Imagine if you will, an obscure meth lab tucked away in some trailer park in rural North Dakota, with a bunch of vagrants tweaking out at all hours of the day and night – robbing, stealing, pawning, and doing just about anything that they can in order to get another sweet fix. Now, imagine a long-time sting operation finally goes into effect and the feds swoop in and arrest everybody involved with the meth production along with all of the collateral users in the area. Upon later investigation they find stacks and stacks of cold hard cash that people used in order to purchase meth. The cash was untraceable, the transactions were clandestine, taking place in back alleys and behind closed doors.
The next day all of the financial blogs and newspapers start spewing out stories.
“Feds Crack Down on The Dollar Bill”
“Dark Times Ahead for USD – Is This The End?”
“Feds Seek an End to The US Dollar”
Sounds absurd doesn't it? That would never happen, of course. The events of this small little meth lab bust in rural North Dakota has no actual bearings on the United States financial system or its chosen currency. The price of the US dollar will not waver, the stock market will not be shocked, and the value of the dollar as a whole will not be lowered because of such an arbitrary and typical occurrence.
People know and understand that criminals use the US dollar for transactions and they do so without government oversight. There are gigantic money laundering operations and criminal enterprises and everyone is using untraceable cold hard cash – the same fiat currency the rest of us use for completely legal and traceable transactions – and no one sits around postulating as to whether or not this devalues the currency as a whole or whether or not the currency itself encourages anonymous illegal alleyway transactions. To do so would be irresponsible and pointless.
Yet – this type of insane speculation and sweeping idiocy is exactly what happens when any mundane and completely unrelated thing happens regarding Bitcoin. The feds crack down on Dwolla transactions to Mt.Gox? Watch the headlines roll in – it's obviously the end of Bitcoin. Not only that, but it's not an independent, singular form of transaction that has been cracked down on, but it's the entire Bitcoin network that has been halted, or so the scary, ominous headlines would have you think.
The most recent example of this headline hearsay is the Liberty Reserve shutdown. Liberty Reserve is an alternative payment network that was created solely for illegal activities. It ran a $6 billion online money laundering operation peddling stolen identities, child porn, drugs, and everything else you can imagine your friendly neighborhood black market would have on its shelves. The currency of choice for Liberty Reserve and its shadowy users was Bitcoin – the equivalent of online cash, which naturally provides users with the ability to make the internet's version of a back-alley anonymous transaction to some guy selling hot watches and shotguns out of the back of his beat-up Oldsmobile.
The Feds watched Liberty Reserve closely, and they shut it down for good reason. The price of Bitcoin didn't plummet (in fact it jumped up by $10 while the news was being reported) and people didn't stop using it.
Yet, irresponsible sensationalist headlines on behalf of the mainstream media and independent blogs began popping up everywhere spelling the end of Bitcoin. The headlines made it seem as though the Feds had just shut down an entire digital currency (as if that were even possible...which it's not) and that the whole digital currency scam had come to an end. I could practically hear the uneducated naysayers' collective condescending, “I told you so.”
Now, I don't entirely blame the journalists for jumping to such insane conclusions – it's a mix of miseducation on what exactly Bitcoin and cryptocurrency actually is and an insatiable need to stir up fervent community hissy fits. But when the same writers make the same mistake over and over again, one can't help but wonder if they're intentionally trying to spread misinformation, and that's something I have a problem with.
Take this headline from the Washington Post, for example:
Yes... yes of course it is! Because Bitcoin itself is a singular, centralized institution that someone can just completely shut down (are you picking up my sarcasm?). Why would Timothy B. Lee not check his facts first, or make an effort to understand the very basics of what Bitcoin is? It's a network made up of thousands upon thousands of individuals across the entire globe. A network so vast, in fact, that the governments of the world would have to pool their resources and engineer a Lex Luthor-type plan in order to shut the entire network down. Of course, Timmy does allude to this later in the article, but that's exactly what is so frustrating about these headlines. People tend to graze through information on the internet like a cow in the fields, or an ADHD-afflicted five-year-old who just downed a Red Bull and a plate of fudge, and pounding out misleading headlines like this causes a lot of harm and only helps in perpetuating the already rampant lack of education about what Bitcoin currently is and how it works.
Jennifer Shasky Calvery, the director of FinCEN, which is the law enforcement branch of the US Department of Treasury, said on Thursday in an interview with American Banker, “FinCEN has been out front in issuing our guidance to make it clear that we see virtual currency as a type of money services business. It's as much part of the financial framework as any other type of financial institution, and it has the same obligations as those financial institutions, the same obligations as any money services business out there. For those that choose to act outside for those obligations and outside of the law, they are going to have to account for that.”
For those of you who are worried about the doom-and-gloom headlines, and for those writers who would keep perpetuating the myth that Bitcoin is somehow subject to a manual shutdown, it's important to understand that, as a whole, the feds are absolutely fine with digital currency, they are working with it. Despite what the news reports say, BTC is more traceable that any back-alley cash transaction ever will be. Digital currency is a good thing, and as long as the government keeps working with Bitcoin, it will only become more legitimate and stable.
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