Make Virtual Currencies Illegal!

in #money8 years ago (edited)

The European Central Bank reportedly wants the EU to tighten controls over virtual currencies, as they fear they might otherwise lose control of the money supply.

I agree that law makers should indeed create new rules for virtual currencies - and even make them illegal. But I might have a different understanding than the ECB what a "virtual currency" is. Bitcoin, Dash, Steem and other decentralised digital currencies are not "virtual". They have a real value.

You need the Bitcoin currency to use the most advanced payment network that has been built by humans yet. You need Dash to secure your anonymity. You need Steem Power if you want to have a say on Steemit. All these currencies are accepted by humans voluntarily because they have a value for them.

There is no such thing as an "intrinsic value". Every good or service only has the value that people subjectively assign to it. Precious metals such as gold and silver have been functioning as money for several thousand years because of their special qualities: they are scarce, fungible, divisible, transportable and durable. 

Paper money was introduced as a mere receipt for real money such as gold. People would only accept those pieces of paper as they could be exchanged for real money at a bank. Governments abolished the gold backing of paper money when the first world war started, as they could only fund it by printing unlimited amounts of money: virtual money with no backing and no real value. The only reason why this new form of money was accepted was because the governments forced people to accept it.

The introduction of virtual money lead to hyperinflation and economic crises. After World War II, the Bretton Woods system re-introduced an indirect gold standard: only the US Dollar was backed by gold, all the other currencies were pegged to the dollar by a fixed value. Governments could change their US dollars at the US central bank into gold.

This system worked quite well for a while, but then the US government printed more and more money to fund new welfare programmes and the Vietnam war. Other goverments started to distrust the US Dollar and changed more and more dollar bills into gold. The US gold reserves were melting away. Therefore on August 15, 1971, President Richard Nixon abruptly ended the gold backing of the US dollar.

Since then, virtual money rules the world. Central banks can create money arbitrarily out of thin air. The money supply has grown like cancer cells and so have government debts. Because of the money supply's inflation (latin for "blowing up"), prices go up and the value of people's savings shrinks, especially when interest rates are manipulated by central banks to be low to "stimulate the economy". 

Here is a nice video by Dominic Frisby and Pola Gruszka that explains the virtual or Fiat Money system well:

Virtual money is evil. It redistributes wealth from normal people to the ones who are close to the source of money - politicians, bankers and people who have good relations to the government.

This malicious system needs to be ended. So I suggest that law makers in Washington, London, Berlin, Brussels and elsewhere make virtual money illegal and shut down all central banks. There is no need for them anymore.

We now have money that is being accepted voluntarily by people and is backed by the laws of mathematics: cryptocurrencies such as Bitcoin, Steem and all the other forms of good, hard money, which prove to have a real value for people.


Read more about the flaws of the virtual money system (an excerpt from my book).

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That's interesting. A (lower) Dutch court ruled that Bitcoin isn't money or currency, but a medium of exchange for barter, giving it the same status as gold or silver or seashells. As far as I know this ruling hasn't been overruled by a higher court, so it still stands as case law. So, in The Netherlands Bitcoin is not a virtual currency at the moment, and barter is perfectly legal and not subject to control measures. I wonder how this will play out.

Nicely put! Upvoted and followed!

Exactly right! Fiat money (dollar, euro, etc.) is "virtual" money...

Bingo... Or should I say Biff, Bam, Zowie!

(For you Batman fans).

upvoted and resteemed!

Verry good post, upvote, follow and of course resteem!!!

You invest a lot of your lifetime in bringing btc out to the people. This is really valuable. Stay with it - you're doing great. Thanks for it :)

Really good read! Totally agree with your points here!

So far, the ECB says that virtual currencies should not be promoted.
This is not banning, it is merely to say that they do not want banks to have anything to do with Bitcoin.
To ban Bitcoin, they would have to make the trading of a non-currency asset against money illegal. Difficult issue, as you can trade digital goods of any kind.

Or they would have to interfere with bartering, i.e. the exchange of one good against another without the use of a currency.

One or another - adressing the topic would probably involve a massive effect on other legal topics in the finance sector. Nobody wants to get their fingers burned on that. Plus the ECB would stir up a lot of dust for being anti-innovative. And some banks are playing with blockchain-stuff themselves.

From the article cited, I would assume that they are pretty clueless. Yes, they would like to regulate virtual currencies. They do not like it. And by now, its considered relatively harmless.

But so far, I do not see, how they want to do it.
European law / finance specialists anywhere?

Hi Ben, I agree with you. I also don't think the ECB will ban Bitcoin, how would they do it? I was asked by a journalist to give my opinion on this issue, when I came up with the wording "Bitcoin is not a virtual currency, the Euro is". So I elaborated on that a bit in this post.