I have been away from the keyboard for a few days. I apologize to all of you who have been checking back with the website. Fortunately, the reason is that I have been working on a special project that I hope will bring fruit both to myself and to the bitcoin community.
I have missed a lot in the few days that my energies have been focused elsewhere. The biggest news is perhaps the fall of Liberty Reserve followed closely by the announcement by Mt. Gox that it will be requiring verification for new users trying to take money out of the system. Of course, following Mt. Gox’s recent problems with the DOJ, they are going to have a heightened sensitivity to compliance.
So what does this mean? The twitterverse and pundits are talking about how bitcoin is set now for its final demise. Once the government focuses its full attention on bitcoin, it will scare away all traditional currency handlers making it very difficult for US residents, and likely people from many other parts of the world, to move value between bitcoin and currency.
This will, in essence, deprive bitcoin of the air it needs to breathe and it will perish, or become the black market means of moving money many in the mainstream press say it is now.
There are a few positive signs in all of this, though. So far, the DOJ is targeting what it sees as money-laundering activities or non-compliance with its regulations. It is not yet aggressively targeting bitcoin users. The longer that bitcoin can be allowed to grow without undue attention, the more integrated it will become to the world economy, and the more difficult it will be to get rid of it.
It is for that reason, that I applaud Mt. Gox’s decision to verify accounts. They need to do so to protect themselves. They also need to do so to protect the reputation of bitcoin. For bitcoin to succeed, we need more and more people to start using it and to see its value. Those people are going to need to trust what bitcoin is, and showing that bitcoin infrastructure is solid and follows regulations — better than traditional banks — is the moment when bitcoin will break through.
I predict that bitcoin’s moment of general adoptions will be after several more economic shocks. The financial system in the US has barely been touched by regulators and the excesses continue unabated. We will see more national crises like Cyprus and then we will see a large financial meltdown in the US. At that time, bitcoin users will start coming out of the woodwork and people will see that it has been in use all around them for a long time. We will see that institutions and corporations had started hedging their bets in bitcoin. And then, there will be no way to stop bitcoin because it will become an international, unmanaged, alternative to national currencies.
Please let me know what you think by leaving a comment. I am also inviting guest posters. Go to the guest post page to learn more.