Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Regulation and the Future of Bitcoin

Episode Date: December 20, 2013

In our pilot episode, we talk about the latest news in regulation. Specifically, we talk about the recent regulatory stories out of France, Switzerland and China. This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/000

This is Epicenter Bitcoin, a weekly podcast about Bitcoin and cryptocurrencies. The pilot episode, recorded December 20th, 2013, regulation and the future of Bitcoin. This episode of Epicenter Bitcoin is brought you in collaboration with the Let's Talk Bitcoin podcast. The very first episode of Epicenter Bitcoin, your podcast about the latest news and developments in the Bitcoin world. I'm Brian Crane, and with me is Sebastian. and we're very excited that you with us today. We have some great topics to talk about, mostly about regulation, about France, China, Switzerland,

and we'll also talk briefly about the Coinbase. But before we dive in, let's briefly introduce yourselves. My name is Brian Fabian Crane. I'm originally an economist and entrepreneur, and I've also had a master's degree in psychology and been doing a bit of programming in the last two years. For the past few months, I've been dedicating all my time to Bitcoin projects. I'm the founder of the Bitcoin Startup's Billing Group.

I write a weekly newsletter with news and analysis called Epicenter Bitcoin. And you can subscribe to that at the epicenterbidcoin.com slash newsletter. And now I'm super excited to be joining forces of Sebastian Couture and do a weekly Bitcoin podcast. So before we dive in, Sebastian, do you want to introduce yourself briefly? Yeah, thank you. Like you said, my name is Sebastin Couture. I was born in Eastern Canada, where I lived until I was in my early 20s. And then I immigrated to France in 2007. I currently live in Lille, which is about an hour from Paris. I have a master's degree in marketing as well as e-commerce. And I've been working in web technologies for five years in different agencies and as well as also as an independent. I currently work as a U.S. designer at an agency specializing in developing research. responsive websites and emails. And I've always kind of been interested in new technologies and the open web. I'm also happy to announce so I'll be doing a Bitcoin meetup also here in January.

Perfect. Well, perhaps we can get started with the France topic. I mean, since you're in, you live in France and there's been a statement by the French central bank. Can you tell us a bit about, you know, what this is about and what it means? Absolutely. So the Bank de France is the, I guess you would say, the equivalent to the Federal Reserve in the U.S., their link to the European Central Bank. And so they issue a periodic publication called Focus, and their latest edition of Focus, which was published on December 5th, is dedicated to cryptocurrencies, and particularly they talk about Bitcoin. The overall tone of this report is quite negative, actually.

They talk about Bitcoin as being an unregulated currency, which offers no guarantees. And also go to some lengths to talk about the dangers linked to Bitcoin, particularly the anonymity of Bitcoin, which makes it ideal for money laundering and financing terrorist groups. they also issue warnings to people who detain Bitcoin saying that it's a liability for those who detain it since its value is based solely on supply and demand. I mean, when I was reading it, I thought it was kind of funny because they point out the obvious in saying that Bitcoin is based solely on supply and demand. But if you go to the extent of that, you could say that all commodities are subject to this

type of risk because their value is based on supply and demand as well. I mean, take wine, for instance, or artwork or gold or any kind of commodity. Yeah, that's a pretty absurd argument to make. Yeah. In the other dangers they outline, they talk about the fact that it offers no, that companies who would accept Bitcoin as payment have basically no interest in accepting Bitcoin as payment whatsoever. And aside from the visibility it would give them. So basically, aside from the publicity and the visibility that it would give them in being a company who accepts or a store or what have you that accepts Bitcoin's payment, that they have no interest in accepting Bitcoin.

And they go to some lengths also in deep in outlining the dangers link to its volatility. So they have this graph here that kind of shows the evolution of Bitcoin prices, which from my perspective, when I'm looking at this graph, I'm, looking at it as quite a positive thing that Bitcoin prices have been going up. So even though they're quite factual in their explanation of what Bitcoin is, contrary to some of the other reports that we've been seeing from different countries and statements by governments or central banks, where clearly there's a lack of understanding of Bitcoin, they seem to understand the way that Bitcoin works quite well.

