Bitcoins: Safehaven from Cyprus Debacle and Officially Recognized by the US Treasury

I questioned yesterday the wisdom of mainstream’s assault on bitcoins, where the Economist calls bitcoins a “bubble”.

Well it figures that the recent spike in the public's interests on bitcoins has partly been a ramification or an offshoot to the Cyprus savings grab debacle

Here is Businessweek/Bloomberg,

Since Sunday, a trio of Bitcoin apps have soared up Spain’s download charts, coinciding with news that cash-strapped Cyprus was planning to raid domestic savings accounts to pay off a $13 billion bailout tab. Fearing contagion on the other end of the Mediterranean, some Spaniards are apparently looking for cover in an experimental digital currency.

“This is an entirely predictable and rational outcome for what’s happening in Cyprus,” says Nick Colas, chief market strategist at ConvergEx Group. “If you want to get a good sense of the stress European savers are feeling, just watch Bitcoin prices.”

The value of the virtual currency has soared nearly 15 percent in the last two days, according to the most-recent pricing data. “One hundred percent of that is due to Cyprus,” says Colas. “It means the Europeans are getting involved.”

So aside from gold, bitcoins appear to be a major beneficiary from the Euro crisis. So which shows more signs of a bubble: bitcoin or fiat money?

Yet for those who claim bitcoin lacks the widespread acceptance, well, they fail to take account that even the US Treasury now officially recognizes bitcoins.

From Bradley Janzen of Freebanking.org

Financial Crimes Enforcement Network (FinCEN) is the bureau of Treasury that enforces the Bank Secrecy Act (which requires banks to spy on their customers for the government).

FinCEN Issues Guidance on Virtual Currencies and Regulatory Responsibilities

To provide clarity and regulatory certainty for businesses and individuals engaged in an expanding field of financial activity, the Financial Crimes Enforcement Network (FinCEN) today issued the following guidance: Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies. The guidance is in response to questions raised by financial institutions, law enforcement, and regulators concerning the regulatory treatment of persons who use convertible virtual currencies or make a business of exchanging, accepting, and transmitting them. Convertible virtual currencies either have an equivalent value in real currency or act as a substitute for real currency. The guidance considers the use of virtual currencies from the perspective of several categories within FinCEN's definition of MSBs.

News Release: http://www.fincen.gov/news_room/nr/pdf/20130318.pdf

Guidance: http://www.fincen.gov/statutes_regs/guidance/pdf/FIN-2013-G001.pdf

Welcome to the mainstream bitcoin.

Well, my favorite iconoclast Nassim Taleb has great words to say about bitcoins at the reddit.com: (hat tip Zero hedge)

Bitcoin is the beginning of something great: a currency without a government, something necessary and imperative.

A sentiment I share. 

Bitcoins could herald the epoch of decentralization or the information age and importantly perhaps a transition to F. A. Hayek's denationalization of money