back to article US senator asks: Will Bitcoin replace Swiss bank accounts?

Senators have held a second hearing on Bitcoin as America's dinosaur politicians struggle to get to grips with the cryptocurrency. On the second day of the hearing seven senators attended, as compared to just one in the initial proceedings on Monday. Tuesday's panel included Ernie Allen, CEO of the International Centre for …

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Anonymous Coward

"Another senator was a little more honest in his appraisal. Senator Mark Warner of Virginia observed that Bitcoin could "dramatically transform" the role of central banks."

...and their ability to spy on the holders of BitCoin.

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Go

Honest senator

"Another senator was a little more honest in his appraisal. Senator Mark Warner of Virginia observed that Bitcoin could "dramatically transform" the role of central banks."

Didn't he also admit it took him 2 months to get his head round it?

A politician who admits stuff is "hard."

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Yes

Senators wanted to know if Bitcoin was being used by terrorists, paedos, money launderers and other criminals.

Yes all of the above would be the answer to this question then.

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Anonymous Coward

Re: Yes

The answer would also be yes for dollars, pounds, euros, yen and every other currency on the planet being used for the above.

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Anonymous Coward

Re: Yes, HSBC Bank.................

and other financial institution REGULARLY laundered terrorist & drug cartel money worldwide.

Are those slimey cocksuckers in jail right now?

Since they are not, then those Feds and Senators are duplicitous, hypocrites that must have already taken cartel and bank bribes to keep them out of the klink.

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Anonymous Coward

Re: Yes, HSBC Bank.................

They may not be in jail, but they did pay something like a $500M file for it. This is the problem with bitcoin, it's not regulateable and it is reasonable to regulate the use of a currency.

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Re: Yes, HSBC Bank.................

$500M is nothing to them. They made so much more than that laundering money for criminals.

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Re: Yes, HSBC Bank.................

Remember that HSBC were fined, not the $ itself

You can simply prosecute exchanges int he same way - even if you can't fine "bitcoin"

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Re: Yes, HSBC Bank.................

@AC 16:25 GMT

it is reasonable to regulate the use of a currency.

Why? With bitcoin we are not talking about a currency that is closely interlinked with the economy of a country or area as are $, £, € etc and therefore needs regulation. Bitcoin could be more accurately compared to gold. Gold is freely tradeable and has, besides jewellery and some industrial niche use, no inherent value.

The only real difference is that gold is tangible, bitcoin isn't. Although all the gold I personally own is in 100% gold-backed ETFs, not tangible at all - and freely tradeable.

It surely is valid to ask the questions of those politicians. But the concerns they (and others) have originate in bitcoin being unknown. And alien is potentially dangerous.

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Boffin

Re: Yes, HSBC Bank.................

"Are those slimey cocksuckers in jail right now?"

No... HSBC cooperated with investigators...

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Re: Yes, HSBC Bank.................

Senators are duplicitous, hypocrites

In other news, water is wet.

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Anonymous Coward

Re: Yes

I don't believe there had been any evidence that bitcoin is used by money launderers or terrorists. References please.

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Re: Yes, HSBC Bank.................

Quote

it's not regulateable and it is reasonable to regulate the use of a currency.

The US has a habit of banning anything it can't understand thus they will begin to regulate the LIFE out of. Think Prohibition and frankly they are still scared of Booze in all shapes or forms. IMHO, Bitcoin will die a long slow death once the US Congress Ctirrers get their teeth into legisltating it out of existence.

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Re: Yes

I don't believe there had been any evidence that bitcoin is used by money launderers or terrorists.

Common sense (to me, anyway) states that they will use bitcoin just the same as they use any other currency exchange that they can. Frankly I'd be surprised if they didn't use bitcoin, at least up until the powers that be noticed it and started paying attention to it.

