Wall Street Journal Debuts Dedicated Bitcoin Coverage

Wall Street Journal Debuts Dedicated Bitcoin Coverage

When a venerated institution such as The Wall Street Journal dedicates a new section to covering bitcoin, you know an idea has hit the mainstream. Announced today, BitBeat: Your Daily Bitcoin Round-Up will aggregate news stories related to bitcoin and other cryptocurrencies the WSJ thinks its readers will find important.

We are launching a new feature here at MoneyBeat: BitBeat, a daily round-up of bitcoin news, notes, and thoughts. The crypto-currency had a hectic 2013, and the new year is already shaping up as a manic one as well. So far, there has been a high-profile hearing on bitcoin’s future, and a high-profile arrest of a bitcoin apostle, and while the price has been stable so far, another wild rally, or brutal sell-off, could come at any moment. We’ll do our best to keep you up to date on all the happenings as bitcoin goes through what many expect to be an important year.

The first piece of news? Bitcoin’s latest price, obtained via CoinDesk.

Veteran reporter Paul Vigna is bringing 16 years of experience covering the financial world to the page, and hopes to update it daily. He describes it as a place for “stuff we don’t have time to turn into stories we can make quick reference to.”

So far all the stories are from the newspaper itself or CoinDesk. Readers can send tips to paul.vigna@wsj.com.

“I started writing about [bitcoin] in the spring,” Vigna said. “I just got interested in it so we started doing it. With the volume of things people send me, it just struck me over the head that we should do a roundup.”

The Wall Street Journal joins Forbes in having a dedicated page for bitcoin coverage. Interestingly, despite featuring literally thousands of topics, the New York Times topic pages do not include bitcoin or cryptocurrency.

“The fact that I’m writing about it shows that I think it’s an important development,” Vigna said. “I don’t know where it’s going to go. As a writer I think it’s a really interesting development, an interesting story. I think this is going to be a pretty interesting year for it. So that’s why we’re doing this.”

This post was originally published in Bitcoin Magazine.

Why Are Bitcoiners Going to Jail for Money Laundering While Big Banks Walk?

Why Are Bitcoiners Going to Jail for Money Laundering While Big Banks Walk?

BitInstant CEO Charlie Shrem, along with alleged co-conspirator Robert Faiella, was arrested by federal authorities last week for allegedly laundering more than $1 million worth of bitcoins. This is a tiny amount compared to the largest drug-and-terrorism money laundering case ever. Yet when British bank HSBC was found guilty in 2012 of laundering billions, the firm paid a fine of $1.9 billion. Authories made no arrests, and HSBC still turned a $13.5 billion profit that year.

Rolling Stone’s Matt Taibbi detailed the crimes HSBC helped fund, including “tens of thousands of murders” and laundering money for Al Qaeda and Hezbollah. By contrast, Silk Road users have only been shown to have bought and sold drugs. (The six murders-for-hire commissioned by alleged former Silk Road head Ross Ulbricht were never carried out.) In fact, by moving transactions online, Silk Road likely decreased the violence associated with the drug trade.

Again, no individual associate with HSBC paid any money or spent a day in jail. Shrem is currently in custody. Why is there such a disparity? Clearly the size, scope, violence or effect of the crime can’t justify the discrepancy in response. The Justice Department explained it by saying that HSBC is, in essence, Too Big to Jail.

“Had the US authorities decided to press criminal charges,” said Assistant Attorney General Lanny Breuer during the announcement of the HSBC settlement. ”HSBC would almost certainly have lost its banking license in the US, the future of the institution would have been under threat and the entire banking system would have been destabilized.”

What are the moral and practical underpinnings of a law whose punishments are harshest for those who violate it least? The Justice Department is here admitting that the costs of fairly enforcing the money laundering laws as written—potentially shaking up a major bank—outweigh the benefits.

Charlie Shrem founded BitInstant, a service that let users quickly buy into Bitcoin, in his family’s garage with $10,000 of their money while still in college. He became a founding member of the Bitcoin Foundation and served as vice chairman of the board—a position he’s since stepped down from. But his startup was plagued by regulatory troubles from the start, fueled by a lack of clear regulation pertaining to Bitcoin. In a trailer for the Bitcoin documentary “The Rise and Rise of Bitcoin,” Shrem claims to spend “thousands of dollars on lawyers every day just to make sure that I’m not gonna go to jail.”