They're very factual in how they explain it, but the overall tone is very negative. And as somebody who's been living in France for the last six years, I can tell you that the position the French Central Bank is taking is not very surprising to me. What I've seen in a lot of cases, and this is obviously not always the case, but from the perspective of an outsider, France can be sometimes resistant to, and in some cases fearful of innovations which may upset deeply rooted institutions. Let me give you an example, and this is certainly the case in other cities as well, but when Uber, the chauffeur service, launch, in Paris, there was a great debate and a lot of protests on the side of the Parisian taxis unions against this new service.

And the position of the government was that regardless of the benefit that this new service and this competition brings to the consumer, well, that we needed to protect the existing institution of the taxi. And finally, the government passed a law which imposes a 15 or 20-minute reservation period before a client can actually benefit from a service like Uber. So this kind of gives you an idea of the overall sentiment in France when comes to new technologies or things that could potentially upset old markets or old lobbies or things like that.

Yeah. I mean, it seems if the only advantage they see in Bitcoin is as a kind of marketing ploy for companies. That's a bit worrying when it comes to thinking about how they're actually going to regulated in the future. I don't know how much, you know, kind of how much it is up to them and how much this is a you-bite thing. But, yeah, it's a bit worrying, I would say.

I think this is definitely worrying because it's really, I think, one of the first statements given by an institution, which has gotten some media coverage. Although I didn't see if anything was being talked about on television, I did see some articles about it in the larger newspapers like Le Monde or the Figuero. I'm sure in a few months we'll get into the standard template of how things get decided here in France, which is where people and the media start talking about it. Then we go into a huge national debate for weeks or potentially months. People might take to the streets until finally the government will take action by passing laws, for instance. Obviously, this isn't the same kind of thing, but this is exactly what happened with the austerity measures taken a few years ago or the retirement age debate or gay marriage or other social issues like that. What worries me is that this kind of sets the tone for the debates to come around Bitcoin in France.

And to come back to what you were saying, ultimately, since a lot of the economic regulation is set at European level, this might come down to EU regulation having to be passed. I mean, it might be up to the EU Parliament to decide on the fate of Bitcoin in Europe and not the national central banks. I think there's potential for much debate in France and in Europe about Bitcoin. The overall, like I said, the overall tone of this publication is quite negative towards Bitcoin. They don't actually make any kind of suggestions as to possible regulation in the future, but they do, go into they do reference for example

the financial crimes enforcement network publication from the US which was published in March of

2013 so they referenced that they also talk about the monetary code and and the

potential what we could consider Bitcoin in the future like I mean would it be a currency

would it be a commodity so they kind of hint that at having those debates. Yeah, that's interesting. Well, I think let's move to the Switzerland topic because it's quite related and it's a very, you know, it's a very similar topic. And once again, it's about regulations. So in Switzerland a few months ago, there was, you know, there was a bit of news that a representative submitted a postulate that was also very negatively praised kind of what you were,

saying about the France report and it was asking the government to write a report on the dangers of Bitcoin and you know really you just mentioning negative things and this postulate actually was accepted yesterday so there will be that report written however there's been another postulate that was submitted this week and it was signed by 45 representatives including the guy who wrote the original postulate from September and it asks the federal council which is kind of the you know the national government to look at or to answer four questions about bitcoin so the first question is what are the opportunities that bitcoin offers the second is basically proposing that bitcoin should be regulated as a foreign currency and asking

your government to say you know what speaks against that the third is asking what kind of regulatory instruments exist at this point that could be used to provide legal certainty for Bitcoin. And the fourth is in case regulatory changes are necessary and what the schedule would look like to realize them. So this is in terms of tone completely different. It really doesn't even mention dangers of Bitcoin. It's very positive. And I was, you know, I have a very good impression of that. And this, so because this was signed by 45 representative, which is a quarter of the House of Representatives, this is probably going to be accepted and it's going to be passed to the federal council.

