BTC Sessions - REGULATORS LOOM: Will Bitcoin Be Fully KYC ep125

Episode Date: December 10, 2020

On the back of an ominous tweet thread from Coinbase CEO Brian Armstrong, more news and rumors continue to swirl in regards to upcoming heavy-handed regulation around exchanges, transactions and personally held Bitcoin wallets. SUPPORT THE SHOW: LEDN Bitcoin backed loans –  get $25 free https://bit.ly/397rlLN Get Wasabi wallet for Bitcoin privacy https://wasabiwallet.io/ Cobo Vault: secure your Bitcoin! https://bit.ly/2GgMFlH BillFodl: get your wallet backups in solid steel. https://privacypros.io/ Bitrefill: use Bitcoin to purchase gift cards https://www.bitrefill.com/buy/?code=O04UMic9 LIGHTNING tips: https://tippin.me/@BTCsessions Telegram channel: https://t.me/btc_sessions

Wasabee wallet and fairly private. Hey everybody. Welcome to the show. I hope you're all doing well today. Lots to talk about today. There's been a lot of rumblings as of late. In the regulatory front, we had an ominous tweet thread from Brian Armstrong and that has seemed to snowballed and we've seen more of that lately. So we're going to be discussing a little bit or rather a lot on the regulatory front today along with a bunch of other topics, everything that's going on in the news today. So of course, as always, welcome to the show. Now, this one is live. So, of course, quick. We'll do it live. Okay. We'll do it live. Do it live. I can, I'll write it and we'll do it live.

And thing sucks. You never know what could happen here. So, again, welcome to the show. I'm Ben with the BTC sessions, and this is your daily session. All right. So let's get my screen going here so that you guys can see. All right. So let's take a quick look at kind of where we're at in the market and a few parameters that I wouldn't mind looking at for Bitcoin. So we're sitting currently at the time of recording that or not recording, I guess going live on this. 18,25450 in and around that range. We took a dip. the last couple days.

We were up in kind of the mid-19,000s, and then we took a hit, and we did previously dip down into the below 18 for a little while, although not super long. So, yeah, I don't know how long this rebound lasts, if we zip back up or if we're in for more. But, hey, we shall see. But for the time being,

for a single U.S. dollar, you can pick up 5,470,000. Sats. We are at block height 660,791. 88.42% of all Bitcoin has been mined. That's going to be hitting 90% by the end of next year. And in terms of fees, if you want to get into the next block, you're going to be paying 67 sats per byte.

If you're looking at an hour, around 13 sats per byte, we'll do you for fees. And if you're willing to wait a day or more, one sat per byte can still get you through. Yeah. So before we dive into everything, of course, just quick shoutouts to sponsors of the show. Lend.io, this is where you can use your Bitcoin for a variety of different services. I've used their Bitcoin back loans on a few occasions to save my butt.

This is where you can use your Bitcoin-S collateral to get a Canadian or U.S. dollar loan. So if you're in a pinch and you need dollars, but you don't want to sell your Bitcoin because that is taxable and you're worried about buying back in at a higher price. that could be for you. Now, they also have Bitcoin and USDC savings accounts with interest rates of up to 11.7% annually paid monthly, and they've got their B2X offering. It uses the same loan mechanism to instantly buy more Bitcoin, effectively doubling your Bitcoin on the spot. Of course, make sure you do all your reading on that, but if you want to check them out and you click the link in the show notes,

if you opt to get one of their loan products, they will give you $25 for free into your savings account. Up next we have the Cobra Vault. This is one of my regularly used hardware devices. It is 100% air-gapped, which is why I love it. That means you never plug it into anything internet connected. It's all done via QR code, keeping the keys to your money safe and offline. It has a secure element, open source firmware. By the way, I recommend that you switch over to the Bitcoin-only firmware.

And it works with all my favorite wallace, Bitcoin Core, Electrum, Wasabi on desktop, blue wallet on mobile. and it works with a lot of the great multi-sig solutions out there. So check them out. Again, links in the show notes, and I am using the CobraVolt Pro for your reference. It has the fingerprint scanner and the rechargeable battery. Now, I live on Bitcoin.

