And here’s my post titled “I’m Satoshi”.
And here’s my post titled “I’m Satoshi”.
The Japanese government is still in the process of discussing how to regulate the Bitcoin network. Yesterday’s answer to Member of Parliament Okubo’s questions was just a starting point for this discussion.
In the opinion of the Japanese government, Japanese banks right now are not allowed to offer bitcoin denominated accounts. That’s because they think that bitcoin is not yet a currency.
I think that question is open to debate. Actually, bitcoin is the most successful currency of the World, appreciating massively against everything else. It is the only worldwide currency everybody with an Internet connection can use. It means Internet with peer-to-peer payments. It is money in the cloud. And it is the only honest money, with absolute protection against inflationary money-printing built in.
But Japanese banks will listen to what the government says. And if the government right now still says that they can’t offer bitcoin accounts, they won’t.
So with this primitive state of Japanese financial information technology regulation, how can one work around these restrictions?
One use case for having bitcoin accounts would be a legal person (a stock company) holding bitcoin.
Any company can open a bank account denominated in traditional currency. That means that the funds in that account are property of the company, and not of its directors.
In contrast, with the MtGox mess, there was no way the company MtGox could hold bitcoin in a bank account. So they didn’t. Their directors held bitcoins, which diluted the boundaries between company and private property.
“Holding bitcoins” means knowing a private key. But actually, most people (me included) don’t know any keys.
With large amounts, the safe way to hold bitcoins is to print a paper wallet. And then keep that paper wallet in a safe place, just like some gold or jewels.
And one such safe place is a safety deposit box rented from a bank.
That in turn means that one can have a company form a contract with a bank about a safety deposit box. Then print paper wallets, and deposit them in that box.
That’s the closest thing possible now to depositing bitcoins in a bank account.
Eventually, all banks will offer bank accounts denominated in bitcoins (and other cryptocurrencies), just like all banks have Internet homepages as a matter of course. Japan won’t take forever to figure out the necessary regulatory framework for that.
This excellent article at Zeit Online (in German) by Armin Steinbach gives another strong reason why the present German feed-in tariff system for renewable energy is not “state aid” under European Union competition law.
The author notes that states can set minimum wages by law. If a state does that, employers need to pay their employees more than under simple market mechanisms. As an alternative, a state could choose to pay workers on low wages some kind of aid from taxpayer funds.
The first case is not state aid, since there are no taxpayer funds involved. The second one is.
In the same way, the feed-in tariff sets a “minimum wage” for solar, wind, and other renewable energy. That means that buyers of that electricity need to pay more than under a model that would leave all prices purely to market forces.
But just like with a minimum wage, there are no taxpayer funds involved. Which means that there is no state aid, and Commissioner Almunia should lose the case the German government just started against him at the European General Court.
That in turn is good news for renewable energy in Germany, which can get rid of the useless and harmful ideas the EU Commission has about how a feed-in tariff should be built. And it would be good news for the principle of democracy, which frowns on attempted power grabs by EU institutions. The Commission gets exactly as much powers as the Member States have transferred to this institution. If they could just start deciding about every policy question around with the excuse that there may be some kind of state aid angle, that would be the end of democracy, and the end of German participation in the European Union.
“Japan Said Ready to Impose Bitcoin Rules“, by Hiroko Tabuchi.
From the article:
Karl-Friedrich Lenz, a law professor at Aoyama Gakuin University in Tokyo, said that although the proposed guidelines would bring some welcome clarification, they could also leave Bitcoin trading to untested upstarts, with little additional protections for users.
“If banks and securities firms can’t handle Bitcoins, Japanese consumers will be stuck with illegal shadow banks like Mt. Gox, and their risk will be much higher as a result,” he said in a note.
The Japanese government has answered some questions by opposition Member of Parliament Okubo. He has posted this answer on his website (in Japanese language).
I would like to restrict myself to some very short comments right now, which are mostly concerned with the format of the answer.
For one, it is very annoying that the PDF-file the government provided is in a format written not from left to right, but from top to bottom. That makes it hard to read on a computer screen, which is usually much wider than it is high. So to read this, a lot of people will print it out, wasting valuable resources.
