Bitcoin to Operate as a “Bank” of Sorts in France While Helping Iranians Avoid US Sanctions

By JG Vibes
dev-test.intellihub.com
December 11, 2012

For those of you who are unfamiliar with Bitcoin, it is a totally new form of decentralized, private, tax-free currency that is traded on the internet, and in the past few weeks there has been a lot of exciting news in the Bitcoin community.

Like many i was skeptical of Bitcoin at first because traditionally our culture is so accustomed to physical currency, even if it isn’t worth anything like our current dollar.

However, after a great deal of research and observation i have come to see the ability that this medium of exchange has to undercut the Federal Reserve allowing people to trade freely and unrestricted.

Although i will still admit that it is a sure bet to have have hard currency saved also, just due to the flimsy nature of the government controlled power and internet grids.

In Iran the central bank’s currency has been plummeting as a result of US sanctions, and people have now discovered Bitcoin as a way of getting around those trade sanctions and avoiding the current hyperinflation.

After all, Bitcoin is completely anonymous and is not subject to the hyperinflation that heavily controlled monetary systems are.

Likewise it is not entangled with the massive global system that has been crumbling for years, it was created completely outside of that paradigm.

To prevent inflation the Bitcoin system is built with an algorithm that controls the Bitcoin creation rate according to the demand that the currency generates.

Late last month The Verge reported that:

“The total number of Bitcoins in circulation just hit 10.5 million, triggering a safeguard against inflation that was hardcoded into the digital currency.

This means a drastic change in the number of new Bitcoins being created, which is expected to have a huge impact on the economy that has been developing around the ecurrency.

The safeguard has to do with the “block reward,” the number of Bitcoins that can be created at a time, which has dropped from 50 to 25.

Bitcoin miners, geeks who configure their own computers to mint the cultish digital currency, have been waiting for this moment for a long time — about four years, which is how long Bitcoins have been in circulation.”

Bitcoin Magazine described the concept more in depth:

“The rate at which new bitcoins are introduced into the system was never intended to stay at 50 BTC per 10 minutes forever. Rather, Bitcoin has a monetary policy that was coded into the system right from the start that reduces the rate over time, until the generation of new bitcoins finally stops entirely at a maximum of 21 million in 2140.

There will still always be one block coming out every ten minutes, but the number of bitcoins handed out as a reward in each block will come down in sharp steps, cutting in half about once every four years (precisely, once every 210,000 blocks).

The event that will happen on Wednesday is exactly this; after block 210,000 hits, every block thereafter will have a reward of only 25 BTC instead of the original 50 – at least until the next block reward halving in 2016.

The main reason why this was done is to keep inflation under control. One of the major faults of traditional, “fiat”, currencies controlled by central banks is that the banks can print as much of the currency as they want, and if they print too much, as happened in Weimar Germany in 1923 and Zimbabwe in 2007 (among many other unfortunate examples), the laws of supply and demand ensure that the value of the currency starts dropping quickly.

Because the only use for money is to exchange it for something else later, a currency that is rapidly decreasing in value becomes even less valuable for that very reason, leading to a hyperinflationary spiral. In the later stages of such a calamity, hundred billion dollar bills littering the ground is not an uncommon sight.

Bitcoin, on the other hand, is intended to simulate a commodity, like gold. There is only a limited amount of gold in the world, and with every gram of gold that is mined, the gold that still remains becomes harder and harder to extract.

As a result of this limited supply, gold has maintained its value as an international medium of exchange and store of value for over six thousand years, and the hope is that Bitcoin will do the same.”

Iranians faced with hyper inflation are seeing a lot of value in this concept and are quickly learning to trade with this anonymous, decentralized currency.  Last month Business Week reported that:

“The advantage for Iranians is that bitcoins can be swapped for dollars that can then be kept outside the country. Another plus: Regulators can’t easily track the transactions, since bitcoins aren’t issued from a central server. Bitcoin users can conduct business on virtual private networks, which hide customers’ identities.

At online store coinDL.com, shoppers can use bitcoins to buy Beyond Matter, the latest album from Iranian artist Mohammad Rafigh. Anyone in the U.S. downloading songs, which fetch .039 bitcoins or 45¢ each, risks violating U.S. sanctions. That doesn’t bother Rafigh, who’s studying computer engineering as well as playing music.”

“Bitcoin is so interesting for me,” Rafigh wrote in an e-mail. “I wish the culture of using digital money spreads all over the world, because it does not have any dependency on anything like politics.”

Rafigh has translated some bitcoin software into Farsi for his friends. “I love Iran, and if Bitcoin is good for me, it can be good for more Iranians like me.”

In addition to branching out in the Middle East, it looks like Bitcoin is also going mainstream in France.  There have been conflicting reports in the media about what this means, but an official post at Bitcoin-Central this weekend gives a full explanation of the recent developments in France.  The post reads as follows:

“There seems to be some confusion about our recent announcement of a partnership with Aqoba allowing us to hold Euro balances legally.

There has been an overwhelming response to this development, unfortunately some of the information quoted by journalists is factually incorrect.  This shall serve as a clarification.  In short, Paymium is neither a bank, nor a PSP. And it doesn’t need to be.

Paymium, the company behind Bitcoin-Central has partnered with Aqoba, which is a registered PSP. The Crédit Mutuel Arkéa bank (not to be confused with the Crédit Mutuel bank) is the bank that Aqoba is associated with to provide the financial infrastructure a PSP needs.

This allows Aqoba to keep funds on behalf of third-parties in payment accounts (“comptes de paiement”) which are different from bank accounts (“comptes de dépôt”).

The difference between these is that funds deposited on a payment account may not be used for investments or loaned out. Additionally, these accounts have no overdraft capabilities.

These accounts will soon get their own IBAN number, be able to be associated with a debit card, but remain distinct from what is legally referred to as a “bank account”.  Funds deposited with us will still remain clearly separated from Paymium’s funds.

It is still a big development for a Bitcoin exchange to be able to operate legally within the European regulatory framework. Bitcoin-Central is leading the way in this respect. But we’re neither a bank, nor a PSP. And we intend to keep it that way.”

A local Bitcoin advocate and expert has put it more succinctly speaking privately with The Intellihub, explaining that: “Bitcoin central is partnered with a payment services provider that is partnered with a bank. Not exactly the same – no loans will be able to be made on deposits.”

I support Bitcoin because i support anything that allows people to avoid government snooping and most importantly, i support anything that gives an alternative to the status quo and the Federal Reserve System.

This is a part of the agorism strategy that i have been covering in recent articles and radio appearances.

For those of you that are not familiar with the term “agorism”, it is a strategy of noncompliance that uses counter economics and underground markets as a way of keeping power in the hands of the average people, thus slowly diminishing the power and relevance of the control structure.

This Saturday in Philadelphia the free thinkers with TFP will be hosting the East Coast Bitcoin Summit.

Here is a video from Reason TV about how Bitcoin relates to the agorist approach:

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Read more articles by this author HERE.

J.G. Vibes is the author of an 87 chapter counter culture textbook called Alchemy of the Modern Renaissance, a staff writer and reporter for The Intellihub and host of a show called Voluntary Hippie Radio. 

You can keep up with his work, which includes free podcasts, free e-books & free audiobooks at his website www.aotmr.com