And they're going to basically have to respond to that. And it seems like this would be very positive. If this comes through like that and if Bitcoin would be classified as a foreign currency, It would give a kind of regulatory certainty. It's also something that in Switzerland, paying with foreign currencies is actually something which is very common. You can pay with euros in a lot of places, even though the Swiss franc, of course, is the national currency. So it probably would be a good thing and it might decrease the costs of starting Bitcoin businesses

and they might decrease the kind of regulatory risks. Another thing that's really cool about this is that the group that made the second postulate is called a parliamentary group for digital sustainability. And they're accepting Bitcoin donations, which is really exciting. I mean, I actually gave him a little bit of Bitcoin and they've gotten like, I think 20 donations so far. And yeah, that's very exciting. I mean, I think this is the first, you know, kind of parliamentary group that I'm aware of in the world that's accepting Bitcoin donations. I know in some places you can donate to political parties with Bitcoins.

But yeah, this is very exciting. So I'm pretty positive. You know, that being said, it's going to take a while until we have an answer there because this takes months. And I think they also have to wait for the next session of the parliament, which is only in March. March. But yeah, I think those are the pretty good signs from Switzerland at least. And let's hope it kind of comes through like that. Because it will be great for Bitcoin. This is really interesting. I'm kind of not surprised, but happy to hear that other governments or, you know, postulates like you say. What is the status, the legal status of this postulate? A postulate in Switzerland is basically a tool for senators or the House of Representatives to kind of talk to the government and make a request to the government. So they will ask some questions or make some proposal. They will vote on it.

Then it will get passed to the federal council, which is the government. And they will have to respond to this. So in the Switzerland case, this postulate had four questions that were kind of in a phrase in a positive way. And if those are accepted, they will be kind of passed on to the government and they will have to respond to this. It's not legally binding. We don't know what law will come out of it. But of course, asking the right kind of question and kind of launching this topic in the right direction will hopefully have a positive impact on future legislation that will be made in such a month. Yeah, and like I was saying, I'm kind of happy to hear that another government entity is having positive thoughts about Bitcoin or is making positive statements about Bitcoin because it's such a stark contrast with what we've been hearing for the last 10 days to two weeks, especially a country that borders France, where the position is clearly very, very negative and doesn't seem like it will have any positive income unless.

unless somebody comes in and changes this position. And also what I find very interesting is that this group, from what it sounds like, is accepting Bitcoin as donations, which could potentially be, like you said, one of the first, I mean, could be a first. I mean, like you said, government parties have been accepting Bitcoin like the Pirate Party, for example. But an actual government entity accepting Bitcoin as donations, this is really a, kind of a good sign that their understanding of Bitcoin is much larger than than these other government entities that have been making statements. Yeah, absolutely. I think that is the case. And it's interesting, actually, if you think about regulations, you know, because in Germany, there's also a pretty positive, I think, regulation and it's pretty clear what Bitcoin is. It's interesting, like, why is that? And the case in Germany was really that there was one representative who was really interested in Bitcoin and very open to it. And I've signed up for his newsletter recently. And I've gotten there absolutely outstanding newsletters. And he writes about

Bitcoin with a great deal of understanding and interest. And so what this guy had been doing for quite, you know, very early on was he just asked questions to the finance ministry, you know, like how should we deal with Bitcoin in this and this way? And because he asked him in a positive way, had kind of a positive view, they very early on had to form an opinion Bitcoin. They had to like go back and do research and so that's why I think we've had a pretty positive outcome in Germany. It's really a lot of it is due to this one person. And and in Switzerland as well, I mean I saw a news report, you know, there was there was some representatives speaking really positively about Bitcoin, you know, that it's important to

you know kind of seize the opportunity and make it possible to have this regulatory certainty to so people can accept Bitcoin. So, you know, a lot of it is also driven by just people now. And let's hope that perhaps there will be someone stepping up in France that kind of pushes for a positive development there. I hope so. I think that even though this report, this initial report and which kind of sets this tone for how Bitcoin will be perceived in France, I mean, I haven't really been watching TV, so I haven't seen if there's been, I mean, other than a few articles I've been reading online, which reference to this report.

