Why Bitcoin Scares the Crap Out of Bureaucrats
In typical bureaucrat fashion, a pair of senators are going after Bitcoin in the hopes that they can stop, uh, illegal drug purchases on Silk Road. Totally ignoring that fact that most normal dope fiends in the United States pay for drugs using Federal Reserve Notes. Should we ban $100 bills because cokeheads like to use them to snort lines?
Two U.S. senators have written an open letter to the United States attorney general, asking federal authorities to crack down on "Silk Road," the Internet black market drug trade, and the digital currency that funds it, Bitcoins.
After reading the report on Silk Road, written by Gawker's Adrian Chen, Democratic Senators Charles Schumer of New York and Joe Manchin of West Virginia wrote a letter to U.S. Attorney General Eric Holder, Reuters reports. The letter states:
"The only method of payment for these illegal purchases is an untraceable peer-to-peer currency known as Bitcoins. After purchasing Bitcoins through an exchange, a user can create an account on Silk Road and start purchasing illegal drugs from individuals around the world and have them delivered to their homes within days. We urge you to take immediate action and shut down the Silk Road network."
When Gawker wrote up Silk Road earlier this month, they so eloquently explained Bitcoin thusly:
Bitcoins have been called a "crypto-currency," the online equivalent of a brown paper bag of cash. Bitcoins are a peer-to-peer currency, not issued by banks or governments, but created and regulated by a network of other bitcoin holders' computers. (The name "Bitcoin" is derived from the pioneering file-sharing technology Bittorrent.) They are purportedly untraceable and have been championed by cyberpunks, libertarians and anarchists who dream of a distributed digital economy outside the law, one where money flows across borders as free as bits.
As we all know, drugs aren't the problem here (if they were, the government would hopefully know better than to go after the "money" used in transactions). The problem is that the government hates anything that bypasses taxes, tracking and forced inflation. The government hates free markets. It hates competition. It hates the idea of the populace taking things into their own hands and completely avoiding their ridiculous rules and regulations, fees and fines and morality clauses.
Bitcoin defines its own value. Can't say the same thing about FRNs, which are under the direct control of the very banks that issue increasing amounts of them on behalf of the Fed to keep the Ponzi scheme rolling.
No wonder it scares the shit out of these guys.