Archive for February, 2014

Bitcoin: Just as Broken as Cash

Posted in default on February 27th, 2014 at 08:44:45

According to a Business insider article, Senator Joe Manchin III is suggesting that lawmakers pursue a ban on Bitcoin. He wrote a very cogent letter on the topic, included in the linked article. In the spirit of his letter, I would like to share my own letter on a related, but slightly different topic.

Dear Senator Manchin,

I write today to express my concerns about the US Dollar. This currency has allowed users to participate in illicit activity, while also being highly unstable and disruptive to the world economy. For the reasons outlined below, I urge regulators to take appropriate action to limit the abilities of this highly unstable currency.

By way of background, the US Dollar is a currency that has gained notoriety due to its varying exchange value and relation to illegal transactions. Each US Dollar is backed by the US Government, thus the US Dollar is not only a token of value but also a method for transferring that value. It also means that this currency allows for anonymous and irreversible transactions.

The very features that make the US Dollar attractive to some also attract criminals who are able to disguise their actions from law enforcement. Due to cash’s anonymity, the market has been extremely susceptible to hackers and scam artists stealing millions from US Dollar users. Anonymity combined with cash’s ability to finalize transactions quickly, makes it very difficult, if not impossible, to reverse fraudulent transactions.

Cash has also become a haven for individuals to buy black market items. Individuals are able to anonymously purchase items such as drugs and weapons illegally.

That is why more than a handful of countries, and their banking systems, have cautioned against the use of the US Dollar. Indeed, there have been moves to ban the US Dollar in several different countries— most recently Russia, where lawmakers are predicting a complete collapse of the currency by 2017. Several other countries, including many in Africa, have issued legal threats over the use of the US Dollar. While it is disappointing that the world leader and epicenter of the banking industry will only follow suit instead of making policy, it is high time that the United States heed our allies’ warnings. I am most concerned that as the US Dollar is inevitably banned in other countries, Americans will be left holding the bag on a valueless currency.

Our foreign counterparts have already understood the wide range of problems even with the US Dollar’s legitimate uses - from its significant price fluctuations to its inflationary nature. Just two years ago, the US Dollar’s prices plunged after the currency’s major holders in the form of banks, experienced major financial issues. This was not a unique event; news of plummeting or skyrocketing US Dollar prices is almost an annual occurrence. In addition, its inflationary trends ensure that only speculators, will benefit most from possessing the currency. There is no doubt average American consumers stand to lose by transacting in US Dollars.

The clear ends of US Dollars for either transacting in illegal goods and services or speculative gambling make me weary of its use. Before the U.S. gets too far behind the curve on this important topic, I urge the regulators to work together, act quickly, and prohibit this dangerous currency from harming hard-working Americans.

Sincerely,

Christopher Schmidt
United States Citizen