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September 2, 2011 / twobitcents

The FBI Catch 22

Everyone is abuzz about the news that the FBI is engaged in terrorizing currencies “competing” to the USD. That’s not too concerning in the sense that Bitcoin is decentralized,and they will have a hard time fighting the anonymous, but we’re now in a catch 22 with evaluating the credibility of new Bitcoin service providers.

In that same article the writer points out “we should expect any Bitcoin exchange or major retailer to have security systems strong enough to withstand a domestic terrorist attack by a US Federal agency”, but eventually concedes that all “exchanges, wallet sites, and retail outlets should be presumed to be compromised.”

I probably don’t need to allude to the massive power the FBI can affect, but I think I just did. This organization could craft up fake documents that say “Super Legit Bitcoin, Inc.” exists and is a valid business. Your average Joe checks the validity of a business and is operators (here is where Bruce Wagner should have been spotted) and everything is in the green. Later the service provider screws him over, and he takes away from the experience that Bitcoin is a scam/fraud. *dusts hands* Done deal, right?

Am I spelling out the demise of Bitcoin? Not at all. If the FBI ultimately ends up creating fake companies to tarnish Bitcoin, they will probably destroy any credibility remaining in the governments role of registering businesses. Meanwhile fostering the environment for a private market to perform the function of what the government currently does. Even with the FBI’s super powers, with the Internet and ability to easily share information,  they will likely just waste their time as the market repeatedly selects them out.

Bitcoin supporter or not, we are on the path away from centralized government-issues/controlled currency. Even rewinding the clock 50 years to credit a similar scenario existed. The difference is that unlike credit, Bitcoin or it’s successor will have nobody to target.

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