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Saturday, March 08, 2014 2:01 PM


Is Bitcoin Legal? Illegal? a Currency? a Commodity?


Regulators in various countries are grappling with bitcoin. What the hell is it? It's a good question and answers vary widely.

Bloomberg reports Japan Says Bitcoin Not Currency Amid Calls for Regulation.

Japan’s government said Bitcoin isn’t a currency amid calls for its regulation a week after the bankruptcy of Mt. Gox, the Tokyo-based exchange that was once the world’s biggest.

There is no law to define Bitcoin and relevant ministries are gathering information on it, Prime Minister Shinzo Abe’s cabinet said in a statement in response to questions from an opposition party lawmaker. Bitcoin transactions can be taxed, according to the statement obtained by Bloomberg News.

Japan isn’t the only country grappling with the regulation of Bitcoin amid reports of hacking into exchanges including Mt. Gox and concern that the virtual currency can be used for money laundering. In the U.S., states are wrestling with how digital-currency businesses could be regulated as money transmitters, while Russia has said Bitcoin is illegal under current law and Finland plans to treat it as a commodity.

The Japanese banking law doesn’t allow lenders to broker Bitcoin transactions or set up accounts for customers to store the digital assets, according to the statement. At the same time, current rules don’t prevent brokerages and asset managers from managing clients’ Bitcoins, it said.

“Japan’s government is falling behind the curve as Bitcoin grew rapidly over the past five years,” said Weizhou Yang, an analyst at Mizuho Securities Co. in Tokyo. “Banks shouldn’t take risks to dabble in Bitcoin business. On the other hand, getting Bitcoin into funds may broaden the investment product base.”
DPJ’s Okubo

Democratic Party of Japan lawmaker Tsutomu Okubo, a former vice finance minister, called on the government to rectify the lack of regulation last week. Officials from the Finance Ministry, Financial Services Agency and Bank of Japan have said they’re not in a position to oversee Bitcoin.

“The authorities’ stance that they don’t have responsibility is disgraceful,” Okubo, who also used to work at Morgan Stanley, said in a telephone interview on Feb. 26. “We need to establish a legal system.”

Finance Minister Taro Aso said today that the government hasn’t decided whether to regulate Bitcoin. Earlier this week Aso, who also oversees the banking regulator, said it wasn’t clear yet whether Mt. Gox’s failure was a crime.

Singapore’s finance minister said last month that the central bank didn’t recognize Bitcoin as legal tender. China has stopped financial institutions from dealing in it, even as trading continues. Danish regulators are drafting a proposal for lawmakers in an effort to protect consumers and businesses from losses.
The answer to my question is yes, no, don't know, and it depends (dependent on what country you are in).

Newsweek Unmasks Bitcoin Inventor

Two days ago, Newsweek unmasked Satoshi Nakamoto, The Face Behind Bitcoin. It's a fascinating article, and one well worth a look.

Here's a paragraph that caught my attention.
Andresen, a Silicon Valley refugee in Amherst, Mass., says he worked closely with the person "or entity" known as Satoshi Nakamoto on the development of Bitcoin from June 2010 to April 2011. This was before the rise of today's multibillion-dollar Bitcoin economy, boosted last year by the unexpected, if cautious, endorsement of outgoing Federal Reserve chair Ben Bernanke, who said virtual currencies "may hold long-term promise."

Since then, Bitcoin ATMs have been cropping up across North America (with some of the first in Vancouver, British Columbia; Boston; and Albuquerque, N.M.) while the acceptance of Bitcoin has spread to businesses as diverse as Tesla, OkCupid, Reddit, Overstock.com and Virgin Galactic, Richard Branson's aviation company, which has said it will blast people into space if they cough up enough Bitcoin.
Denial, Bizarre Media Road Chase

The Guardian reports Satoshi Nakamoto: man denies being bitcoin inventor amid media frenzy.
Dorian S Nakamoto, the Japanese-American man named as bitcoin inventor Satoshi Nakamoto, has denied any link to the digital currency amid a farcical media chase through Los Angeles.

Nakamoto, 64, disputed a Newsweek cover story that on Thursday unmasked him as the “father of bitcoin”. His denial cast doubt on a putative scoop the magazine used to relaunch its print edition.

Nakamoto made the denial in an interview with the Associated Press after a day of near-slapstick scenes in which dozens of journalists pursued him and an AP reporter through the city, provoking a social media storm. “I got nothing to do with it,” he said.

A media posse continued seeking Nakamoto on Thursday night after he left the AP office in downtown LA where he and the reporter had sought refuge earlier in the day.

The Newsweek story, written by Leah McGrath Goodman, named him as “the mystery man behind the crypto-currency” which exploded in popularity in 2013 and supposedly made its founder worth $400m.

Satoshi Nakamoto, a name attributed to the currency’s founder, was widely deemed a pseudonym for an elusive, genius hacker. Numerous media organisations tried and failed to find him.

Newsweek, a venerable but struggling brand that had dropped its print edition in 2012, returned to newsstands this week trumpeting its 4,500-word story under the headline “Bitcoin’s Face”.

Within hours of publication dozens of journalists camped outside Nakamoto’s door, ringing the bell with no response, until their silver-haired, bespectacled quarry, dressed in a grey sports coat and striped shirt, emerged and said he wanted someone who spoke Japanese and would buy him lunch.

“I’m not involved in bitcoin. Wait a minute, I want my free lunch first. I’m going with this guy,” Nakamoto said, pointing at an AP reporter. “I’m not in bitcoin, I don’t know anything about it.”

Cameras followed as the pair headed in a Prius to a sushi restaurant. When reporters intruded they left and drove downtown, the pursuers tweeting all the way and making comparisons to the OJ Simpson highway chase in 1994.

The pair took refuge in the news agency’s downtown headquarters, leaving a media mob outside. In AP’s report, published late on Thursday, the alleged currency mastermind said his English was imperfect and that the Newsweek reporter misinterpreted him when he said was “no longer involved in that”.

“I’m saying I’m no longer in engineering. That’s it,” he said of the exchange. “And even if I was, when we get hired you have to sign this document, contract, saying you will not reveal anything we divulge during and after employment. So that’s what I implied. It sounded like I was involved before with bitcoin and looked like I’m not involved now. That’s not what I meant. I want to clarify that,” he said.

McGrath Goodman, who spent two months researching the story, responded that she stood by her version of the exchange on his doorstep. “There was no confusion whatsoever about the context of our conversation – and his acknowledgment of his involvement in bitcoin.”
Followup Statement

Newsweek issued a followup statement in regards to the denials ... "Newsweek stands strongly behind Ms. Goodman and her article. Ms. Goodman’s reporting was motivated by a search for the truth surrounding a major business story, absent any other agenda. The facts as reported point toward Mr. Nakamoto’s role in the founding of Bitcoin."

I believe Newsweek has it correct. Leah McGrath Goodman did a fantsatic job of investigative reporting.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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