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Bitcoin Presentation

For Current Economic Problems
by

Justin Powell

on 29 April 2013

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Transcript of Bitcoin Presentation

Digital Currency Regulation What is Bitcoin? Bitcoin is a "crypto-currency". A currency that is decentralized, P2P, and virtually anonymous. It was first created in 2008 by Satoshi Nakamoto. Bitcoin uses cryptography, hence the title of "crypto-currency", as a means of transferring and creating the currency. Bitcoin "miners" generate more Bitcoins through a series of de-encryption of public hashes. Bitcoins use what is called sha256, but there are other crypto-currencies that use different encryption methods. This "hashing" on the network also provides payment verification and is the means of transferring Bitcoins from one user to another. What is a currency? Currency is a medium for exchange, and has a few other basic requirements.
Unit of Account - A standard on which prices are based.

Store of Value - Must retain purchasing power over time. Current Regulation Bitcoin is currently regulated as an MSB, or Money Services Business; much in the same way that MoneyGram is regulated.

The guidelines put out by FinCEN (Financial Crimes Enforcement Network) state that there are three categories of participants in virtual currencies:

1) Users - someone who obtains a virtual currency for the purpose of buying goods and/or services.
2) Exchangers - a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency.
3) Administrators - a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency. Issues This creates a few issues for the users of Bitcoin.
1) As people "mine" more Bitcoins, they become "administrators" of the virtual currency and as such become regulated as a MSB.

2) Were someone to attempt to trade Bitcoins as one does stock or foreign currency, the act of selling a Bitcoin for actual currency, such as the US dollar, labels that person as an "exchanger" and so holds them to the regulation of MSBs.

3) The simple act of exchanging state currency for a Bitcoin makes that person an "exchanger" by FinCEN guidelines.

By this logic, the only way Bitcoins can be used is to buy goods and services, for which there is not much in the way of infrastructure. Bitcoin by Justin Powell The End How to fix it: The original guidance for MSB regulation had a clause stating that one was only classified as an MSB if there was a transaction of over $1,000 in the following categories:

Check Casher
Currency dealing or exchange
Issuer of travelers' checks, money orders, or stored value
Seller or redeemer of travelers' checks, money orders, or stored value
Money transmitter
U.S. Postal Service

There is one exception to the $1,000 rule. Money transmitters do not have a minimum requirement. They are immediately considered an MSB.

Bitcoin transactions are categorized as money transmitters and if we were to allow them the minimum limit, it would make the general use of Bitcoins much less complicated. What do MSBs have to report? Because a MSB is considered a financial institution, it must report all transactions that would classify them as an MSB.

This is very difficult as most transactions using Bitcoin are anonymous, and neither party usually knows the other's name, let alone other personal information such as address and date of birth.
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