Most of my income is in Bitcoin, but I need to eat. I need to drive. I need to do a whole bunch of different things. And bit refill is a godsend for me to be able to do that. Not just that, but maybe you need to do some Christmas shopping. Maybe you need to take advantage of some of the games. games that you've had this year, you can do that through bit refill. And in the process, you can actually earn Bitcoin back. So you may as well earn some of those stats back while you're

spending. I use this quite regularly. It's very nice for me. They've just got basically everything I could want. So head over to bitrefill.com links down below. And then finally, we have the guys at Privacy Pros with the Bill Fottle. This helps you back up your wallet in solid steel. you would be writing it down on a piece of paper and keeping it somewhere safe, but that doesn't really save you in the event of fire or water damage, like a flood. Plus, you might accidentally throw things out. So putting your seed frays in solid steel saves you from fire and flood and just kind of you proofs it.

You're much less likely to throw out a piece of solid steel than a piece of paper. So check them out. There's a link in these show notes down below. they also have a bunch of other cool swag and things like Faraday bags for the more privacy conscious ones out there check them out and with that let's dive into what's going on here because so so some preamble for those not in the know back this past week we had Brian Armstrong and he tweeted out a tweet thread that was rather ominous talking about potential incoming regulations around self-hosted, quote-unquote, self-hosted wallets, which means like

privately held wallets, taking it into your own custody. You know, there was no specifics of what was actually happening, but there was rumors around the Treasury handing down some harsh regulatory measures before the end of Trump's term. So this has continued to snowball, and there's a lot of kind of worry around this at the moment. So this happened. This article here is from Yahoo Finance and Reuters. The G7 finance officials back the need to regulate digital currencies. So this article here says a few things.

Finance ministers and central bankers from the G7 advanced economies strongly supported the need to regulate digital currencies. The U.S. Treasury Department said in a statement Monday after a virtual meeting of the officials, German finance minister issued a sharply worded statement after the meeting, underscoring his concerns about authorizing the launch of Facebook's Libra cryptocurrency, newly named, renamed, rather, Diem in Germany and Europe. He said, quote, a wolf in sheep's clothing is still a wolf. It is clear to me that Germany and Europe cannot and will not accept its entry into the market while the regulatory risks are not adequately addressed.

He added, and this is my favorite part, he added, we must do everything possible to make sure the currency monopoly remains in the hands of states. Fuck you. Fuck you. They're not even trying to mask it anymore. They're like, we need to keep this monopoly so that people don't have choice of the currency with which they're forced to utilize. in their daily lives.

Well, I hate to tell you, but that ship is sailed. Even in the face of extreme regulatory measures, something will survive. I'm guessing Bitcoin. Something will survive and you will not be able to nail it down. I'm sorry. It's not this is Bitcoin serves to fix the problems that gold had in the first place that allowed us to go off a gold or sound money standard. It's going to be very difficult to do this.

Now, I do enjoy here that he's talking about Libra. He's talking about Facebook's cryptocurrency without addressing the elephant in the room, which is Bitcoin, because you can actually go after Facebook. It's a lot more difficult to do anything about Bitcoin other than trying to stop the on and off ramps and deal with that. maybe going after app stores could, but that's going to be difficult, man. Anyways, we did have also, which way do I want to go?

Let's skip over to this. So in relation to the Treasury rumors, this gives further credence to the fact that it's a warranted rumor. There was a letter sent out by members of Congress to Steve Mnuchin, the Secretary Treasury, And the beginning of the letter dated yesterday, December 9th, says, Dear Secretary Mnuchin, we write to you to express our concern regarding reports that the Treasury Department is considering issuing regulations that would restrict the use of self-hosted wallets.

We request that the department consult with Congress and industry stakeholders before taking any decisive action. So what they go into here is they basically outline how ridiculous a proposal like this would be and how far it would set back the U.S. in relation to most of the world and how more friendly jurisdictions would make leaps and bounds more progress than the U.S. in an instance like this, they allude to the fact that the Internet was tried to, they tried to regulate the internet the same way. And if that had gone through, it would have stifled innovation.

