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Is This the End of Bitcoin Anonymity?

Published on April 11th, 2014 by Submissions

Is This The End Of Bitcoin Anonymity? Jeremy Allaire's Controversial Bitcoin Speech

By Ella Mason

At the recent ‘Inside Bitcoins’ conference in New York, Jeremy Allaire, the CEO of Circle, stated that, ‘Bitcoin needs greater levels of governance around it. I do not believe this industry will grow without collaboration from governments around the world.’

This statement caused quite a stir among the Bitcoin community. Many members of that community believe that one of the biggest benefits of Bitcoin is the fact that it is not governed by regulatory bodies. To gain a greater understanding and to learn more about currencies and the financial markets, information can be found here: http://www.ig.com/uk/spread-betting.

Members of the Bitcoin community see this as important for ensuring independence and long-term stability of the currency. Even more controversial was a second statement by Allaire, ‘One critical component to ultimate mainstream acceptance is the ability to assign identities to transactions.’

The idea that Bitcoin should not be anonymous strikes at the heart of what many see as a fundamental feature of the digital currency. Being able to perform anonymous financial transactions is one of the reasons for the popularity of Bitcoin. The idea that identities would be assigned to transactions could hamper growth of the currency.

But Allaire believes that greater regulation of the currency is necessary in order to strengthen relationships with traditional banks. He believes that banks require legal clarity as to the risk that Bitcoin poses. If there is stability with both banks and governments it will lead to wider acceptance of Bitcoin.

Common Misconceptions About Bitcoin

One of the current myths surrounding Bitoin is the belief that the currency is illegal.

In 2013 the US Financial Crimes Enforcement Network (FinCEN) set guidelines which stated that when miners mine bitcoins for their own personal use they do not need to register as a money service business (MSB). Because they are not required to register as an MSB they are not subject to the same reporting and record keeping regulations.

Another misconception is that Bitcoin is likely to be shut down in the same way that Liberty Dollars were. However, the shutdown of Liberty Dollars was due to a prosecution brought on it under counterfeiting laws because Liberty Dollars resembled the silver coins produced by the United States.

Bitcoins do not resemble the United States currency in any way.

Also, Liberty Dollars were a centralised currency and so shutting them down only involved arresting the heads of the company. Bitcoin, in contrast is a decentralised currency with no central server or office that can be shut down.

Another objection to Bitcoin is that it can help enable tax evasion. The fact is, however, that while it is easy to transfer the coins it is no easier to spend them anonymously on tangible goods than any other form of currency. Tax agencies will still be able to target the coin users because their assets will not be consistent with their reported income. Being able to follow a money trail is not always necessary in order to prosecute for tax evasion.

Jeremy Allaire's statements about ending the anonymity and regulatory free nature of Bitcoin are highly controversial. But they do signal a wider recognition that steps need to be taken in order to maintain the long-term viability of the fledgling digital currency.

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