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Bitcoin and gold

Evil Auditor, oddly enough I heard two stories on the radio today. The first story was that part of the reason for the Senate’s current hearing on Bitcoin is that a PAC for one of the major parties is interested in receiving Bitcoin as campaign contributions, and thus part of the familiarization process for members of this chamber is comparing and contrasting Bitcoin’s anonymity with current legal requirements for identifying contributors to candidate-specific campaign funds.

The second story (mentioned in passing) was that the Indian government has increased their import duty on gold bullion three times this year, from 4% to its current 10%. In India, at least, there is a gatekeeper who must be satisfied before imported gold can be freely traded.

I admire your faith in the equivalence of ownership of gold-backed ETFs to ownership of physical gold — but perhaps I’m too skeptical for my own good on certain topics.

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Re: Bitcoin and gold

I don't see the link between the anonymity of bitcoin and identifying contributions to campaign funds. If someone wants to keep his contribution anonymous there are other options, such as cash. Frankly, I don't know the regulation about campaign funds in detail. But in my opinion it should be the campaign to keep track of who it's contributors are and not the value transfer system.

I am aware that certain countries know limitations in trading otherwise freely tradeable goods. This, however, doesn't invalidate my point.

I agree with your scepticism on ETFs - I had and still have the same reservations. When I compare the risks and costs of holding gold physically with risks and costs of ETF the latter was favourable to me. The bank that holds my portfolio with the gold certificates is independent of the bank that issued said ETFs. The issuing bank is required to hold the equivalent of physical gold in its own premises (in a small country in the middle of western Europe) and in the unlikely case of the banks default my certificates should still give me access to my part of the physical gold. On the other hand holding gold physically bears the risk of it being stolen or lost and/or comes with the costs of transportation and secure storage.

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Anonymous Coward

Re: Yes

You need to think a bit more carefully, Bitcoins are not as fungible as dollars or other more mature currencies. Nor is there the volume in circulation to tempt money launders. Those dudes deal in billions with a B.

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Re: Yes

bitcoins can be tangible, if you write the numbers on a piece of paper; they are (afterall) just a string of numbers. gold can also be traded without physically posessing it.

It can also be said that art is only paint on some canvas.

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Re: Yes, HSBC Bank.................

You can't fine the $, but world currency markets place a value on it compared to every other currency and commodity. If the powers that manage the dollar do things widely regarded as deleterious to its value, then that value (as measured in other currencies or commodities) will go down.

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@Evil Auditor - a better analogy

" Bitcoin could be more accurately compared to gold."

A better analogy might be Pokemon cards or stamp collecting. Both are arbitrary, manmade and near virtual assets made in arbitrarily limited editions, in the sense bunches of nerds for whatever nerdish reasons value and trade these things. The difference between these and Bitcoins is that the latter are purely virtual assets, being numbers grouped together in blockchains validated by group consensus containing data binding the digital signatures of senders with the digital identities of receivers.

Would you pay £1000 for a Penny Black ? Probably you would only do so if you wanted to give into a blackmail demand requiring such payment in order to recover data on a computer encrypted by a virus , because the blackmailer thinks they have a better chance of escaping prosecution if paid by such means. The most widely known uses for this kind of crypto-currency suggest state crackdown on the effective underwriters of this essentially criminal network (known as exchanges) which exchange cash for bitcoins and vice versa to be getting increasingly likely.

Better alternative currency models suiting the needs of legitimate business exist and are possible, e.g. the Swiss Wir Bank .

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Re: @Evil Auditor - a better analogy

The flaw with stamps/cards for currency is that there's no limit to how many could be produced. If you say they're protected from copying, and can only be made by one entity, it's then a currency that is controlled by that one entity. Neither of these points are the case with Bitcoin, so they are not analogous.

If there was a thing that were limited in supply, but not simply due to a single entity's control, then that would be a better analogy. You know, like gold.

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Re: Gold is freely tradeable

No, its not. And is in point of fact at the root of a somewhat infamous case on this side of the pond.