Next, these answers are very short. Having just spent writing over 25 pages just to deal with the question if you need a banking license to operate a bitcoins exchange in the way MtGox did, I find these answers rather lacking in depth and detail. And the answer “We don’t know” comes up rather often. As the government paper says right at the start, they are still collecting information and investigating these issues.
But the most important observation for the time being: This government answer only summarizes how the Japanese government understands existing law. It says nothing about how they might regulate the Bitcoin network in the future.
For example, when I discussed reports from unconfirmed sources about this document on Wednesday, I thought that the government wanted to issue some new rules that prevent banks and securities firms from dealing in bitcoins. It turns out I was wrong about that. All the government says is that in their understanding of existing laws, banks and securities firms are already not allowed to offer Bitcoin network related services.
It may be open to debate if that is true. I would like to come back later and discuss that issue. But this paper does not want to set any new policy. It only wants to describe the law as it already exists today.
Part 43 of my third global warming science fiction novel “Last Week”. Link to Part 1: “Back To Paradise Era”.
FRIDAY, FEBRUARY 18 2023 1:22 P.M.
“This looks delicious,” Angel said. “I am really lucky to be…”
She stopped talking in mid-sentence. Her hand holding the fork froze close to the plate. As did the rest of her body.
Satoshi didn’t understand what was happening. Was Angel pulling some kind of prank on him? Pretending to freeze completely, and watching for his reaction? This was very not like her.
Then, all of a sudden, there was a sound of thunder, a flash of intense green light, and a figure appeared out of thin air, standing right next to their restaurant table.
A catholic bishop. A man of abouty fifty-five years, bald, beardless, wrinkles in his face, wearing a bishop’s vestments. On his head he had a mitre, a richly decorated high headgear of a diamond shape. A large Episcopal ring was decorating his left hand. On his body there was a long wide-sleeved tunic, the dalmatic, which was unable to hide his overweight. A golden cross on his chest completed the picture.
“Khalmorot?” Satoshi asked.
“What happened to Angel? Is she all right?”
“Don’t worry. I’ve just put her into hypnosis for a couple of minutes. I need to talk to you in private,” Khalmorot said.
“What do you want?”
“First off, I need to explain that time machine. You already know that it’s not real.”
“Yes,” Satoshi said. “I saw that with the Glaring Glasses the other day. So that was true?”
“It was. That whole time machine story couldn’t be true in the first place. Did you notice why?”
“It’s easy. If it were true, Angel’s mission would destroy everybody she knew. Her father, the Emperor. Her teacher. Her lover. Everybody. So of course it would destroy herself as well. Which would mean there would be no Angel to get on the time machine in 2323,” Khalmorot explained.
“Now that you say it, yes, that makes sense.”
“And if we actually had a time machine, we’d go back into our own past to warn our own ancestors,” Khalmorot said.
“But Angel said she lived all her life in the 24th Century.”
“I set her up with that memory. It’s easy to do if you have the creative efforts of a couple of hundred million years of civilization and our technology in databases and direct brain interfaces. The Glaring Glasses are only a little taste of that.”
“So all of that is not true. Will she remember any of her life as a Princess once she wakes up from this dream?”
“Yes. She will remember all of that exactly, but she will know that it is all not true. Just like someone might remember a good book or movie.”
“You must be some kind of alien species.”
“Of course. That’s why we have so far superior technology. Did you know Mount Fuji in Japan is a spaceship?” Khalmorot asked.
“No. I’ve never heard of that one.”
“It only looks like a mountain. Actually, it’s the spaceship with which we came to your planet about two hundred million years ago. I was on that spaceship when we arrived.”
“You’re two hundred million years old?”
“No. I’m over three hundred million years old. I lived as a Prince of my race for a couple of centuries before our planet went up into smoke from our own runaway global warming. My mind is mirrored in a large computer database, and I have robots I can use if I want to walk around in the real world,” Khalmorot said.
