Banking on Bitcoin Page #6

and now they're

in prison for life.

They were playing hardball.

It was very evident

that their intention, as the judge

herself said in her sentencing,

was to make an example

out of Ross,

was to say to all of you

people using bitcoin,

to all of you people

who want to tangle

with unregulated marketplaces

and technologies

and open source

cryptocurrencies,

"we will throw the book in its

entirety at you if you do this."

We seized a whole bunch

of bitcoins.

And in order to sell those

bitcoins off or go to an exchange,

you have to fit within

federal law and state law.

There's not really an exchange

that could handle that,

that met those regulations

at the current time,

so it had to be handled

through auction.

You know anything

about bitcoins?

There's an article in "the

wall street journal" today

- on bitcoins.

- - Really?

Right here,

if you want to read it.

It is?

Digital currency,

did you see that?

Wow, oh!

"Digital currencies

will disrupt global finance,

transform the way

we pay for things,

and just maybe,

make the world a fairer place."

From what I've read

on the computer,

they have had some problems.

- Yeah.

- Yeah.

The reason is

because you can't track it.

Well, I think I don't like

this idea at all.

When we saw

the silk road shut down,

a lot of people said,

"bitcoin's nothing but

illegal drugs on the Internet.

That's what it is."

And they would point

at the silk road and say,

"look here at all the stuff

that's happening here."

And I think when you saw

the silk road shut down

and bitcoin transaction volume

take a tiny little dip,

and then keep going up,

you know, I think that was

a great event to point at

and say, "it really

wasn't about that.

It really isn't about that."

It's a tiny little part

of the economy.

I guess in the last week

I've really started

hearing about bitcoin.

Recently I heard a scenario

after the FBI had seized

a bunch of bitcoins

due to illegal transactions,

now they're gonna be

auctioning them off

like they would a private yacht

for, you know,

from some drug dealer.

So that, in a way,

legitimizes the use of it

as a currency.

Looks like it's the first live

bitcoin exchange on wall street.

Looks that way.

Yeah, so one for 950.

- Buying or selling?

- -Selling.

550 on a thousand...

Right now we were looking

at the open interest

at the floor of

the bitcoin exchange.

There's different

exchanges that are online,

that will present

at the bidding house,

but there's no true

open outcry exchange.

Buyers and sellers

coming together

in an open, clear,

transparent, honest way.

- Gox is the highest one.

- Why don't we call it 900?

900...

There's my transaction,

probably the first two

transactions of the day.

It's really not about the money,

it's about being involved,

and I think there's a lot

more people gonna follow me.

Charlie shrem, 24 years old,

arrested today and charged with

engaging in money laundering

shrem enabled people

to transfer money

from bitcoin to cash via his

company called bitinstant.

Now the other point

that the DEA is making

is that shrem bought drugs

online at silk road

and that he knew silk road

was a trafficking website.

And we know the winklevoss twins

who obviously were featured

in the movie about Facebook.

They're actually investors

in shrem's company.

Yeah, you know, a lot of people

are very excited by this idea.

They like the idea that

you can have a currency

that is not tied

to any kind of central bank,

but at the same time,

I mean, think about it.

If you're in

the federal government,

you don't like the idea

that people could

effectively use another

form of cash

to buy things that they

shouldn't be buying online.

With me, it wasn't all

my customers.

It was one customer,

out of about 100,000 customers.

This was one customer.

One single...

And I made that case

in my sentencing.

I said, "your honor,

this was one customer."

It happened that I was literally

coming home from Amsterdam.

I was in my sweatshirt.

I was still stoned.

I didn't know what was going on.

Charlie did not know

when to shut up,

and that ended up

getting him in trouble,

and probably led to the end

of his company.

But they got me under

the patriot act,

and it's money laundering

because I knew that

the money I was taking

was eventually possibly going to

be used for drug trafficking.

Now drug trafficking is not

buying drugs, it's selling drugs.

I didn't help the drug seller.

I helped the guy buy drugs.

But I never went

to trial because...

And I pled guilty because

who wins at trial, you know?

Like this guy, silk road,

he's gonna go to life.

In trial, all he needed

to get was a lady

whose son died

from a cocaine overdose

and I would've... the jury

would've convicted me right there.

So essentially Charlie was

selling bitcoins to a guy

who was selling

bitcoins to people

who were putting drugs

into their own bodies.

And for this, Charlie

was charged with crimes

that could've put him

in jail for 20 years.

That's what the prosecutors

were shooting for.

We have banks that have atms

on every street corner

in America,

and those banks know very well

that that cash

is getting used for drugs.

And yet, that's fine.

They're allowed to do that.

No one gets in trouble.

But Charlie sells bitcoin

to a guy who sells bitcoin

to someone who uses drugs,

and he goes to jail.

He was an entrepreneur that

started building this industry,

built services

that people found useful,

when bankers almost destroyed

the world economy

and none of them

got in trouble whatsoever.

And here we have this 23-year-old

kid, he goes to jail

because he started

building an alternative.

Over the last six months,

our agency has been conducting

an extensive inquiry

into virtual currency.

The information

we're going to gather

in this fact-finding effort

will allow us to put forward,

during the course of 2014,

a proposed regulatory framework

for virtual currency firms

operating in New York.

Yesterday, we had

serious criminal conduct

come to light involving

virtual currency

as a vehicle

for money laundering

drug trafficking,

and other major felonies.

Right now, the regulation

of virtual currency industry

is still akin

to a virtual wild west.

That's why we're evaluating

whether our agency should issue

a so-called bitlicense,

specifically tailored

to virtual currencies.

I think people who imagine

a very powerful utility,

like bitcoin

that would somehow escape

regulation entirely

are either naive

or extreme optimists.

Bitcoin is a battle of ideas,

and it forces the issue of

whether people should be

as free in their handling

of money as they are

in their handling

of speech or religion

or relationships

with each other.

If you want to have

this thing go mainstream,

you're going to have

to have the regulators,

the lawmakers weigh in on it.

One of the first ones

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