Bitcoin Money

Ding, Ding, Ding!  James Turk Gets It!

GoldMoney founder James Turk (@GoldMoneyNews) interviewed Félix Moreno de la Cova (@flix1) and released two videos — the first on gold and silver price moves, and a second in which Bitcoin is addressed.

Mr. Turk knows digital currency as his company is a pioneer in the space.  GoldMoney provides a payment system that supports account-to-account (A2A) transfer available to a subset of its customers.  Those customers can make person-to-person payments of their gold held in their GoldMoney Holdings accounts transacted in goldgram currency units.

A goldgram represents a gram of gold physcially held in vaults by GoldMoney and a goldgram’s value fluctuates along with the exchange rate for gold.  Because GoldMoney provides this payment system for these gold holdings, goldgrams exists as a digital currency.  A customer can also spend goldgrams with merchants who accept goldgrams digital currency.

Until November of last year, quite a few of GoldMoney’s customers were able to to transact in goldgrams.  That changed when GoldMoney restricted its goldgrams payments system to only remain available to those from the Bailiwick of Jersey, a tiny island off the coast of France where GoldMoney is based.

And that is where Mr. Turk displays his clear understanding of Bitcoin’s raison d’etre:

Turk: In theory, just leave the gold in the vault and use GoldMoney to click their ownership of gold to someone else, and the gold still stays there.

Moreno: Of course. They can’t do that right now.

Turk: They can, if they lived in Jersey.  We haven’t stopped the payments everywhere.  We’re still doing that and hopefully at some point of time in the future when the regulatory environment improves we’ll be able to re-establish that service. But I suppose that’s part of the beauty of Bitcoin and more generally of competitive currencies.  Here is a currency that has developed a successful following, apparently is growing based on the numbers I see, and it has managed to do that without any government regulation.

Moreno: In spite of it I would say.

Turk: Ya, I agree with you on that.

Mr. Moreno then describes a concrete example of where this makes Bitcoin different from any other digital currency in existence.

Moreno: Argentina just blocked PayPal payments.  Argentines can no longer make a PayPal transaction from one account to another account in Argentina.  Bitcoin bypasses all that.  Who cares what they say.  Who cares what the regulation says.  [Bitcoin] has no country.  It has no central place that can be regulated.  It is just a network.  And just the same as where BitTorrent hasn’t been shut down despite a massive onslaught from the record industry, Bitcoin can’t be shut down.

Another comment that needs to be quoted for truth:

Turk: To me what I really like about Bitcoin is that it is really pushing the edge of the envelope. It is causing people to think.  It is causing people to understand that there’s more out there than just something that comes from a government central bank, or from government more generally.  The market can create alternatives.

Mr. Turk appears to have come a long way in the past thirty days.  Last month he answered questions submitted on several social media sites.  In one of the questions he was asked about Bitcoin:

Questioner: When will I be able to fund/withdraw my GoldMoney Holding with bitcoins?

Turk: Probably never. BitCoins are the ultimate currency backed by nothing. It is not money in my view because money is a tangible asset, and BitCoins are not.

Mr. Turk is describing how, in his opinion, Bitcoin digital currency fails a certain test and as a result bitcoins cannot be money. But that wasn’t the question. What was being asked was when Bitcoin as a payment network could be used to transfer value to and from GoldMoney Holdings.

If Mr. Turk were to be forthright, he might have given the more likely answer: GoldMoney knows it could be put out of business by the swipe of a regulator’s pen.  He said as much in the answer to another question.  He wrote:

The future is unpredictable and uncertain. So all we can do is look at the things that have happened in the past and take steps to protect ourselves.  It is clear from history that when governments are out of control, anything can happen, and there is only one way to protect yourself – diversify. You need to diversify your assets as much as practical. Not all governments act in unison, so even if you lose some assets by grabs from ham-fisted politicians and bureaucrats, if you are diversified, you won’t lose everything.  [emphasis added].

GoldMoney is in a delicate dance.  Almost a year ago, GoldMoney closed its operations in the Netherlands after sparring with its Dutch regulators:

We do not want to subject ourselves, and by extension our customers, to unnecessary and unpredictable regulatory requirements [thus] we have reached the difficult conclusion that the only way to resolve this situation is to cease all business with Netherlands-resident customers.

GoldMoney has decided it is preferable to abandon markets than to try to serve its customers in those markets due to the massive and invasive regulations that are imposed.

A technology protocol is oblivious to regulations and though regulations may be applied to technologies or be changed in response to technological developments, their effectiveness is not assured.  Though Mr. Turk groks this, regulators make take longer to reach the same conclusion.  This was evidenced last week when legal counsel to the Federal Reserve learned that Bitcoin has no “server farms” to go after. Though there is the expectation by many that such a pursuit will be eventually attempted.

Regardless, Bitcoin keeps on growing in nearly every metric — transaction counts, current market valuation and the amount of computing capacity allocated to verifying transactions and protecting Bitcoin’s decentralized network.

That Bitcoin begins resonating with precious metals investors just accelerates the network effect that has been attained thus far.  It is quite a statement that those who only recognized money that has for existed six thousand years are now considering a money that has existed barely one thousand days.

Further discussion on this interview can be found on the BitcoinTalk forum.

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