But I'm hopeful that people will come forth and people who use Bitcoin will come forth and talk about the obvious positive aspects of Bitcoin and inform the government because they don't seem to be very much informed about it. although this initial report is kind of it doesn't look very good I'm hoping things will turn around yeah absolutely let's let's move on to the China topic you know because I mean once again it's so similar and it's the exact same topic coming up

and so the China topic has been on everyone's minds for the last 10 days or so maybe maybe a bit longer two weeks Yes, absolutely. I mean, I think China has been kind of on the Bitcoin news for the past two months almost, and it's been driving the price, the demand's been crazy there. You know, we've watched how Chinese exchanges, you know, kind of took over Bitcoin trading. I think they've been trading more than a US dollar recently. And for a long time, there was this view that China was going to be very positive and open towards Bitcoin and that it kind of, kind of, of they would want to take this leading position in the Bitcoin market. And this has kind of turned out to be wrong, unfortunately.

But it's been very gradual that this realization came because it's been confusing to figure out what exactly the Chinese think about this. So this all started 10 days ago when there was the first official notice by the Chinese central bank, classifying Bitcoin as a virtual commodity. They also said it's not a real currency, etc. They also said that people should be free to trade bitcoins. They said goods and services shouldn't be pricing Bitcoin, should be traded with Bitcoin. And the kind of impression on the God from that was that the Chinese want Bitcoin to exist,

but they wanted to be in a very limited, confined space where it's just kind of a training object, an object of speculation for Chinese people. At this point, when this occurred, the outlook was, from what I could see, at least they're issuing this statement, but at least we know what's happening, and this may cause the price to stabilize,

or at least we know what's happening and we know that they're giving people to go ahead to trade in Bitcoin because they're telling people basically it's at your own risk so it's kind of opening up giving the green light I guess for people to use Bitcoin but in the way that the government of China

want people to use it. That's what it looked like at least but the reaction was very conflicted you know there was kind of a first there was a slump you know Bitcoin lost 20% or something like that or 30% even and then they recovered again and people were very conflicting you know some people were said oh this is negative news other people were saying well China is actually recognized in Bitcoin they're legitimizing Bitcoin exchanges so it was very

confusing and not really clear what was going on and then on Monday of this week so on the 16th of December there was a meeting of the central Bank of China with different payment providers. And in that meeting, supposedly, they told payment providers not to do business with Bitcoin. So since then, you know, BTC China has had their payment processes shut down and they've had to switch several times. But right now, the situation is that they and other Chinese exchanges as well are not able to accept deposits in large, on to their exchanges. And this is bad news.

And this is really bad for Bitcoin in China because essentially it means that now you can't buy Bitcoin on any of the exchanges or at least it's very difficult. The only way to buy Bitcoins now is if you already have money in the exchange. But to remove more money in the exchange, at least right now is not possible. BBC China has said that they're working on it and they're hoping to find some other solution and maybe they will but at least right now it seems kind of unlikely because if the Chinese government was okay with that they probably wouldn't have gotten to this point and if they're not okay with that obviously they won't find another way because they would just tell them not to do that

either so I think it looks really bad now I don't and if obviously if this happens essentially it means that bitcoin trading all this bitcoin interest investment that has been happening over the last two months and longer is gone. Right. And now, do you think that maybe, and I'm just thinking about this now, maybe the Chinese government is shutting down, well, wants to gradually shut down exchanges maybe so that they can be the sole Bitcoin trader? maybe perhaps the Chinese the people's bank of China or the Chinese government would like to control Bitcoin trading through a state Bitcoin exchange