During the depths of the Great Depression, FDR suspended trading in gold and made it illegal to own in the US. Coins which had been struck were ordered returned to the Mint to be destroyed. By happenstance one such coin ($10 face value I think) escaped collection and turned up in the hands of a Middle Eastern royalty. It was deemed legal for them to have owned the coin through some odd twist of the law. The last time the coin changed hands it was valued in excess of $20 million. About a decade ago it turned out that through happenstance there were 20 more such coins that escaped collection. However in this case the coins were deemed to have been stolen from the Mint despite a reasonable doubt and the government has confiscated them.

While the proponents of bitcoin tout it's detachment from governmental entities that is the precise point of conflict. Governments have legitimate causes to regulate the exchange of currency. Unless they are in some way involved in its distribution or creation that regulation cannot occur.

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Re: I don't see the link between the anonymity of bitcoin and identifying contributions

That would make you an idiot sir, especially for a tech site that routinely covers stories about electronic fraud and identity theft.

The link is fairly obvious. Campaign contributions are by and large made electronically or via check. In either of these cases there is a quick means of verifying someone who is working through a regulated means of currency exchange and which theoretically provides a quick check against the donor. Under US law you are required to be a citizen of the US to donate to a campaign. Banks can verify that for checks, credit cards can do it automatically when you receive the card data. Bitcoin allows no such check.

Granted, there are still a myriad of ways around the checks, most famously The Big 0 not doing the expected point of origin check on credit cards during both his campaigns. But the system at least permits them whereas bitcoin does not.

I'm still ambivalent on bitcoin as a currency. A fool and his money are soon parted, and I see no sense in getting in the way of fools doing so. On the other hand, I would strenuously object to allowing campaign contributions be collected in the form of bitcoin, precisely because the relevant point of campaign finance law is to expose who is buying the politicians.

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Re: You need to think a bit more carefully

No, you need to engage the brain before letting fly the fingers.

The most notable recent story about bitcoin is the demise of The Silk Road which was reported as a major drug trafficking route. All drug trafficking necessarily involves money laundering. Maybe not at the local pusher-doper level, but certainly at the distribution level. It's how you get your illegal money into legal channels for other use.

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Anonymous Coward

Re: Yes

@Danny 14 - on the offchance you're replying to me, I said fungible not tangible.

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Re: Yes, HSBC Bank.................

@Evil Auditor

"Gold is freely tradeable and has, besides jewellery and some industrial niche use, no inherent value."

Worth noting that the US made it illegal for private citizens to hold gold (since repealed)

http://en.wikipedia.org/wiki/Executive_Order_6102

They can try and take my Bitcoins from my cold dead hands.

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“Are Bitcoin wallets going to replace the my Swiss bank account?” asked Jeff Merkley, a Democrat Senator for Oregon, who was worried about his money laundering.

FTFY

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Jeff should only worry if he hasn't, like all the others, closed his Swiss bank account long ago and moved money to much calmer places in the Caribbean. Or, for example, what does the USA do against "financial practices" in Delaware? That would probably be my place of choice for hiding/laundering money - not being a US citizen I'd be safe from the USA and having the money within the USA also safe from all other countries.

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Anonymous Coward

what does the USA do against "financial practices" in Delaware

FFS, don't disturb the myth thing they got going against Switzerland. Otherwise people may remember that it was actually Wall Street that created the economic crisis, not the in comparison tiny sums hidden in Switzerland... I'd watch out for black helicopters if I were you.

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With major terrorists not trusting their phone or internet, I suspect diamonds (or drug) will stay their currency of choice.

Diamonds are really useful if you want to transport a very large amount of money, in your pocket and passing airport security undetected....

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Anonymous Coward

Re: Off line

Drugs are not valued as currency for anyone who isn't a drug dealer. The drugs which have a sufficient density of value/KG are the more illigal ones. You can't easily transport them and if you're discovered you go to prison for a long time. Diamonds while just about legal to carry in bulk are about the worst way to transport large amounts of "money". For a start you can't realise a diamond into cash because of controls on conflict diamonds. You can't just walk through an airport with a pocket full of diamonds, there will be many, many questions to answer if you are picked up.

