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]