We’ve all seen the stories about the IRS’ new regulations on Bitcoin, declaring it property, and congress recent attempts to make not reporting $10,000.00 in Bitcoin a felony, but what we might not consider is that right inside our own house, could be the type of problem that ends the wild-west, unregulated trading of crypto-currency, at least for Americans, who currently make up over 38% of Bitcoin investors.
Here on Steemit, we’ve had a bit of drama over exchange, Poloniex, jacking around with their wallet for the last week, holding a ton of steem, and leaving depositors fundless. It seems like a minor thing, but this is exactly the sort of thing the fledgling crypto world can ill afford. It needs to be fixed before governments begin to step in and change things.
As Americans, we give a lot of lip service to “freedom” and “liberty” but the truth is, especially where our finances are concerned, to a large degree, our government owns everything. How else do they end up being able to take it from anybody, without even charging them with a crime? And bitcoin is no different, the FBI is currently the world’s largest holder of the crypto currency at the center of the crypto universe.
And it always starts the same way. We appeal to authority. It’s all fun and games until somebody loses their coins and goes crying to a court. And, try as they may, they won’t precedence to give them jurisdiction, yet. But guess what? 50%+1 of both houses and a presidential signature later, and they own the crypto exchanges, lock stock and smoking barrels.
Don’t believe me? Prior to the Great Depression, stocks and other securities were primarily traded among the wealthy elite, who, it was believed, could afford the risk, and had the financial intuition to ferret out bad deals. But, initially, it was a con man’s game. The Blue Sky laws, enacted by states like Kansas, were put in place as more everyday people began to invest.
They insisted on full disclosure from companies about their assets and the nature of the investments, but left investors to fend for themselves beyond that.
Soon, the economy was booming and stock trading became big business. People who had never had bank accounts, began to invest in companies they’d never heard of, partly because no one had, they were too new. Bankers and company owners would trade shares among themselves to raise the price (sound familiar?) then dump the shares on the unwitting public at inflated prices and cash out.
Then, black Tuesday happened and took the banks down. Immediately, congress began planning to regulate the entire industry and now, it is one of the most heavily regulated of all businesses around the world.
Is that what we want?
As I’ve been looking into where my own coins have gone I’ve made some interesting discoveries. Exchanges like Poloniex, and Bittrex are not what they appear to be at all. A look inside their wallets tells an interesting story. They don’t earn rewards, but they send coins to accounts across Steemit, why?
Not sure. But, I can see where their money is coming from and make some assumptions about why.
In Poloniex’ case, the money is almost entirely from steem being powered down, and cashed out. Nothing wrong with that. You can track the transactions back to their originator and see where it’s coming from. But, it seems to me, that a separate account should be set up for these transactions, ensuring the integrity of the bookkeeping.
If the Poloniex commissions are removed to another account on regular intervals, and all other expenses made from there, then we can see that things are handled correctly, and there’s much less tendency for you coins, or mine, to be spent before deposit on the exchange.
I’m not saying they’ve done that, I’m saying there’s virtually no way of knowing. In accounting terms, this is known as “co-mingling” of funds and it’s illegal under SEC jurisdiction in the securities business. Investor’s accounts are sacred and can’t be touched for any but very specifically proscribed reasons, under strict regulations.
So, what am I saying? I’m saying it’s time Poloniex and Bittrex and the other exchanges grow up and start acting like the multi-billion dollar gate keepers they are! If I were in their shoes, I’d enact some strict controls, immediately.
I’d established published protocols, along with transparency and an appeals process that doesn’t land a user receiving form letter email responses to their questions for over a week when funds go missing unexpectedly.
I’d set up some type of oversight within the community, and make it known who could we could turn to to help us understand baubles in the system, there are sure to be some, it’s brand new, and who to go to when we need things set straight.
If I were Steemit, and I guess I am, I would insist that any exchange dealing in Steem have a protocol in place before launching, and a white paper describing their ethical rules and code of conduct. I’d make it happen now for those who are right here with us.
I think this needs to happen sooner, rather than later. We libertarians and anarchists talk a good game abut not needing government, but here’s the reality, the reason they take over is because the shit hits the fan, and it’s going to.
Within the year, we will see law suits over crypto currencies become common place, now that they are described in IRS code as property. They will be subject to asset forfeiture, asset split in dissolving business partnerships and marriages, and more.
When the SEC comes knocking, they’ll need the public on their side to take over. Without them, they face an uphill battle, the formation of a large black market and turning a lot of ordinary citizens into outlaws in the process. They’re good with that, but it’s hard and it takes time. They’d rather have a clear cut case. Poloniex is handing them one right now.
On the other hand, if the Crypto space can grow up, form an alliance, write some rules that they voluntary agree to, including consumer protections and appeals, they might have a chance. At the very least, they might get a minder, but no direct control. If the rules are in place and working, it’s less likely some congressman will make his name on bringing the corrupt Crypto industry to heal.
It's our choice and I know I’m one small coin in a big ocean, but I think it’s worth a shot. We need to respect each other and stay true to the idea of blockchain, transparency and fairness. It’s meant to make money more fair, and secure. But, the way it’s going right now, it’s going to end up just like the stock exchange, another fatcat business, so heavily regulated, you need a pro to trade your coins, and you’ll pay taxes and fees on every transaction.
It will happen, unless we decide we want something better.