And we would be nowhere near as well off as we are now with a global open internet. And the goal of global open finance is one to strive for not to hinder. They go on to talk about how difficult it could be to pin that down and how you don't need really a surveillance state drag net on every single tiny transaction of people buying their goods and day-to-day items. It does not need to be done. And the compliance cost on companies could be onerous and completely ruin the value

proposition therein of even having something like this. So, yeah, interesting letter here. One of the signees, interestingly enough, funny enough, is Warren. Davidson and if that sounds familiar, he's the guy who actually used the term shit coin during the hearings around Facebook's Libra. So super funny. Anyways, in the same vein, we have France. And France is on the verge of imposing mandatory KYC rules for all crypto transactions. Now, I should clarify here, this is more based around exchanges. And this was actually spurred on under the guise of preventing terrorist financing, which side note, before we dive into

the meat of the story here, the majority of terrorist financing is done via the US dollar, and a lot of it is actually done through the banking system itself. A lot of the money laundering and everything goes through actual banks. So besides the point, a little bit further down this article from the block. They talk about the actual KYC measures. So they said in France, the finance ministry is set to publish a decree later this week, likely Wednesday or Thursday, which will mandate full KYC for all crypto transactions, including crypto to crypto transactions. A decree is the rule of law in France and does not go through any parliamentary approval processes. So it's good to know that the people have their say or don't at all.

The full KYC of all crypto transactions means that exchanges and other firms will have to verify their customers, irrespective of transaction size. In other words, all transactions worth more than zero euros will have to go through full KYC processes and require two forms of government identification. Can you imagine being like, I just want like five euros. of Bitcoin to learn about it and then being like, you need two pieces of ID and we're gonna fully KYC and track everything that you're doing now. The current limit for KYC checks is a thousand euros and at present applies only to crypto to Fiat transactions.

So again, to specify here, currently if you're an individual and you move Fiat currency, so whatever your local currency is, I guess in France, it would be the Euro, if you fund an account with euros and then trade those for Bitcoin or other cryptocurrencies, then yes, there's a KY process, KYC process involved in that. And that to me makes sense in that traditional finance is wrought with fraud. You can easily gain access to somebody's bank account and send money over that may or may not be yours or you may be stealing it from somebody. And so they need to double check that because if they give somebody irreversible Bitcoin and they would draw from the exchange and they later find out that the individual was sending money that was now reversed back to the proper bank account, well, the exchange is out the money.

But in this case, it's literally just everything. So if you have Bitcoin and for some reason want something else, a stable coin or whatever, both of which you can't really be reversing for the most part. we'll say. It still applies. So it just seems like they just want to see and crack down on everything in France. I mean, best of luck, because there are other measures people can take. So let's say you don't like this. What do you do? Let's say you're not too keen and you maybe want some preparation in the instance that the worst of the worst happens. You hope for the best, but prepare for the worst. Well, there's a number of things that just in practice you should do anyways. It's just good practice. Number one, self-custody. Don't leave your stuff on exchanges. Get it off.

Get it into your own custody. Trusted third parties are security holes, right? They are honeypots of not only information, but of funds. It's the same amount of effort for somebody to try and hack an exchange as to hack an individual, but the reward is far greater. So it's much better to have it in you're in custody. Number two, make sure you got good security. Get yourself a device, a hardware device. If you're newcomer and you're kind of timid and you want something super easy, maybe lean towards a ledger or treasurer. I've done videos on both of those. If you want a little bit more control, maybe better privacy and kind of a step up and you want to level up your Bitcoining, you want to probably lean cold card or cobo. Both of those can be air-gapped, meaning they don't get

plugged into internet connected devices. You have some more controls there. So either way, videos on all those, you can check them out, search my channel. Up next, maybe you just don't want to go through centralized exchanges. Maybe the rules get onerous and you just, you don't want to deal with it. Buy peer to peer. Now, I haven't done videos on these yet, but they're coming. I swear to God, I just, I don't want to make a lackluster and incomplete tutorial on this kind of stuff. But check out BISQ, B-I-S-Q, and check out Hoddle-Hoddle, both.