“Is your planet far away? How did you know about Earth?”
“It’s right next door. You call it Venus.”
“What? There was intelligent life on Venus?”
“There sure was. But we were not intelligent enough to avoid the fossil fuel trap. Just like humanity, we burned through all our fossil fuel in the first couple of thousand years of our civilization. We started a runaway global meltdown positive feedback loop. The kind you call ‘Venus syndrome’ here. It was a really stupid thing to do, in hindsight. If we really had a time machine, we would of course go back and warn our own ancestors.”
“So now you are trying to stop global warming on Earth by setting me up with bitcoins and Angel with the Glaring Glasses and her time machine story?”
“Of course not. Quite on the contrary.”
“I’ve been causing global warming on Earth,” Khalmorot explained.
“Why would you do such a thing? It doesn’t make sense.”
“You think global warming makes sense? I mean, you are a species smart enough to start civilization. But right at the same time you are so stupid as to burn all the fossil fuel? How do you explain that basic contradiction?” Khalmorot asked.
“I’ve never thought about that.”
“The explanation is very easy. Humanity has not burned all that fossil fuel on their own. I hypnotized your leaders and made them do it for the last couple of centuries.”
“That explains things. We actually were not so stupid on our own. Though there might be some of my fellow humans who have achieved this impressive level of stupidity without outside assistance. But why would you do that? Why would you want Earth to go the way of Venus?”
“It’s for this television show I’m running. The HEAT GAMES. It has the highest ratings ever. In our whole history. Of course it’s somewhat controversial. Some of our viewers object. But that’s great to get higher numbers.”
“What? This whole global warming crisis is happening so that a bunch of aliens can have fun in a television series? With humanity as the unwitting suicidal stars?”
“Exactly. Entertainment rules the world. Of course, we can always make you turn the heat down again. We could kill all humans anytime we want. Just as you are eradicating all those other species. That would stop global warming right there. It sure would. I am rather sure of it. But killing all humans would deprive us of a very important source of entertainment. It’s really kind of fun watching you morons fall into exactly the same trap that fried our own planet.”
“So why have you set up Angel and me with this?”
“It’s because the Moros 27 asteroid. That part is quite real. We are monitoring space for potentially dangerous asteroids, and we found this one three hundred years before impact.”
“Would that be dangerous to you as well?” Satoshi asked.
“We’re very well adapted to high temperatures. A couple of centuries of vaporized rock blanketing Earth wouldn’t be much of a threat. We’re quite safe way down in our mountain. Except if the asteroid happens to impact directly on Japan. That would be very bad news. We would need to move our spaceship, and we are not sure that would be easily done after 200 million years.”
“So there is a risk for you?”
“There is. There sure is. Besides, if Moros 27 hits the Earth, all life is going to be wiped out. That would be bad news because Earth would become a rather boring planet. Humanity serves a very important purpose in our society. You are providing for our entertainment. The last couple of thousand years have been the most hilarious ride ever,” Khalmorot said.
And disappeared in another flash of green light.
Nikkei reports (without sources) about plans of the Japanese government on the Bitcoin network.
Part of those plans is only common sense. For example, if someone bought bitcoins at low prices in the past and sells them now, the capital gains will be taxed under normal rules. That part is also something that does not need any new regulation at all. Existing Japanese tax law says that capital gains are taxed already.
But there are two ideas which are dangerous to Japan’s future.
One is about consumption tax. The article says:
Purchases made in bitcoins will be subject to Japan’s consumption tax.
If all that says is that you need to pay consumption tax for a camera you bought with bitcoins the same way as if you bought it with Japanese yen, again, that’s only common sense.
But if it says that you need to pay consumption tax also if you buy 100,000 yen worth of bitcoins, that would be an insanely high Tobin Tax of eight percent on any such transaction, which in turn would make it completely impossible to have any bitcoin exchange in Japan. No customer would be as stupid to buy bitcoins in a country that tries to do this.
The United Kingdom tax authority just two days ago declared exactly the opposite:
The other very problematic idea (again, from the Nikkei article):
Banks will be prohibited from handling them, and securities firms will be barred from brokering Bitcoin trades.
