"They don't, but that's because Euros/Yens are backed by foreign governments".
No, that is not the reason. Replace "Euros/Yens" with "gold" in my sentence, and my point stands with gold being backed by nothing. Basically the US government is totally fine with side markets that they cannot control directly and that exist in parallel with the USD (whether it is EUR, gold, Bitcoin, whatever).
Your other argument also fails to convince me that the government would want to declare Bitcoin illegal. You say it can be used for money laundering, but gold and cash can already be used for money laundering (and even more discreetly since trading gold or cash does not leave a trail like in the Bitcoin blockchain). The US govt does not make gold and cash illegal because they realize it is silly/unenforcable/pointless and would hurt the economy more than it would manage reducing illegal activity. Case in point: the US did attempt to criminalize possession of gold in 1933, but they eventually realized how silly and stupid this was, so they decriminalized it!
When the Internet was being developed throughout the world, were you the kind of person who looked at it and envisioned that its censorship-resistant decentralized aspect could be used to facilitate the transmission of potentially illegal information (software, data, child porn, ideas, etc, especially in countries with no freedom of speech) and said "geesh I bet governments are going to make Internet illegal"?
"For one, the government doesn't care for 'startups springing up everywhere'"
I think my point was clear that these startups are potentially the start of a big new economy complementing the current one that could financially benefit the government with revenues from taxes. So, yes, the government would love to see a big economy pop up.
"Plus, if bitcoin is banned, its economic activity will just migrate to conventional money again, it wont be lost."
No. The world economy is not a zero-sum game. It is possible to create wealth (wealth is stuff we want, not money, see http://www.paulgraham.com/wealth.html ) and Bitcoin and its economy would certainly create extra wealth. Another example showing how silly your assumption that the economy is a zero-sum game is: since the start of e-commerce, do you think that it has stolen commerce from or mostly added to the brick-and-mortar industry? Obviously, sometimes stolen (journals, etc) but e-commerce has mostly added wealth and economic activity on top of the brick-and-mortar one. In other word the size and richness and wealth of the current economy far surpases the one of the economy pre-Internet.
> You say it can be used for money laundering, but gold and cash can already be used for money laundering (and even more discreetly since trading gold or cash does not leave a trail like in the Bitcoin blockchain)
Spoken like a person who has never tried to launder millions of dollars in gold. You don't just go down to the pawn shop and redeem millions of dollars in gold.
"Mexican authorities say that, since 2008, criminal gangs have robbed so many trucks carrying gold shipments that some mining companies have been forced to switch to aerial transportation"
I don't really understand what stealing trucks full of gold has to do with any of this. He said that the US is "totally fine with side markets that they cannot control directly" and that "Your other argument also fails to convince me that the government would want to declare Bitcoin illegal." and I have to agree.
They need to be able to control the currency, thus bitcoin will never become more than it is now. I'd bet on the powers that be squashing it a million times.
>No, that is not the reason. Replace "Euros/Yens" with "gold" in my sentence, and my point stands with gold being backed by nothing.
For one, the US government has banned gold for decades. So it's not that "OK" with it. It also closely monitors gold deals for money laundering purposes. Not to mention that there are governments all over the world that still forbid the private gold ownership.
>Basically the US government is totally fine with side markets that they cannot control directly and that exist in parallel with the USD (whether it is EUR, gold, Bitcoin, whatever).
The US government is totally NOT-fine with anything it cannot control, especially side markets. Gold is a bad example: they already have banned it once in the past. EUR is also a bad example, because its a legitimate foreign currency (of 400 million people), not some "side market". And bitcoin is also a bad example, because it's insignificant at the time -- a very small niche. There are small software shops that make more money annually than bitcoin has at this point.
>You say it can be used for money laundering, but gold and cash can already be used for money laundering (and even more discreetly since trading gold or cash does not leave a trail like in the Bitcoin blockchain). The US govt does not make gold and cash illegal because they realize it is silly/unenforcable/pointless and would hurt the economy more than it would manage reducing illegal activity. Case in point: the US did attempt to criminalize possession of gold in 1933, but they eventually realized how silly and stupid this was, so they decriminalized it!
It's not that "eventually realized how silly and stupid it was". Like "oh, snap, why did we ever do such a thing? We are never to take the same decision again". It was just that another government, 4 decades removed from the one who took the original decision, and in different circumstances and economic climate, reverted the decision. We are 4 decades after that again, and things can change again if similar occasions to 1933 occur (which was in the "Great Depression" era).