While Shrem operated in regulatory uncertainty, and didn’t know the charges against him on the day he was arrested, HSBC received 30 different formal warnings in just one brief stretch between 2005 and 2006. Even then, HSBC was openly flouting the rules. The bankers knew, for instance, that they were funneling money for people such as one of 20 early financiers of Al Qaeda, a member of what Osama bin Laden himself apparently called the “Golden Chain,”according to Taibbi. Another customer was powerful Syrian businessman Rami Makhlouf, a close confidant of the Assad family.

Some, including Tiabbi, have called for equal jail time for all offenders. There is no doubt that the Justice Department is overstating the lasting, worldwide effect of justly applying money laundering laws. However, the drawbacks to enforcing laws against what’s estimated to make up a third of all transactions are very real. In this reality, it’s legitimate to ask whether laws against money laundering should be applied to anyone.

Money laundering is, simply, the process of concealing sources of money. While the standard image of money laundering involves murders, Mexican narco-gangs, and Al Qaeda, in reality there are many reasons that normal people would want to keep their transactions anonymous—which is a big reason why Bitcoin gained popularity with libertarians in the first place.

As J. Orlin Grabbe wrote, ”Anyone who has studied the evolution of money-laundering statutes in the US and elsewhere will realize that the ‘crime’ of money laundering boils down to a single, basic prohibited act: Doing something and not telling the government about it.” Criminalizing this means that by default government has the right to know the source of all of every citizen’s money. In some jurisdictions, money laundering can be just using financial systems or services that do not identify or track sources or destinations.

Writing in American Banker, Bitcoin advocate Jon Matonis explains that “from President Roosevelt’s 1933 seizure of personal gold to the Nazi confiscation of Jewish wealth to the recent deposit theft at Cyprus banks, asset plundering by governments has a long and colorful tradition. Protecting wealth from oppressive regimes continues to this day.”

In that piece, Matonis calls money laundering the thoughtcrime of finance, a sentiment that’s gained traction in libertarian circles. Hiding or failing to report where money comes from is, in and of itself, a victimless crime. The theory is that everyone owes it to the government to make enforcing laws against violent crime easier. But that’s not really accurate, as most of the laundered money is used in other crimes whose violence stems from their being illegal, such as gambling and the drug trade.

This reporting to the government comes at a significant cost, both in terms of resources and privacy.

The Economist has estimated the annual costs of anti-money laundering efforts in Europe and North America to be in the billions. Even its most legitimate function, trying to keep people from financing terror, has been deemed a costly failure by the magazine. Curiously enough, the Economist concedes that efforts to reduce identity theft and credit card fraud are most effective at combating money laundering.

Perhaps this cost could be justified if the information gathered through the reporting requirements was used to cut off funds to terrorists. But as the HSBC case shows, that’s not the case. After getting notice after notice about failing to properly report on its customers, HSBC simply hired former call center employees to “investigate” cases of money laundering to unsavory characters. And when one employee actually did, he was fired.

Besides costing billions, efforts to stamp out money laundering also erode privacy. Ensuring every transaction is above board forces banks to be cops through so-called “know your customer” laws. These laws essentially conscript private businesses “into agents of the surveillance state,” according to the American Civil Liberties Union. Bitcoin offers an interesting counterpoint: Even if accounts may be anonymous, transactions are all public, which is a level of transparency not seen in the fiat currency system.

So why does alleged Bitcoin laundering deserve jail time? On a pure cost-to-benefit basis, perhaps it makes sense to jail Shrem while giving HSBC executives a slap-on-the-wrist fine. Revoking the bank’s license would rock the entire financial system, while Shrem’s enterprise was already on hold at the time of his arrest.

However, laws which result in jail time for minor infractions while the worst offenders walk free deserve their own cost/benefit analysis. If money laundering laws are worth their cost to companies, to the government, and to privacy, surely they are worth applying fairly and evenly. If not, perhaps its time to rethink whether they make sense at all.

This post originally appeared at VICE Motherboard.

Does Bitcoin Have an Image Problem? Three Reasons It Shouldn’t.

Does Bitcoin Have an Image Problem? Three Reasons It Shouldn’t.

