I interviewed peter saddington the first person to buy a lamborghini with bitcoin
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Are regulators ready for it? You might never have heard of the DTCC, but if you own stock, bonds or a mutual fund, it takes care of something that belongs to you. This is the center of the entire American stock-trading system. Each share has an owner, and — no matter how fast it changes hands — a clearinghouse keeps track of who owns what.
Or, really, to eliminate it - and with it, the whole system that makes the vault necessary. This new system, which he calls Medici, after the banking family that ruled over Renaissance-era Florence, would do something no other stock exchange has ever done. It would transform processes that now depend on centralized institutions for trust, and let people instead transact directly with one another.
They are talking about what Byrne and other Bitcoin 2. Unlike an exchange or a clearinghouse, the blockchain — invented and published in by a mysterious cryptographer known only by the pseudonym Satoshi Nakamoto — is completely decentralized.
Already, solitary tinkerers and Fortune companies alike are test-driving applications that will demand the attention of many of these agencies. So at any given time, anyone in the Bitcoin market is helping verify the behavior of the entire market. As a result, a lot of activities that required governments or other trusted intermediaries to keep track of things and keep everyone honest can now run on computer programs that belong to no central authority.
The original Bitcoin code, for example, creates and transfers money without oversight from the Federal Reserve, highly regulated private banks or anyone else. Its most enthusiastic early adopters were online black markets. In May, a federal judge in Manhattan sentenced Ross Ulbricht, the founder of Silk Road, an online drug bazaar that ran on anonymous Bitcoin transactions, to life in prison without parole.
Understandably, all of the Bitcoin buzz also caught the attention of government regulators. Many Bitcoin backers give American regulators credit for their restraint: Rather than try to eradicate Bitcoin, federal agencies moved to regulate it, or at least set some baseline rules to protect users. In March , the Financial Crimes Enforcement Network issued guidelines that said digital currency exchanges had to comply with federal anti-money laundering laws.
In July , the Winklevoss twins — the entrepreneurs who sued Mark Zuckerberg for allegedly stealing the idea for Facebook from them at Harvard -- filed to register a Bitcoin ETF, which would let investors easily trade shares of Bitcoin on the stock market. That scheme is still awaiting SEC approval. In March , the Internal Revenue Service stated that Bitcoin should be taxed as an asset rather than as currency. In May, the SEC issued an investor alert warning about the risks of investing in virtual currencies; in August, the Consumer Financial Protection Bureau issued an advisory about risks to consumers.
There are also inklings of potential turf wars. In November, a commissioner of the Commodities Futures Trading Commission asserted that Bitcoins were commodities and that the CFTC has the authority to intervene if Bitcoin prices are being manipulated, a position that could set up jurisdictional turf issues if the SEC decides it wants to regulate the cryptocurrency as a security.
Along the way, the SEC has pursued enforcement actions against various Bitcoin enterprises, including a Texas-based Ponzi scheme, for infractions that are not particular to digital currency.
In popular coverage , Bitcoin itself tends to be the focus of attention, either breathlessly hyped or dismissed as some kind of doomed techie challenge to the dollar. But among people paying close attention, whatever happens to Bitcoin is seen as only the first act. Whether or not Bitcoin itself thrives, more important applications of its technology are likely still on their way. Byrne and other financial entrepreneurs believe it will rewrite the rules of the financial system by taking out middlemen.
Because it gives users anonymity while guaranteeing the authenticity of their actions, other believe it will allow e-voting to become the accepted norm for elections around the world.
Take Uber, says, says Jason Somensatto, a Washington lawyer who deals regularly with the SEC and has taken an interest in what blockchain technology might someday do. You push a button and a car shows up. A spokesman for the SEC declined to comment for this story, but lawyers who deal with the agency say that when it comes to financial novelties, the SEC tends to wait until something goes wrong rather than proactively issuing guidance. That creates a chicken-and-egg conundrum for Bitcoin 2.
Entrepreneurs appreciate the enthusiasm. He feels differently about the SEC. Ultimately, the blockchain is likely to touch every corner of the federal government. In the very near term, the Bitcoin market itself is beginning to take on new and more sophisticated shapes.
Former bankers for Goldman Sachs and Morgan Stanley, among others, are developing futures in the currency and other derivatives that could help stabilize its price. Already, Evan Greebel, one of the securities lawyers handling the Winklevoss Bitcoin ETF, said he knows of efforts afoot to create smart contracts for car leases that will automatically prevent lessees who default on payments from starting their Internet-connected cars.
Greebel says such contracts will have implications for the federal bankruptcy code as well. He also predicts that import and export registries will soon migrate to the blockchain, a matter for the Federal Trade Commission to oversee.
The National Association of Voter Officials is working with a startup called V Initiative that wants to put American elections on the blockchain and let people vote from their personal devices — a transformation that goes to the heart of government.
It is possible that an illegal activity could arise, even a very large one, with no operator to sue, threaten or shut down. Because of the immense potential range of applications, the regulatory tone may have to be set by Congress or the White House. Byrne, who holds a PhD in philosophy from Stanford and made Overstock the first major retailer to accept Bitcoin last year, is ready for this brave new world.
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