Wednesday, May 18, 2011

Bitcoin's competitive advantage

One of bitcoin's biggest competitive advantages, IMO, is it's ability to cut through inefficient regulations. The general public might actually see (in terms of prices of consumer goods) just exactly how inefficient these 'legitimate' institutions are.

Take California's Bill 2789 (HT: The monetary future):

What the law accomplishes sounds mundane enough: it requires money transmitters--companies that act like banks, but aren't, such as PayPal--to get licenses. As usual, however, the devil is in the details. Previously, California corporations were only required to get money transmitter licenses for international funds transfers, and domestic transfers were unregulated. Now both kinds of transfers are regulated. Also, the price of each license is a little bit steep: half a million dollars and change.

Half a million dollars? For a license to transmit money? Bitcoin will do it anonymously, for free. It get's worse:

Oh, and if you want to do business nationwide, you'll need 43 more of those licenses from almost every state. The forms and requirements are different everywhere, most states want your fingerprints to do a criminal background check (the exact same criminal background check, it turns out), and the price varies wildly from a measly $10,000 to $1,000,000+ per state. Want the forms? Good luck finding them; some states don't post them on-line.

Things like this alot of times are the major cost of doing buisness.

At the very least it set's a minimum on the size of transactions that are viable. Also, it's the consumer who ends up bearing most of this burden of which the poor, as with most regulation, bears the brunt.

Not anymore.

Now ordinary people can raise microbounties!

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