Plus, the US still keeps very close tabs on gold, especially as it related to money laundering.
Something that they are willing to do for Bitcoin also. From the Wall Street Journal: "the U.S. is applying money-laundering rules to "virtual currencies," amid growing concern that new forms of cash bought on the Internet are being used to fund illicit activities. The move means that firms that issue or exchange the increasingly popular online cash will now be regulated in a similar manner as traditional money-order providers such as Western Union Co. They would have new bookkeeping requirements and mandatory reporting for transactions of more than $10,000. Moreover, firms that receive legal tender in exchange for online currencies or anyone conducting a transaction on someone else's behalf would be subject to new scrutiny, said proponents of Internet currencies".
>No. The world economy is not a zero-sum game. It is possible to create wealth (wealth is stuff we want, not money, see http://www.paulgraham.com/wealth.html ) and Bitcoin and its economy would certainly create extra wealth.
The economy might not be a "zero-sum game", but currency pretty much is. You kill a currency, activity and wealth migrates to another.
Plus, wealth is also destructed every day. A 0.0001% drop on Wall Street will destroy more wealth than all current bitcoins combined (which is a laughable amount, $150M, IIRC).
In my eyes, bitcoin is a geeky and early-adopter obsession slash fad, that attracts the wrong kind of people (the "gold-rush" types and techno-naive) and gives them false assurances.
Your argumentation attempts to compare Bitcoin to the fact there is a very real possibility that the US government will declare gold illegal again in the future... I am sorry but this makes me see you as a lunatic. If you believe that about gold, you may just as well believe they will make wearing red shirts illegal on Wednesdays. No amount of arguing will make you change your mind.
You say euros and gold are "bad examples", but I could cite tons of other examples. For example the US perfectly allows holding and trading in all (virtually all?) foreign currencies including countries it has strained relationships with (Iranian rial, Burmese kyat, etc) and these countries have economies as large as, if not larger than Bitcoin. And because none of these foreign exchanges or currencies are illegal, I doubt Bitcoin will be made illegal.
I await your reply explaining in a convoluted way why each and every foreign currency or commodity is somehow a "bad example", and why the US would allow them but not Bitcoin.
No, that is not the reason. Replace "Euros/Yens" with "gold" in my sentence, and my point stands with gold being backed by nothing. Basically the US government is totally fine with side markets that they cannot control directly and that exist in parallel with the USD (whether it is EUR, gold, Bitcoin, whatever).
Your other argument also fails to convince me that the government would want to declare Bitcoin illegal. You say it can be used for money laundering, but gold and cash can already be used for money laundering (and even more discreetly since trading gold or cash does not leave a trail like in the Bitcoin blockchain). The US govt does not make gold and cash illegal because they realize it is silly/unenforcable/pointless and would hurt the economy more than it would manage reducing illegal activity. Case in point: the US did attempt to criminalize possession of gold in 1933, but they eventually realized how silly and stupid this was, so they decriminalized it!
When the Internet was being developed throughout the world, were you the kind of person who looked at it and envisioned that its censorship-resistant decentralized aspect could be used to facilitate the transmission of potentially illegal information (software, data, child porn, ideas, etc, especially in countries with no freedom of speech) and said "geesh I bet governments are going to make Internet illegal"?
"For one, the government doesn't care for 'startups springing up everywhere'"
I think my point was clear that these startups are potentially the start of a big new economy complementing the current one that could financially benefit the government with revenues from taxes. So, yes, the government would love to see a big economy pop up.
"Plus, if bitcoin is banned, its economic activity will just migrate to conventional money again, it wont be lost."
No. The world economy is not a zero-sum game. It is possible to create wealth (wealth is stuff we want, not money, see http://www.paulgraham.com/wealth.html ) and Bitcoin and its economy would certainly create extra wealth. Another example showing how silly your assumption that the economy is a zero-sum game is: since the start of e-commerce, do you think that it has stolen commerce from or mostly added to the brick-and-mortar industry? Obviously, sometimes stolen (journals, etc) but e-commerce has mostly added wealth and economic activity on top of the brick-and-mortar one. In other word the size and richness and wealth of the current economy far surpases the one of the economy pre-Internet.