Last week TechCrunch delved into bitcoin’s image problem. Having followed bitcoin for the past year or so, I expected a substantive critique of bitcoin’s legitimate branding… let’s call them opportunities. Instead I got a poorly researched bit of toothless invective. Here are the piece’s biggest errors.

Take the Winklevii, white knights in the bitcoin army, who are asking for little to no regulation of the bitcoin markets, a prospect that will further drive away “respectable” users.

Oh, if only. In reality, Business Insider reports that last week at the New York hearing on regulating bitcoin, the Winklevoss twins said they were gratified the Department was discussing ways to help legitimize Bitcoin commerce. And that their Bitcoin ETF is awaiting regulatory approval from the SEC.

As it stands now, bitcoin is used to buy drugs and maybe stuff from Overstock.

Actually, people who research things before they say them have found that illegal narcotics make up about half a percent of bitcoin transactions.

Finally, bitcoin users are seen as misogynistic and sexist. While this post by Arianna Simpson is not indicative of the entire culture, it is a cautionary tale for those who may want to take part in a meet-up or seminar. Furthermore, new users trying to ask questions in forums or IRC chat rooms are bombarded with invective, and posts like this one casting a negative light on BTC receive countless defensive replies. If bitcoin users don’t want to be seen as sexist, insular nerds, then the change begins from within.

How someone who wrangled a TechCrunch byline could be so unfamiliar with the tech community at large to think that what Simpson experienced is any way unusual for a tech meetup of any kind absolutely baffles me. Our author is either inexplicably ignorant about the problems which plague the tech sector in general, or is being disingenuous in an effort to make bitcoin look especially bad.

There is no impetus for the average user to dump money into an unregulated system that appears as volatile as the currency of some banana republic run by a capricious dictator.

How about a 4,000% increase in price or an escape hatch for people living under oppressive regimes?

And perhaps the biggest whopper of them all:

I understand the value of the system as a .zip file for wealth.

Well, no, you clearly don’t. This is where the legitimate branding opportunities come in. Bitcoin is probably going to help the wealthy the most and first. That’s just how things work. However, that doesn’t mean bitcoin doesn’t eventually offer the most promise to the poor. Here’s how.

1. Smart Property

Smart Property, built on the Bitcoin protocol or protocols based on it, has the potential to open up worlds of credit and contract previously unavailable to people who are low-income, homeless and otherwise not currently deemed “credit-worthy.”

See: http://ethereum.org/

2. Money remittance assistance

Remittances are a huge deal for people in developing nations. And bitcoin makes them cheaper and easier than ever before.

See: http://bitpesa.co/

3. Innovative charity

How odd that our author would say, “Forums like /r/bitcoin on Reddit are endlessly effusive, crowing that this cafe is accepting bitcoin and this dentist is filling cavities for bitcoin,” and yet totally miss the most exciting thing on /r/Bitcoin. The subreddit makes up the vast majority of funding for Florida’s mosteffective and innovative homeless shelter, whose operating budget is almost entirely made up of the cryptocurrency, obtained via donations from reddit users.

See: http://seansoutpost.com/

See: http://bitgivefoundation.org/

This post originally appeared in Bitcoin Magazine.

Co-Hosted Liberty Panacea

Co-Hosted Liberty Panacea

Sunday night I co-hosted the Liberty Panacea podcast with Matt McKibbon. Matt and I have great chemistry, and similarly nerdy interests, so of course it was a great time. Really hoping I can join him again soon.

It’s a call-in show, so if you’d like to know when I’ll be on next, follow the show on Twitter.

Listen below, or here.

Find Additional Radio Podcasts with Liberty Panacea on BlogTalkRadio
Podcast Interview with Don’t Worry About the Government

Podcast Interview with Don’t Worry About the Government

Chris Novembrino from Don’t Worry About the Government was kind enough to have me on his show.

In this installment, Chris is joined by Cathy Reisenwitz from Sex And The State. In addition to the content found at “Sex And The State,” they discuss ‘thick’ and ‘thin’ libertarianism, slut shaming, the Republican primaries, and why Cathy is losing her passion for the ‘hate watch.’

Will she get it back?

There’s only one way to find out…

Listen here. Had a really great time.

And Like Chris’ Facebook page.

And follow him on Twitter.