Archive | Economics

EU to allow freezes of bank deposit withdrawals?

As Europe moves towards a cash free society there are worrying signals from the EU…

European Union states are considering measures which would allow them to temporarily stop people withdrawing money from their accounts to prevent bank runs, an EU document reviewed by Reuters revealed.

This is a practice used e.g. in Greece and Cyprus in times of financial turbulence. (In Cyprus the government also confiscated parts of the peoples’ bank deposits, a so called »haircut«.)

The official reason – to prevent bank runs – might be logical. But so far the reasons have rather been national financial difficulties, stemming from local economies being linked to the single European currency, the Euro.

And the Euro-crisis is far from over. The idea of fixing totally disparate economies to one exchange rate and one interest rate is still very problematic. And the European Central Bank, the ECB, is still trying to save the Euro by various stimulus packages and by indirectly printing more money. Without a doubt, more problems lie ahead.

This leaves the average citizen powerless. Your money is no longer yours – but the governments to be used as a financial tool. (Or to be confiscated.)

Thus reducing the independent citizen to a serf.


Reuters: EU explores account freezes to prevent runs at failing banks »


“EU agency: too soon to regulate Bitcoin”

EU Observer:

It is too early to regulate the so-called block chain technology that underpins virtual currency Bitcoin, the European Securities and Markets Authority (ESMA) said on Tuesday. “At this stage, it is premature to fully assess the changes that the technology could bring and the regulatory response that may be needed,” ESMA said. It added that the new technology may benefit the financial sector by reducing costs and increasing efficiency.

Link 1 » | Link 2 »


Falkvinge on the War on Cash

Would you like your government to have more insight into your personal finances than you have yourself? That’s where we’re heading with the ongoing “war on cash” – into a world where every transaction is not just loggable by the government (or a government-coerced agent), but where you can also be held responsible for anything and everything you buy and sell.

Falkvinge: The war on cash being justified as “necessary against organized crime” is the worst excuse ever »


Latest digital currency: Zcash

Competition between currencies is the stuff libertarian dreams are made on—and central bankers’ nightmares too. Already digital monies, in particular Bitcoin and Ethereum, are rivals. On October 28th a new crypto-currency will join the fray: Zcash. Many such “altcoins” are dubious affairs and don’t add much. But this one brings important innovations.

The Economist: Known unknown »


EU to end Bitcoin anonymity

Today, the European Commission has released details on the new EU Anti-Money Laundering Directive – aiming at combating terrorist financing. Among the details, we find some disturbing news on digital currencies such as Bitcoin:

Tackling terrorist financing risks linked to virtual currencies: to prevent misuse of virtual currencies for money laundering and terrorist financing purposes, the Commission proposes to bring virtual currency exchange platforms and custodian wallet providers under the scope of the Anti-Money Laundering Directive. These entities will have to apply customer due diligence controls when exchanging virtual for real currencies, ending the anonymity associated with such exchanges;


Anonymity is not a crime!

But then, again, this is not really about terrorism. It’s about giving the government control over your money.

Then we have this blow to all those terrorists shopping around for missiles…

Tackling risks linked to anonymous pre-paid instruments (e.g. pre-paid cards): the Commission also proposes to minimise the use of anonymous payments through pre-paid cards, by lowering thresholds for identificationfrom €250 to €150 and widening customer verification requirements. Proportionality has been taken into account, with particular regard paid to the use of these cards by financially vulnerable citizens;

Again, this will only make life more complicated for ordinary, law-abiding citizens.

And there will be cross-border control of all bank accounts:

Give Financial Intelligence Units swift access to information on the holders of bank- and payment accounts, through centralised registers or electronic data retrieval systems.

“Centralised registers.” Like in total control.

This might come in handy for our governments when the next Euro crisis calls for a citizen haircut – like when Cyprus confiscated parts of people’s bank savings.

Your money is no longer yours. You are no longer free.


European Commission:
• Commission strengthens transparency rules to tackle terrorism financing, tax avoidance and money laundering »
• Questions and Answers: Anti-money Laundering Directive »

Related reading: Bargeld ist Freiheit »


The DAO: When Blockchain technology outsmarts itself

Blockchain technology has gained interest far outside the Bitcoin society. Today e.g. banks, financial institutions and keepers of public records show an active interest – as the technology builds on an underlying ledger that cannot be manipulated.

Meanwhile in the Blockchain community people have developed several virtual currencies. One of them is Ethereum. Wikipedia explains…

“Ethereum is a public blockchain platform with programmable transaction functionality. It provides a decentralized virtual machine that can execute peer-to-peer contracts using a cryptocurrency called Ether.”