The best way is a fist full of €500 notes, they are legitimate to own freely tradeable and are worth a very large amount of money. Or, something untraceable, like bitcoins, hence the concern about them.

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@AC 16:31 GMT

More and more countries inflict restrictions on cross-boarder cash transfers. A bunch of bank notes, while it still happens, is definitely not a good choice (ask e.g. Cornelius Gurlitt - and he didn't even exceed the legal limit), it's too easily detectable. Diamonds are much more compact than cash, can safely be swallowed or rather easily hidden otherwise. So yes, you can pass airport security with a pocket full of diamonds - given they don't bulge your trousers - or alternatively, a stomach/rectum full of them. Changing them into cash is, despite the controls on conflict diamonds not really a problem. Either your diamonds may indeed have a certificate of origin - after all, you're not trading in diamonds but merely transporting wealth - or if they don't, you only have to know the right people. Or do you believe all the certificates of origin are genuine?

But I agree, transporting large amounts of money is easier with bitcoin. It comes with the risk of volatility though, probably a higher volatility than currencies or diamonds.

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Anonymous Coward

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I suspect diamonds (or drug) will stay their currency of choice.

I would stay away from diamonds as investment. But i'd also never go near drugs. It's trading in the misery of others, a bit like payday loans with double interest.

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But i'd also never go near drugs. It's trading in the misery of others ...

How do you figure that ? I can assure you that the only people who feel miserable about drug taking are those who miss out on the fun, and they're usually pinch faced tighty-whiteys who get off on feeling miserable and spend their lives trying to make sure everyone else feels the same way.

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Re: Off line

I can assure you that the only people who feel miserable about drug taking are those who miss out on the fun

Tell that to a heroine addict who can't get clean. Or a parent who lost a kid to an overdose. Or the innocent victim who happened to be too nearby when a couple gangbanger dealers decided to open up on each other. Or the poor sap that the above heroine addict mugged to pay for his hit. The list goes on and on.

Drugs are a bad deal man. They always have been and always will be. You could possibly make the point that treating them as a social problem rather than a legal one would make things better (that's my feeling on the matter), but to say they don't cause misery is ignorance of the worst kind.

As for getting currency across borders, I'd go for rubies, emeralds, sapphires, and the like. It might take more of them than diamonds, but they don't have near the controls to work around.

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Re: Off line

Unlike gold, the technology is just about here to make diamonds cheaply. Of course, some people might prefer diamonds that were dug out of the ground - and the diamond mining industry is trying hard to protect itself - but diamonds aren't a thing to hang on to for long now.

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@sisk. Let's take your points in order.

First heroin. In its medicinally pure form it is essentially harmless - in as much as you can lead a fully functional normal life apart from needing regular injections a la insulin. The problem you are describing comes from the drug being illegal and therefore both impure and expensive. You should also be aware that despire what you might have heard, not everyone on heroin becomes addicted. Addiction is a complex conjunction of causes and the usual mantra that correlation isn't causation applies here.

Second overdose. I get this, I do, but it's really no different to losing your child due to gun violence, car accidents or any other preventable cause. Shit happens and a bad experience by one doesn't automatically make something bad news.

The list does indeed go on however most of the ills you ascribe to drugs are second order effects caused by prohibition.

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I suspect diamonds (or drug) will stay their currency of choice.

I would stay away from diamonds as investment.

No contradiction. The former refers to a medium of exchange. The latter refers to a store of value. As a medium of exchange, one cares only about short-term stability, for as long as it takes to transfer the currency from one party to another and then use it to buy one's chosen store of value. And with a store of value, one can sacrifice things that are vital for a medium of exchange. Things such as fungibility and liquidity and portability. An old master painting may be a good store of value, but it is fairly hopeless as a medium of exchange. A currency suffering 50% annual inflation is fairly hopeless as a store of value but still perfectly usable as a medium of exchange.