of those you can do peer to peer, basically you can do things like send a bank transfer to somebody and they send you Bitcoin. And there's some measures in between and, you know, reputation systems to kind of mitigate your risk in those transactions. But worth taking a look at. Now, outside of that, what about earning Bitcoin? You can earn Bitcoin directly for goods or services. So, you know, if you're doing services, you can be requesting Bitcoin direct and just give them a receiving address. or if you've got an online shop, you can utilize something like BTC pay server. This is free and open source software

that allows you to have a plug in on a website that accepts Bitcoin, on chain, and via Lightning Network, and there's no intermediary, there's no third party. It's just software that runs. It checks the price and prices however you like. And then when somebody comes to your shop

and buys something from you online, they can pay direct in Bitcoin, And there's no one in between that. It goes direct into your own wallet. So worth checking out. Up next, run a node. Running a node is excellent because you are running the Bitcoin software yourself. So in an instance where perhaps wallets on app stores get co-opted,

well, if you're running your own Bitcoin node and you're using your apps or your wallets to reference your own node, then that, that company that issued the wallet can no longer tell you what Bitcoin is. So what I'm getting at here is if there was an attempt to switch wallets over to only recognizing like a KYC version of Bitcoin, like a fork of Bitcoin, you could basically say, no, I'm running the Bitcoin software here. That's what I'm referencing. If you try to send me something that is not real Bitcoin, I will not accept it.

And by referencing your own node, you ensure that. So I've done videos on my node and on Umbral, both of which are kind of easy, kind of set up, plug and play, download software, and you're off to the races type things. Alternatively, by the way, check out those videos and see if you would like to run either of those. Alternatively, you can, just on a laptop or on a home computer, download Bitcoin Core. and that will probably take a while to sync, maybe a couple days or whatever, but you leave your computer on. It downloads the entire history of Bitcoin transactions

and runs according to the rules of the network and nobody can force you to change that software as remains true with MyNote and Umbroles. So check out those options for you there. And Bitcoin Core, of course, just for free. You don't have to buy parts or do anything. And then finally, coin join. You break the links between,

you and your coins so that you maintain your financial privacy. And I'm not just talking from a regulatory sense. I'm talking in general. If you're doing Bitcoin transactions, every time you transact with a merchant, the merchant can see the change that comes back to you and then start to paint a picture of what Bitcoin you actually own. And this can make you a target for criminals. They can figure out who you are and come and threaten you until you hand over your

Bitcoin if they know how much Bitcoin you have. using tools that that allow you to coin join break the links so that you don't become that type of target. So please download wasabi, download samurai, both of these can be used. And I've done videos on both of these that break the links between you and your coins. And, you know, outside of this, there's more stuff coming down the funnel. We've got pay to end point in or pay join. Lots of interesting things and something else that I will be touching on later. But privacy is improving for Bitcoin. It's not perfect, but you know, you can use different things like lightning and everything and that improves upon it too. So let's move on from the regulatory front.

We'll have to see how things develop. But again, it's in my opinion, it's going to be very difficult to get a handle on this. Even if bad regulations get past, I feel like eventually it's going to be a shrug your shoulders moment and they'll have to repeal certain things. especially in that you're not going to coordinate an entire globe to have the same regulations. And the more friendly jurisdictions will be leaps and bounds ahead of the ones that are too onerous with their crackdown. Now, moving on, micro strategy, this is the company that recently piled $425 million worth of their $500 million treasury into Bitcoin. Well, they are going to raise another $400 million to buy even more Bitcoin. Man, these guys are bullish on Bitcoin.

So Micro Strategy is doubling down on its Bitcoin bet, saying Monday that it plans to offer $400 million of convertible bonds in order to buy more cryptocurrency. The proceeds from the offering will be invested in Bitcoin pending the identification of working capital needs. Micro Strategy bills itself as a business intelligence firm, but has been doubling down on this capital allocation strategy disclosed in July, which included investing up to 250 million assets into Bitcoin. That was just their first round. Now, Microstrategy bought more in December, December 4th to be specific, saying now it has around 40,824 Bitcoin in total.

They say we see the recent stock rally as overextended and see incremental risk to the story following an announcement of $400 million convertible note fund for even more Bitcoin purchases. This is from Citigroup and they downgraded Microstrategie to a sell after this news. Funny thing in another branch of Citigroup, they put out an analysis saying that Bitcoin could be 300,000. plus by the end of 2021. So you have Citibank and Citigroup talking about basically opposite ends of the spectrum saying Bitcoin is going to be worth 300 grand potentially. But you should probably sell the company that is buying more Bitcoin. It seems not to parse.

