Bitcoin needs regulatory framework to change ‘risky’ image

Go Lean Commentary

Bitcoin PhotoElectronic Payments / Virtual Money schemes are very important in the strategy for elevating the Caribbean economy.

Bitcoin can be good for the Caribbean, but we need the regulatory framework in place to change any “risky” image of such schemes.

This point is detailed in the book Go Lean…Caribbean, a roadmap for the introduction of the Caribbean Union Trade Federation (CU) and the Caribbean Central Bank (CCB). This Go Lean roadmap has 3 prime directives:

  • Optimization of the economic engines in order to grow the regional economy to $800 Billion & create 2.2 million new jobs.
  • Establishment of a security apparatus to protect the resultant economic engines.
  • Improve Caribbean governance to support these engines.

This Go Lean/CU/CCB roadmap looks to employ electronic payments / virtual money schemes to impact the growth of the regional economy. Similar to Bitcoin, there are two CU schemes that relate to this foregoing news story:

  • Cruise Passenger Smartcards – The Go Lean roadmap posits that the cruise industry needs the Caribbean more than the Caribbean needs the industry. But the cruise lines have embedded rules/ regulations designed to maximize their revenues at the expense of the port-side establishments. The CU solution is to deploy a scheme for smartcards that function on the ships and at the port cities (Page 193).
  • e-Commerce Facilitation – The Go Lean roadmap defines that the Caribbean Dollar (C$) will be mostly cashless, an accounting currency. So the Caribbean Central Bank (CCB) will settle all C$ electronic transactions (MasterCard-Visa style or ACH style) and charge interchange/clearance fees (Page 198). This scheme allows for the emergence of full-throttle e-Commerce activities.

These electronic payments provides the impetus for M1, the measurement of currency/money in circulation (M0) plus overnight bank deposits (like demand deposits, travelers’ checks & other checkable deposits). As M1 values increase, there is a dynamic to create money “from thin-air”, called the money multiplier. The more money in the system, the more liquidity for investment and industrial expansion opportunities.

By: Clare Hutchison

LONDON (Reuters) – Regulators should create a framework of rules to help to make virtual currencies such as bitcoin more attractive to ordinary consumers, a lawyer from the Bitcoin Foundation said on Tuesday.

Bitcoin made headlines earlier this year when Tokyo-based bitcoin exchange Mt. Gox filed for bankruptcy after saying it might have lost some 750,000 bitcoins in hacking attack.

Patrick Murck, general counsel at the Bitcoin Foundation, said cooperation was needed between authorities to create rules that would support those using the digital currency responsibly.

“There’s an opportunity to work together to stop people saying it’s scary and risky,” he said. “The challenge is just to get a framework out there that makes sense for people,” said Murck, speaking at an event on the state of digital economy.

Launched in 2009, bitcoin offers a way for people to conduct transactions over the Internet. Supporters say the anonymity that bitcoin offers lowers the risk of fraud, while critics say that same anonymity and lack of central oversight make it easier to commit crimes.

The Bitcoin Foundation aims to standardise the currency, protect it from theft or counterfeiting and provide education.

Some companies involved in bitcoin, including investment firms and those providing services for the currency’s users, have also called for regulation to ensure their customers feel more comfortable about virtual money.

A number of regulators, including the U.S. Securities and Exchange Commission, have warned investors about the risks of scams related to virtual currencies.

Murck said there were a handful of well-funded companies working towards making bitcoin more attractive and safer for ordinary consumers by trying to insure bitcoin holdings and to reduce the currency’s volatility.

Those companies have learned from the collapse of Mt. Gox and have more knowledge about how the industry works that was not available before, he said.

Bitcoin could be ready for the mass market by the end of the year, Murck added. “I feel much more confident today than I did 12 months ago. The wind is definitely blowing at our backs.”

The banking industry also has a role to play in opening the bitcoin market up, Murck said, by providing finance to companies involved in bitcoin or integrating bitcoin services into its own products.

Reuters News Source (Retrieved 05/13/2014) ––sector.html

Cruise shipOverall, the Bitcoin concept is in crisis; the dissolution of the Mt. Gox exchange dealt this industry a near-fatal blow. With virtual money, there is no association with hard currency, commodity or chattel goods. It is just the “good faith” and credit of the currency – eWallet – issuer. A bankruptcy filing undermines that “faith”.

The people and institutions of the Caribbean understand this plight all too well. There is little faith in Caribbean monetary institutions either. All interstate trade in the region must take place in US dollars, British pounds or Euros. There is no faith in indigenous Caribbean currencies. The roadmap commences with the statement that the Caribbean also is in crisis, and that this “crisis is a terrible thing to waste”. The region is devastated from external factors: global economic recession, globalization and rapid technology changes. The book then posits that to adapt, there must be a new internal optimization of the region’s strengths. This is defined in Verse XXIV (Page 13) of the Declaration of Interdependence, with these words:

Whereas a free market economy can be induced and spurred for continuous progress, the Federation must install the controls to better manage aspects of the economy: jobs, inflation, savings rate, investments and other economic principles…

Creating the CU/CCB governance is “Step One, Day One” in the Go Lean roadmap. Implementing this, the appropriate regulatory framework, as requested in the foregoing news article, allows rock-solid monetarily integrity for the local financial systems. This would provide the foundation, so that the regional society can be elevated, economically and governmentally.

The Go Lean book details a series of community ethos, strategies, tactics, implementations and advocacies to foster the proper controls for electronic payments/virtual money in the Caribbean region:

Community Ethos – Money Multiplier Principle Page 22
Community Ethos – “Light Up the Dark Places” Page 23
Community Ethos – Lean Operations Page 24
Community Ethos – Cooperatives Page 25
Community Ethos – Promote Intellectual Property Page 29
Community Ethos – Ways to Bridge the Digital Divide Page 31
Tactical – Separation of Powers – Central Banking Page 73
Implementation – Assemble Central Bank Cooperative Page 96
Implementation – Ways to Deliver Page 109
Implementation – Ways to Impact Social Media Page 111
Planning – Ways to Better Manage Image Page 129
Anecdote – Caribbean Currencies Page 149
Advocacy – Ways to Mitigate Black Markets Page 165
Advocacy – Ways to Foster Cooperatives Page 176
Advocacy – Ways to Foster Technology Page 197
Advocacy – Ways to Foster e-Commerce Page 198
Advocacy – Reforms for Banking Regulations Page 199
Appendix – Alternative Remittance Modes Page 270

Now is the time for all of the Caribbean, the people and governing institutions, to lean-in for the changes described in the book Go Lean … Caribbean. The benefits are too alluring, a better place to live, work and play.

Download the free e-book of Go Lean … Caribbean – now!

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