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Unlike gold, the technology is just about here to make diamonds cheaply.

Technically diamonds should be cheap already. Da Beers artificially inflated their price via marketing and monopoly for over a century. From the documentaries I've seen on the subject the last couple years it looks like the monopoly is just about broken finally, but the prices haven't come down yet.

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Re: Off line

And the alcoholic who can't get clean, or the kid with parents who are drunk all the time...

Yes, it's true that they can cause misery, but it's also wrong to imply this is alway true in every case - or at least, I hope to be consistent you and the OP never go near drink or support pubs, if that's what you believe - so it seems fair to point out the other side too.

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Just this morning I was using the Google to search for the Facebook and the email told me about that Bitcoin that the cheese and chocolate banks use to fund the terrorism and the kiddie porno-graphics. It's about time we put a stop to this sort of thing. Therefore I have created the Group Advocacy for Youth and Leadership Awareness System (GAY LAW) which will stop the terrorists and paedophillies from buying and importing untaxed chocolate and cheese.

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Given bitcoin's wildly fluctuating value, I don't see it as a replacement for tax evaders using offshore bank accounts anytime soon unless it stabilizes and stays stable for a long period of time, like a decade or more. Bitcoin is yet another fiat currency, but instead of being backed by a Government or Bank's credit, its backed by a bunch of geeks with FGPA and ASIC miners. I mine bitcoins myself for a bit of extra cash, at least until the difficulty gets to the point where I can't do it anymore, but I know and understand full well that BTC value is as imaginary as a US Dollar or Euro's value. All fiat currencies as well as precious metals can and do crash. Its happened in the past and will happen in the future.

The Senate would be better off investigating unaccounted/hidden Gold and Platnium holdings than bitcoins in my opinion if they want to stick it to people evading taxes by using alternatives to conventional cash holdings or offshore accounts, but I'm neither a politician or an economist.

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Anonymous Coward

The thing is that you aren't going to be hosting the value in bitcoins for more than a very short amount of time. You convert your cash into bitcoins at the source, then out of bitcoins at the destination almost straight away. You've achieved anonomisation and international placement of the dodgy currency.

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Anonymisation?

What's the problem with anonymisation of money? Anyway, this you can achieve rather easily without bitcoin. The problem starts when you want to legitimatise dirty money. Can bitcoin do that?

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god it makes me sick everytime i hold a £5 note that some paedo has probably touched it at some point and had their dirty fingers all over the Queens face.

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Anonymous Coward

What is this obsession the world has with pedos? I mean seriously, while I accept fully that we do well not to tolerate them and to legally restrict their activities, having them (and the evil terrorists and tax evaders) as the main issue of contention wrt Bitcoins, rather misses the point.

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"What is this obsession the world has with pedos?"

A universal revulsion that can be directed against any activity or object deemed to be facilitating their activity. Its the "Think of the children" argument.

Practically any other quasi-criminal activity is subject to varying degrees of unacceptability in different cultures. Drugs, prostitution, dodging the tax man, etc. are not guaranteed to generate the same reaction as pedophilia. So its a useful claim to generate ill will against anything that can be tied to it.

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While it is an issue of concern in most countries, the UK takes the whole paedo thing to extremes. Kind of like the US does with terrorism. If you weren't paying attention and just heard politicians sound bites and alarmist headlines you'd think that 80%+ of the people in the UK have a naked child chained to a radiator in their basement and supplement their income by trading kiddie porn pictures.

It shouldn't take a genius to see that those things simply aren't true. People in the UK are just like everybody else except they like the letter 'u' over much. The fact of the matter is that cowardly politicians and others with hidden agendas take advantage of the situation. The 'guilt offensive' is one of the lowest tactics out there and used by only the worst sorts of people: "I'll do whatever I want and hide behind paedos/terrorists/God/patriotism etc..." It's simply poor leadership and a public that's had risk assessment and management bred out of them.

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Unhappy

'guilt offensive'

exactly

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