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Comment by illumin8 | Hacker News Reader

The problem with all cyber-currencies is that they can be used for money laundering, so the feds will shut them down. I know, you're saying, "it uses crypto so you can't track it and it's decentralized so you can't shut it down." This is true, however, if you want to spend your bitcoins you need to convert them into some recognizable currency, which means you need a bank to do so, which can and will be shut down by the feds.

See the case of E-Gold for a similar comparison. E-Gold was doing something very similar: letting people transfer money anonymously and untraceably, but backing it with real gold in a vault so that it had some legitimate worth. The feds shut them down.

Crypto currency sounds great, but unfortunately it always breaks down where the rubber meets the road, or where the crypto currency gets converted into real currency. These places are easy to shut down by any government.

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The simple solution is for digital assets themselves to become more "real." For example in Loom a merchant can issue a digital asset redeemable for his own products and services, and that digital asset can trade freely like cash. It's "real" because you can reliably obtain real things with it. These asset types are not as liquid as the US dollar yet, but within certain trading networks they can be quite useful.

Regarding money "laundering," that used to be defined as concealing the proceeds of crime. Now privacy itself has been defined as laundering, even when no fundamental crime is involved. That is to say, privacy itself is criminalized by statute. It's sick, and decent people need to reject that way of thinking. Stick to the principles of common law and voluntary exchange.

Just keep the gold in a vault in some foreign country, and keep the entity out of the US.

Look at TPB--a lot of money has to change hands on their site (advertisers, etc.) and in spite of pretty much every country trying to shut them down they seem to be doing OK.

So are you suggesting that a fundamental property of any workable currency system is the ability for the government to track and control where every unit of currency goes and how it is used?

No, I'm just stating a reality of the banking and financial systems. If you want to receive wire transfers, you need to be a federally licensed financial institution, and therefore subject to regulation. Those regulations say you must report all activity that meets certain patterns (ie, certain dollar amounts, suspicious transactions, etc). So, by default all money transfers are monitored by the government. If you want to turn bits into currency (ie wire transfer) you need to pass through a federally regulated entity to do so.

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