Such a policy would be most unfortunate, both for consumer protection as for the future of Japan’s financial industry.
If banks and securities firms can’t handle bitcoins, Japanese consumers will be stuck with illegal shadow banks like MtGox, and their risk will be much higher as a result.
As I discussed in a paper published yesterday, MtGox needed a bank license, since they were in the business of taking deposits from their customers. Under this new proposed policy, they would be barred from applying for one in the first place, as would anyone else be.
This is the equivalent of a ban in 1994 for banks to set up an Internet homepage. If such a policy is enacted, it will be a great symbol for Japan missing the greatest innovation since the Internet.
The Japanese cabinet decided last summer to make Japan the “World’s Most Innovative IT State”. To achieve that, the government calls for “revolutionary new industries and services”, which it says should be “promoted”.
You don’t promote revolutionary new services by shutting down the market completely before even the first bank or securities firm starts the first experiments. That’s backward thinking.
And you certainly don’t get to be “the World’s Most Innovative IT State” with a policy hostile to the Bitcoin network. You’d be stuck with an Internet still unable of handling peer-to-peer payments, while everyone else gets the new upgraded version of the Internet.
Tokyo has won the 2020 Olympics. But with this kind of policy, Tokyo’s financial industry will certainly not win in the global competition between financial centers.
Good news for New York and London, I guess.
The German government just announced that they have sued against the EU Commission decision to open a “state aid” procedure against the German feed-in tariff law.
As discussed before on this blog, there are substantial disagreements. The EU Commission thinks that the German law qualifies as “state aid”, which would give the Commission the right to decide about German feed-in tariff policy. The German government disputes this.
While the government is talking to the Commission and wants to get this disagreement solved by negotiations, they had to file the lawsuit since yesterday was the deadline to do so.
If these negotiations succeed, the German government can always retract the lawsuit. If in contrast they do not succeed because the Commission insists on overstepping their competence, this step leaves the option of getting this problem resolved in court.
I have been writing a short piece on the question if a bitcoin exchange like MtGox would need a banking license under Japanese law.
This is still a very rough draft right now. I have not yet succeeded in finding out what the Japanese Financial Services Authority (金融庁) thinks about these questions, though I did try to find out.
So I am not very confident on publishing this yet. On the other hand, current events make this topic somewhat relevant right now. And maybe readers can point out some of my errors.
Anyway, here we go:
If you like this, please consider having a look at part 6 of my Bitcoin global warming novel titled “I’m Satoshi“.
Part 42 of my third global warming science fiction novel “Last Week”. Link to Part 1: “Back To Paradise Era”.
FRIDAY, FEBRUARY 18 2023 9:17 A.M.
“So, let’s get this World saving business done now.”
“Yes. I think I’ll start slowly today. Maybe invest the first four billion dollars of my money to set up the Buy&Hoard fund trustee company,” Satoshi said.
“Is that difficult to do?”
“It is, if I want to sell shares to the public. I need to file a lot of paperwork and get approval for that. I’ll have my lawyer do that for me, of course.”
“You have a lawyer?”
“No. I was able to steer clear of lawyers until now. One of the benefits of telling no one of my money. But I’m sure I’ll find someone who can handle some routine paperwork like that,” Satoshi said.
“So, what do you need to do?”
“I’ll first need to set up a company. Mind if I call it the ’24th Century Angel Fund’? I would like to keep your name permanently in it. Just to remind me of you, once you’re gone next Tuesday.”
“Go ahead. I don’t need to stay out of the public attention. I’ll be gone soon, if you are right. And you probably are.”
“So, that’s settled. I’ll set up that company with that name and fund it with $4 billion, for starters. I’m not sure if that will be enough to have any influence on fossil fuel prices, though.”
“It probably won’t be enough to do much. But it’s a good start.”
“Do you have any idea how much money all the oil reserves left are worth?” Satoshi asked. He had never researched these questions before.
“Of course. They’re worth around $250 trillion at 250 dollars a barrel right now, with about one trillion barrels left. That’s only common sense.”