No, I don't think so. I mean if they wanted to control Bitcoin trading they could to be easy China even I mean I mean I think before that they were going to do anti-money laundering and identification anyway so So if the Chinese would want to control Bitcoin trading, it would be very easy for him to do just by putting up regulations, controlling those companies, etc. But what they're doing now is at least what it looks like at this point is that they're basically stopping it completely. Of course, the consequence of that will be that Bitcoin trading moves abroad and then the Chinese won't have any control over Bitcoin. So the issue in China wasn't that the Chinese want to have more control of Bitcoin trading. I think the issue was simply that the Chinese were scared. It was this new thing, uncertain thing.

And that they probably also saw that Bitcoin could be used to circumvent capital controls. And China has very strange in capital controls. So I think those are probably the two main reasons why they've acted this way. Okay, I see. So what do you think is that they want to protect their capital control? They're worried that this might be a way to circumvent it. Maybe they're also worried that this is sort of a democratic movement where they have little or no control over what actually happens within it.

Now, just in terms of the effect that this has had on the market, the price on December 4th was hovering around $1,100 US. Now, this week we've seen lows, I think, as low as between $4 and $500. So this has had quite an impact on Bitcoin prices. is what do you think this for the long term of Bitcoin? I mean, can this serve as an example for other governments that are maybe kind of looking at Bitcoin and not really sure how to handle it, how to regulate it, and maybe looking at China and saying,

okay, China's doing this. Maybe we want to align ourselves with their policy or use it as a template or as inspiration. for how we're going to implement policy in our country. Yeah, so there's two things. First of all, the price right now, according to the coin desk weighted average thing, it's almost $700. So if you think just a month back, if you think in the past, you know, this is still a

very high price. So in a sense, I think this is kind of a vote of confidence, at least if it stays in these areas for Bitcoin, because it's really not that much if it crash, if you think of it kind of in the broader picture, and this is not the end of Bitcoin. As far as other countries go and the future of Bitcoin regulation, I do think we will see different countries that basically adopt a different, as similar stance to what China has been doing or what it seems like they're doing,

which is basically outlaw of Bitcoin, kind of confine it to this very, in each realm that doesn't allow its full potential to be achieved. I think this will happen. There's no doubt about this because central bank and governments have very strong interests against something like Bitcoin prevailing. But other countries will be much more open and I don't, and much more positive. So I think we will see over the next years that Bitcoin kind of moves to the most friendly country, to the most positive legislative environment.

And hopefully it will achieve so much utility and have such a positive effect in those countries that the more hostile countries will realize that what they're missing out is too powerful and kind of turn around and give in. So I think those are kind of my expectations. I hope it will work out this way. I think we'll have a lot to look forward

to in 2014 in terms of as we've seen or as we've talked about in this episode in terms of regulation. I think there's a lot of things are going to be happening in terms of regulation over the next year. Absolutely. I mean, I think countries are at this point and everyone is starting to realize that there is something important here. You know, regulars are starting to realize that they're starting to try to kind of wrap their

head around it. And I think this is going to be a huge topic that will be great. that playing with for the whole next year and even beyond that. Absolutely. And we'll be following those stories as they continue to evolve. So that's all the time we have for today's episode. We'd like to thank everyone who listened and especially Let's Stock Bitcoin and Adam B. Levine for making this possible and believing in the power of podcasting.

Of course, if you like what we do and if you'd like to make Epicenter Bitcoin a weekly rendezvous on the Let's Talk Bitcoin Network. Please vote for us by donating to our address, and Adam will be chiming in in just a minute to let you know how you can do that. And if you're the type of person who appreciates a well-curated overview and analysis of the latest Bitcoin news, please subscribe to the Epicenter Bitcoin newsletter, and you can find that at epicenterbidcoin.com slash newsletter. Until next time, when we bring you the latest groundbreaking, earth-shaking, Bitcoin Insights. You know,