Maybe the right hand should check what the left hand is doing. Anyways, the stock has doubled since the beginning of November as the price of Bitcoin has surged. Yeah, the stock did fall 4.8% pre-market on Tuesday. But I mean, if you look at the chart, it's barely a blip, just like the recent dip in Bitcoin is barely a blip. Moving on here, the S&P Dow Jones indices to launch cryptocurrency indexes in 2021. So S&P Dow Jones indices, a division of financial data provider, S&P Global Inc. Said on Thursday, it will launch cryptocurrency indices in 2021, making it the latest major finance company to enter the nascent asset class. S&P Dow Jones Index branded products will use data from New York-based virtual currency company, Luca, on more than 550 top traded coins.

The company said, I don't know why they're putting effort into some of those tiny ones. besides the point. Anyways, moving on, clients will be able to work with the index provider to create customized indices and other benchmarking tools on cryptocurrencies. Yeah, so that's interesting. Again, I guess stuff like this,

it just gets it in front of more eyeballs and people start to give more credence to Bitcoin itself as they see that. Now, American investors are apparently gobbling up this Bitcoin boom more so than, previously. Okay. And so this boom has represented a shift in the market, which has typically been dominated by investors in East Asian nations like China. We saw that in 2017. A lot of times you would see major price moves in the middle of the night when it was daytime in China,

if you're in Western countries. That seems to be changing. So they say nations like China, Japan, and South Korea, you know, they used to kind of have the, the, the, the first say or move the market more. Well, it is North American investors who have been bigger winners in this 165% rally this year. Weekly net inflows of Bitcoin, a proxy for new buyers, to platforms serving mostly North American users, have jumped over 7,000 times this year to over $216,000 Bitcoin worth $3.4 billion in mid-November, and this was compiled for routers. Reuters. East Asian exchanges have lost out. Those serving investors in the region bled 240,000 Bitcoin worth $3.8 billion last month versus an inflow of $1,460 in January, according to data

from blockchain researcher chain analysis. The change is being driven by an increasing appetite for Bitcoin among bigger U.S. investors, according to Reuters interviews with cryptocurrency platforms and investors from United States and Europe to South Korea, Hong Kong, and Japan. The sudden influx of institutional interest from North American region is driving a shift in Bitcoin trading, which is rebalancing asset allocations across different exchange platforms. Yeah, I mean, I would echo that just in watching, again, as I alluded to, the timing of price movements, you seem to see the bigger movement. movements happening more often than years past during the day in U.S. markets as opposed to

overnight in East Asian markets. Now, another, again, a lot of these institutions are getting pretty bullish on Bitcoin. J.P. Morgan, by the way, who's CEO previously called Bitcoin a fraud and said he would fire anybody that was caught trading Bitcoin, while J.P. Morgan says gold will suffer for years because of Bitcoin to see this coming out. Anyways, so money has poured into Bitcoin funds and out of gold since October, a trend that's only going to continue in the long run as more institutional investors take positions

in cryptocurrencies according to the bank's quantitative strategists. J.B. Morgan is one of the few Wall Street banks that's predicting a major shift in gold and crypto markets as digital currencies become increasingly popular as an asset class. The trend poses a problem for bulls and precious metals markets over the coming years if investors move even a small slice of their allocations away from gold into crypto. Quote, the adoption of Bitcoin by institutional investors has only begun, while for gold, its adoption by institutional investors is very advanced. Grayscale Bitcoin Trust, a listed security popular for institutions,

has seen inflows of almost $2 billion since October. compared with outflows of $7 billion for exchange traded funds backed by gold. JP Morgan's calculations suggest Bitcoin only accounts for 0.18%. So less than a single percent, like a fifth of a percent of family office assets compared to 3.3 percent for gold ETFs. Tilting the needle from gold to Bitcoin will represent the transfer of billions in cash. wild. Okay. Last

bullish institutional leaning article here. Bitcoin making progress on bid to oust the dollar says Morgan Stanley chief global strategist. So

Morgan Stanley investment management chief global strategist waxed bullish on Bitcoin's potential to usurp, uh, the US dollar for payments in a Wednesday financial times op ed. Quote, today most bitcoins are held as an investment, not used to pay bills, but that is changing.

