Today Der Spiegel reports about the new “measures” that the German government has taken regarding Bitcoins, the virtual currency.
Bitcoin is a strange animal. It has some characteristics of a free-market, commodity-based currency and some of the fiat-based currency (or as it is called in Libertarian circles, Monopoly money because they are intrinsically worthless).
If you are interested in information about Bitcoins, you can find a nice summary in Wikipedia Bitcoins.
Today the Finance Ministry of Germany has declared the Bitcoin a “unit of account” (whatever that may mean). This is typical government horse manure. Real money does not originate in governments but in markets. The so-called “recognition” of the German government does exactly nothing for Bitcoins other than recognizing that they exist…. only about 3 years too late. Then, why would they do so? Because recognizing their existence is the first step to robbery… scratch that… taxation.
Does anybody actually believe that a government is in the slightest interested in what “private wealth” is doing? Certainly not. If they were, they would have stepped in long ago, considering that Bitcoins are widely volatile. People can sustain huge losses yet, no government seems to be in any hurry to rescue investors from them. Of course, if one would to try to invest in hedge funds, which are actually safer than Bitcoins, well, you can’t unless you qualify as a sufficiently large investor and leave a paper trail longer the wall of China.
Funny thing, Der Spiegel also reports that Thailand has recently banned Bitcoin transactions since they were afraid they may lose control over their money flow. Translation: Thailand’s government is afraid that by allowing transactions in Bitcoins they may lose the monopoly to print funny-money (the Thai Baht), which will place the government into an instant bankruptcy.
In Germany Bitcoin profit investments are free after a year (why a year? why not 11 months, 30 days, 3 hours and 17 minutes? we guess somebody must have a calendar fetish). But now (with Bitcoin’s new and improved status) it may be taxed! Hurray! The taxman has arrived! Oh… wait a second, that’s bad. Actually, that’s worst!
In US the FinCEN (the Financial Crimes Enforcement Network – do they have their own TV channel? … nevermind) reported about the “legal status” of such virtual currencies. Funny since Bitcoin is a market-driven currency and hence valid, while all the other funny-papers that countries call currencies are actually… well… less worth than toilet paper! But we digress…
Also, according to the geniuses at FinCEN, virtual currencies are not legal tender under any sovereign jurisdiction. Really? Seriously? How much more twisted and idiotic can FinCEN be? The whole concept of “legal tender” is nothing but a smoke screen allowing countries to maintain its monopoly to print, and print, and then print some more and essentially, defraud their citizens.
By definition a real currency has no jurisdiction because is market-created and market-driven. Wherever there is a market it has the potential to be accepted. Only market participants get to make this decision. It is irrelevant and completely independent from jurisdictions that may attempt to manipulate it and control it. So, Bitcoin has no sovereign jurisdiction? HURRAYY!!!! We hope it will keep that way forever.
Of course, the US being what it is, and FinCEN being what they are, had to remove a large layer of anonymity from Bitcoin users by demanding bureaucratic paperwork for Bitcoin-to-Fiat-Currency exchanges. Anonymity, which is, to begin with, none of their business!
Bitcoin will reach a maximum number of virtual coins by the year 2140. If nothing is altered, a fixed number of country-independent units of value is a good thing; quite close to a true gold currency.
But then Bitcoin is a virtual currency, subject to all kinds of hacks and exploits. This is nothing like a true gold currency since the amount of gold that is extracted every year from mines is negligible when compared to the gold already in circulation. You can’t make more gold, while you can make more Bitcoins.
In summary, as Libertarians we applaud any and all attempts to free money from the clutches of organized governments, however feeble they may seem.
Use Bitcoins or not, it's your choice.
Note: please see the Glossary if you are unfamiliar with certain words.