And out of the Etherum project came concepts like DAO, standing for Distributed / Decentralized autonomous organization. Back to Wikipedia

The DAO is a digital decentralized autonomous organization and a form of investor-directed venture capital fund.

The DAO has an objective to provide a new decentralized business model for organizing both commercial and non-profit enterprises. It has been instantiated on the Ethereum blockchain, and has no conventional management structure or board of directors. The code of the DAO is open-source.

The DAO is stateless, and is not tied to any particular nation state. As a result, many questions of how government regulators will deal with a stateless fund have not yet been dealt with.

The DAO was crowdfunded via a token sale in May 2016. It set the record for the largest crowdfunding campaign in history.

Brilliant, really. And extremely interesting.

Then came the “Sorry Dave, I cannot do that” moment. Wikipedia…

In June 2016, it was revealed that hackers had exploited a vulnerability in the DAO code to enable them to siphon off perhaps as much as $50million in funds from the DAO. Stephen Tual, COO of, the company that had worked on the development of the DAO, announced that they were working with the Ethereum Foundation to modify the underlying protocol to freeze the accounts of the hackers, and also said that the DAO would be wound up as a result.

Some say the DAO was hacked. Others claim the money was stolen. But apparently someone just seems to have taken advantage of the rules inscribed in the code, initiating a fork.

Now, it becomes very technical. If you are interested in the details, I suggest you read this piece by Bloomberg View columnist Matt Levine: Blockchain Company’s Smart Contracts Were Dumb »

It will be interesting to see what happens now – if The Dao irreversible code is to be confronted with some relevant jurisdiction’s law, in court. Or if there will be a rollback, a back-dated hard fork in the ledger.

Blockchain technology is still very young and there is a lot of learning by doing. And learning the hard way.

If you inscribe functions to code that cannot be changed there are both great opportunities and risks. You need to be proactive, to foresee future problems and developments – and to refrain from functions that can be misused.

Smart contracts cannot save stupid people.

Let’s hope that people have learned from this experience for the future. Blockchain is still a great, smart concept. Ethereum is still very interesting. And, in a wider perspective, DAO is a brilliant idea. I hope it will not be derailed by this temporary bump in the road.

It’s all in the code, stupid.


Updates: Wired » | IBT »


Bitcoin rate on the move

Right now, we see the Bitcoin (BTC) exchange rate skyrocketing. At the moment, the day to day volatility is some 25 percent – with the price of 1 BTC closing in on USD 550.

This might very well be a temporary fluctuation. But there are telltale signs that we might see the BTC price continue to rise.

One reason is that BTC is becoming increasingly popular with the Chinese. CCN.LA writes…

Started by Arthur Hayes, a former Citigroup trader living in Hong Kong, the goal was to create an exchange where people use cryptocurrency to bet on securities not easily accessible to them in their home markets.

Because China restricts exchanging its yuan for other currencies, citizens find it expensive and difficult to invest in overseas securities. Foreign investors are also restricted in trading China stocks.

Link: Bitcoin Derivatives Exchange Expands, Skirting China’s Currency Curbs »

Then, we have the fact that BTC mining is to be slowed down. The Dollar Vigilante explains…

On July 18th of this year bitcoin undergoes a major event that only happens every four years called a “halving”.

Bitcoins are developed through the process of mining. Only 21 million bitcoins can be in existence at any one time. The value of mining is regulated in order to maintain this number. To prevent miners from surpassing this limit, the currency is designed to cut the value of mining in half every four years. It is as if the Federal Reserve slashed the amount of money-printing it does by half.

This could have a major impact on the overall value of the currency. If demand for bitcoin continues to grow while the number of coins that can be mined is drastically decreased, the value should naturally surge. That’s just the law of supply and demand.

Link: Bitcoin Skyrockets And Is Now Up More Than 100% This Jubilee Year »

The Dollar Vigilante also lists these reasons for BTC increasing in value over time:

  • Bitcoin and Blockchain are the Future of Money and Banking
  • Capital Control Crackdowns, Bank Bail-Ins and Worldwide Taxation Schemes to Drive Bitcoin Growth
  • The Coming Debt Jubilee Could Send Bitcoin Easily above $10,000… Maybe $100,000… Maybe More

A bit optimistic, perhaps. But we really should consider what can happen if there is a USD or Euro crisis. (E.g. a debt crisis, a new bank crisis and/or a haircut on bank savings.)

And the fact that BTC is a decentralised currency out of reach of governments control will always give it a role in a free market.

We live in interesting times.