Angel had done her homework preparing for her mission to the 21st Century.
“So, $4 billion would be less than 1 percent of that amount. It won’t be enough to move the market in any way,” Satoshi said.
“Of course. You’ll need to attract other investors. Show the business case, start the positive feedback loop. There’s over $200 trillion in assets in the global fund management industry.” Angel really had done her homework.
Satoshi searched a bit on the Internet and found a large law firm specializing in securities regulation. He phoned them.
“Hi. I need to set up a $4 billion commodity fund. Would you be interested in assisting me with that task?”
They were interested. As well they should be, with that kind of money involved. He set up a meeting with one of their partners for later that morning. Then he checked his mail and transferred $40,000 as a first payment to the Bitcoin address the law firm had indicated in that mail.
“Are you coming to the meeting?” Satoshi said.
“Yes. I’ll grant your lawyers the honor of my visit,” Angel said.
“There’s only one problem.”
“For founding such a company, I need to give them my identity. I need to come out.”
“So, you’ll present them with a passport on the name Satoshi Nakamoto?”
“No. That’s not my real name, of course. I’ll show them a passport with my real name.”
“What is your real name?”
“You don’t need to know. I’d like to keep you calling me ‘Satoshi’, if you don’t mind.”
“That’s okay with me.”
“I’ll keep calling you ‘Angel’ as well, once you’re back to your real identity as Thusnelda Sneeze.”
“That’s very kind of you. Of course you will. I am not Thusnelda Sneeze. I am Angel, a real Princess from the 24th Century.”
“You sure are. As far as I’m concerned, you’ll stay my pretty Princess from the 24th Century until the end of time,” Satoshi said. “Now, let’s announce the news to the World. As you said, we need to find some investors to get this fund to the necessary scale. Watch.”
Satoshi navigated to the dashboard of the Angel 2323 blog and started typing a post announcing the new fund.
“Hello World, it’s Satoshi.
“As you know, our little problem of global warming is easily solved by the concept of Buy&Hoard.
“Buy&Hoard means buying up fossil fuel resources and keeping them off the market. That will increase fossil fuel prices, guaranteeing trillions of dollars of profits for the investors involved. And it will accelerate the transition to renewable energy, which is inevitable anyway. It will accelerate the process enough to keep global warming way down under a business as usual scenario. We’ll have plenty of resources left to start deflecting the Moros 27 asteroid headed our way. And there is no need for any legislation or international Treaty to pull it off.
“Someone should start working on this idea. That someone is me. I’m just an ordinary guy who happens to be the World’s richest person. I don’t know anything about funds. So I just set up a meeting with some lawyers to invest a modest $4 billion in kickstarting this fund.
“It will be like the first bitcoins fund. You may know that it was set up in 2013. For the first time, anybody could easily buy some bitcoins just like any other investment. No more hassles with international wire transfers. No more headaches about storage or worries about getting your bitcoins stolen by some hacker or other.
“Once my fund is up and running, it will be exactly the same for oil. Anybody will be able to buy a barrel of oil, and keep it in the ground for the next couple of decades, to contribute to the price hike humanity needs. Leave the hassle of actually buying the oil and the trouble of storing the oil safely to the fund. And note that the price hike that will save the World from runaway global warming and Moros 27 will be also good news for the financial health of our investors.
“Anybody who missed out on buying bitcoins early on, here is your second chance. Oil prices will take off if our fund gets to scale. It’s just common sense. Do something for the planet, and get rich in the process. Who could argue with that?
“I have decided to name this fund the ‘24th Century Princess Angel Fund’, in honor of Princess Angel, who was willing to give her life in a suicide time travel mission back to our World so as to warn us of global warming and the Moros 27 asteroid. It is a small sign of gratitude for her willingness to sacrifice her life for the mission.”
Satoshi finished typing.
“How does that sound to you?” he asked.
“You sure know how to treat Royalty properly. Thank you.”
Satoshi clicked the “publish” button.
Link to part 43: Heat Games.