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Bitcoin Bill Begs Questions

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kparcell
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kparcell   8/26/2014 9:36:13 PM
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Excerpt: "Bitcoin and other digital currencies are picking up steam worldwide, and in late June California attempted to legalize the use of digital currencies through Assembly Bill 129. The bill also was designed to make legal the use of so-called "community currencies," the alternative currencies issued and circulated by a small but increasing number of local communities looking to, among other things, foster local businesses and community cohesion."

A celebrity objected to the use of his name to promote a cryptocurrency, and his well-paid lawyer found an obscure corporate code that prohibited use by corporations of any currency not the lawful money of the Unites States, which ended the legal battle.  California quickly moved to revoke that code before nuisance lawsuits against institutions such as Disney Dollars beat them to the courtroom.  I see no good reason to suppose that this is a sign of support from California for alt currencies, much less for bitcoin.

Local currencies issued by corporations, associations and individuals are lawful in the USA and so did not violate the code. States can't issue currency, and only the Fed can issue currency for use across State boundaries.  So only a few corportations, such as Walt Disney Company, were in violation of the code.


Another correction: Quoting Penal Code Section 648"...except as authorized by the United States...."

The actual text of the code reads "...except as authorized by the laws [emphasis mine] of the United States...."

Again, local currencies are legal, so no problem there. And in this case, it isn't a matter of corporate code, but criminal statute, and neither California nor the USA has any interest in shutting down Disney Dollars, so there's no hurry.

Another correction:

Excerpt:  "Digital currencies are created as electronic blockchain entries in a shared public transaction database."

Most digital currencies do not use blockchain protocol.  In fact, Cyclos banking software supports creation and circulation of digital currency, and had been downloaded around the world about 100,000 times before block chain was invented.

Aside from these errors of fact, and the dubious conclusion that California is leaving it to the US Federal Government to regulate digital currencies, I think it's worth mentioning that the blogger has a good point about the urgency of the question of whether the Federal Government "has the capacity to make and implement wise policy choices" in regard to digital currency.  In my opinion, for whatever that's worth, the US is doing ok there - first because the USIRS ruled that Bitcoin is not a currency but a commodity for tax purposes, which means that when used in trade there must be records kept of each transaction and included as appropriate in filings of profits and losses. Can you imagine if everyone had to do that with every transaction made with currency? This one ruling probably spells the end of Bitcoin, although because it's a Ponzi scheme (as determined by the World Bank) and not used much as currency anyway, there'll be some lag time between the ruling and the inevitable crash. 

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