bit coin wallets. Bitcoin is akin to trading in pure cash - hard to trace, and thus hard to regulate and audit.

That's what scares the government.

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Anonymous Coward

Re: until the tax mechanism is worked out...

> At the moment there is no common legislative framework which can account for taxes due.

Governments determine their own tax framework. Generally Bitcoins are taxed the same as any other commodity - if you make a profit from the purchase and sale of them then you pay capital gains tax.

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Re: Tax mechanism?

Bitcoin requires self-reporting of taxes. Hence no government control, which is sort of the point of Bitcoin. And it's historically well established that tax rates in excess of 12% lead to serious problems with under-reporting taxes. Right now I doubt there's a government on the planet that could survive on that rate of revenue collection. Hell, in the US states can't collect sales taxes on online purchases because people won't self-report it, and those are as low as 4%. Whether this is good or bad may depend on your point of view. But I don't see any way that a government could consider this good.

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Re: akin to trading in pure cash

Worse than pure cash actually. Pure cash has to be safely stored and transported. In either location it's prone to being stolen. Hence most people are willing to put it in a bank which offers protection for the cash. At which point it is monitored by the government. Bitcoin on the other hand would theoretically be easily transportable if it were accepted like real currencies. And they claim it is relatively secure.

Full disclosure: I have no personal involvement in mining, trading, or speculating in bit coin. To me it stinks of conspiracy theorists or worse the sort of thing likely to bring law enforcement down on my head.

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Anonymous Coward

IF WE CAN'T CONTROL IT, IT ISN'T A LEGITIMATE CURRENCY!!!!!

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mining?

Mining? Come on, its not mining, its pressing a button and letting a machine process.

Processing NOT mining

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Alert

Re: mining?

There speaks someone who has never had to work down t' binary pits day in day out wi' nowt but a lamp for company risking the perils of tunnel collapse and stinkdamp to bring home the precious bits that yer family depend on to buy bread and milk.

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Re: mining?

It's a very good analogy. A meatspace miner "processes" his way through the ground, until he happens upon a gold nugget, diamond, or whatever, which would be analogous to a bitcoin miner having done enough processing to cryptographically confirm a transaction on the network.

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@murph

>IF WE CAN'T CONTROL IT, IT ISN'T A LEGITIMATE CURRENCY!!!!!

Shoutiness aside, I wonder what you mean by "legitimate currency".

If A gives B three dongles in return for X

and B gives C three dongles in return for Y

and C gives A three dongles in return for Z

and if none of A, B and C are within your category, "we",

then:

- Are dongles a "legitimate currency" from the point of view of A, B and C?

- And who else's point of view counts anyway?

Upvoted you anyway on the assumption that you were being ironic about the exclusive right to define legitimacy assumed by governments / financial institutions.

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simples - approach it as a commodity, not currency

From regulator's point of view, bitcoin is not a currency because it's unregulated. It will never be regulated, because there is no central bank to do so. However it does not mean it is totally useless - it's presently traded, so it certainly does have some value, to some people. I would suggest bitcon should present this to banks as a commodity, not as a currency, and try to regulate its trading just like, for example, precious metals would be.

Of course the risk of holding (thus also trading) bitcons would be deemed to be much, much higher compared to established commodities (crude, gold), but this risk is reflected in volatility and spreads anyway, so there is nothing new here.

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currency regulation and central banks

Bronek, a central bank is not necessary to regulate a currency; the US dollar was regulated without a central bank until 1913.

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Re: currency regulation and central banks

I suppose it was "regulated" by US government back then. More broadly, currencies need a power to guarantee that they will retain some value, and this power is normally associated with central bank. Commodities do not need such guarantee.

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