He cited increasing usage in small pockets of international trade and PayPal's recent move to tap cryptocurrencies as a funding mechanism. Considering are considered in the context of falling faith in ever growing dollar reserves, This trend could bode well for market leading cryptocurrency, the market leading cryptocurrency being Bitcoin. He said that or argued that Bitcoin will gain as its traditional competitors falter. He cautioned that the Bitcoin bubble could yet burst, but even if it does, governments and their money printers should be shaken.

Do not assume that your traditional currencies are the only stores of value or mediums of exchange that people will ever trust. Tech savvy people are not likely to stop looking. looking for alternatives until they find or invent one. Yeah. Again, somebody looking at this, seeing a need to move out of dollars because of the tendencies of central banks to devalue the ever living crap out of them. And that tendency only accelerating, yeah, of course, there's going to be people looking for alternatives. And Bitcoin seems to be fitting that bill pretty well right now.

And that seems to be where a lot of people are flowing. But hey, let's see how this coming year goes. Now, a couple little technical things that have come out. The first coin swap test could herald an era of stronger Bitcoin privacy. So this kind of hearkening back to me talking about some coin join stuff previously. This is slightly different from coin join. So coin swap, a promising Bitcoin privacy technology, was finally put to test on Tuesday. Bitcoin is by default not very private, despite the perceptions to the contrary.

The full history, obviously, of every transaction on the Bitcoin blockchain is public for anyone to browse. Coin swaps are a type of transaction that boosts a user's privacy by making that history much less straightforward. Now, they announced this transaction, the first coin swap supposedly first of its kind. Coin swap transactions look like transactions going from one address to another. but they're actually being sent somewhere else. Further, coin swaps can be implemented in such ways that they look just like normal transactions, making them quote unquote invisible, unlike other popular privacy tools like coin join. Coin join, you can see it's a coin join.

You just can't really decipher who owns what at the end of it. Now, Belcher announced he was refocusing his Bitcoin privacy efforts on coin swaps in May with the mission to massively improve Bitcoin privacy over the summer. He was awarded two grants from Square Crypto and nonprofit Human Rights Foundation to support his work. So that's exciting. I'm excited to see this. And this is complementary also to things like pay join, which is where you go to pay a merchant,

but the merchant actually adds in some currency into the mix. And it's impossible to tell who owns what or even what the total amount actually. being transacted was so that you retain the privacy, you don't know who the originating wallet was, who the recipient was, who was the merchant and who was the payee. Yeah, so very interesting some of these developments happening. And finally, again, jumping kind of backwards to that list that I was talking about running a full node. Well, if you're using ledger and using Ledger live on your computer, they have just added in the feature, even though it's in kind of the experimental phase, you can, can connect to your own Bitcoin full node, which is excellent. So you can head over to ledger support.ledger.com and you can look under ledger live desktop.

There is an article on setting up or connecting to an existing node that you have. So very bullish on that, very excited about it. Kudos to Ledger for adding that in. I'm looking your way, Treasurer. I hope to see that in your Treasor Suite desktop. I did do a video on Treasor Suite, but I didn't see the option to connect your node. if I'm not mistaken, maybe I'm miss speaking there. We'll see.

Anyways, guys, yeah, there was lots today. I will wrap it up there. Thank you so much for watching and or I guess listening potentially in the future if you're hitting the podcast instead. If you're on YouTube, hit like, subscribe and share. All of those really, really do help. Honestly, the more you do that, I see there's people watching live right now. There's people in the chat.

When you hit like, when you hit subscribe, when you share it out, more eyeballs, more people watching. And I always appreciate it. Thank you guys so much. If you want to help out the show in another way, you can hit the sponsors I previously mentioned down below. Leden, Kobo, Bit Refill, Privacy Pros, A.K.A. the Bill Fottle. That's all linked down below.

And if you really liked what you saw, you can drop me a Bitcoin Lightning Network tip at my tippin.me page. That is t-I-P-P-I-N dot me slash at BTC sessions. With that, I'm out. I will see you next time for your daily session. You know,