Fragmentation of Bitcoin Community Begins after the Collapse of Mt. Gox and Secondmarket’s Wall Street Exchange Proposal

bitcoin wall streetvia chycho

A few comments regarding Bitcoin and the recent developments with Mt. Gox (2, 3, 4, 5, 6, 7, 8, 9) and the announcement that SecondMarket is stepping into the game and planning to launch the “first New York-based Bitcoin exchange” (emphasis added):

“SecondMarket CEO Barry Silbert says that he’s modeling it after the early days of The IntercontinentalExchange (ICE), and that he hopes to have a set of founding members in place by the end of March (i.e., a ‘seat’ model). These members are expected to include Wall Street banks and well-funded Bitcoin startups (think Circle and Coinbase). Non-member firms or individuals would not be allowed to trade — at least at the outset — but likely could do business via the member firms.

When Wall Street insiders announce that they are joining your game, but not allowing you to play on their field, which is what is implied with “Non-member firms or individuals would not be allowed to trade”, one should be concerned that the fundamental rules of the game may be changing, but, unfortunately, with fear running rampant within the Bitcoin community due to the collapse of Mt. Gox, many welcomed this news from SecondMarket.

For me, I shuddered when I read this announcement and in my opinion that should have been the reaction across the board, but it wasn’t. On the contrary, the prospect that a new exchange would put Bitcoin regulation in the hands of Wall Street bankers was largely dismissed:

“Multinational financial corporations helping shape Bitcoin’s evolution is a contentious prospect for many bitcoiners who spent years investing in the digital currency. To some, forsaking the anarcho-capitalist spirit that spawned Bitcoin feels apocryphal. But, to those who anticipate future calamity after the downfall of Mt. Gox, sacrificing Bitcoin’s decentralized nature in exchange for assurance and framework is a necessary, if not unavoidable evil.”

When the news about Secondmarket’s Wall Street exchange proposal came out some of us spent some time on a few threads trying to explain why this is a bad idea, but we didn’t get far. The common rebuttals to our comments were that we needed a stable market and this may require regulation through Wall Street insiders and involvement of big banks, and that’s when I shuddered again and slowly backed away.

[Continued at chycho]

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  • http://www.ContraControl.com/ Zenc

    Just as Chycho fears, this is an obvious ploy to co-opt Bitcoin with the intention of regulation and taxation or perhaps total destruction.

    Bitcoin has amply demonstrated the practicability of crypto-currency, though I fear that it may not survive its own success.

    The Early Bird may get the worm, but the second Rat gets the cheese.

    Also, no discussion of Bitcoins is complete, without reference to Neal Stephenson’s “The Great Simoleon Caper”. http://kuoi.org/~kamikaze/Text/simoleon.html

  • Reasor

    I think it’s exciting that there are still people out there who can’t find the flaw in a financial system so deregulated that money can just move to the bank to some robber’s account, and the anonymity built into the system guarantees that no one will ever find out who the thief was if the system works as advertised. Hot damn, I wish I had got in on mining Bitcoin early so that I could sell it to the true believers now.

    • salviad

      > “Obviously, Wall Street’s interest in Bitcoin is that it’s a form of
      money laundering that will enable them to get away with more fuckery
      than they do now.”

      Agreed. I don’t think HSBC was very happy giving up 6 weeks of their income/profits as a fine for laundering money for drug cartels/terrorists/cia. Maybe bitcoin will protect that profit.

    • Sytallix

      First of all, there most certainly is too much regulation within the financial system. For you to even compete against Wall St you need to spend millions of dollars complying with all manner of regulations and licensing agreements. Clearly, this is a massive god-send to any TBTF bank as the money is negligible to them.

      Regulations also make it impossible for small time investors to get into the market, as the costs of complying with regulations for a small time client ($5-30k) will exceed the modest fees they would charge, leaving them with no financial expertise.

      Everything these banks do that is all ready illegal, they should be prosecuted for. However, adding even more regulations that further entrenches them (the TBFT’s) at the expense of those who would replace them and conduct honest business will only worsen the situation.

      Also, no one can just ‘take’ you bitcoins if you store them correctly, but Govt provided currency is constantly stolen from you, via taxes, inflation, deficit spending and soon to be ‘bail-ins’.

  • don77701

    Mt Gox had it’s chance, now get out of the way, it’s Wall street’s turn.

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