The Jerusalem Post reports that the Bank of Israel (BoI) issued a warning to Israelis on Wednesday, saying that Bitcoin carried high investor risk and did not constitute 'legal tender'. The BoI outlined for citizens the risks associated with virtual currencies: 1. they are not…
The BoI outlined for citizens the risks associated with virtual currencies:
1. they are not backed by a central bank or government,
2. they are not legal tender,
3. nobody has to accept them as a form of payment.
This is the same posture being adopted by central banks across the globe – an appeal to the established hegemony of central banks and the use of dismissive, authoritarian tones intended to deflect thinking away from the meaning of Bitcoin. The statement that ‘nobody has to accept them as a form of payment‘ is humorous since it applies equally to any form of payment. The fact that BoI has joined the chorus comes as no surprise and reveals what Israeli author, Gilad Atzmon, calls “pre-traumatic stress disorder” about the disruptive potential of the new currency. Consistent, also, is an apparent under-estimation of citizens’ ability to weigh relative value when making transactions or choosing a store of wealth.
The BoI message makes the argument that a lack of ‘financial oversight‘ means that Bitcoin can be used for illicit activities such as money laundering and funding terrorism. The fact that bitcoins can be ‘transferred anonymously’ means that financial institutions may have trouble complying with regulations and assessing the currency’s risks.
Again, we see a message that associates Bitcoin with crime and the potential for crime – here intended as both a deterrent and a veiled threat: you don’t want to associate yourself with criminality, and if you do: we will be watching you! The association with the criminal underworld is clever since it cannot be refuted, given the repeated media coverage given to Silk Roads 1.0 and 2.0. The associative argument being made, namely, that crime is illicit and, so, by association Bitcoin is illicit too, is punctuated by placing the phrase ‘funding terrorism’ at the end of the sentence – an emotive and manipulative device – given Israel’s state of civil war.
Contrary to the popular misconception, Bitcoin transactions are not anonymous. and this is also stated clearly on the Bitcoin wiki. Private ,yes, but the fact that Bitcoin is not anonymous has, therefore, long been known and is the reason for developments such as Zerocoin that are seeking ways to anonymize individual bitcoin transactions.
The BoI also makes the argument that, because Bitcoin transactions are anonymous, they will hinder potential users (specifically financial institutions) from complying with regulation and will hamper their ability to assess Bitcoin’s risks. Unfortunately, this argument confuses the notions of risk assessment and anonymity in the bank’s attempts assert their intention to “regulate”.
Of course, this particular argument may be intentionally worded and constructed in such a way as to render it disjointed and confounding. By substituting the truth, namely that Bitcoin transactions are anything but anonymous, we arrive at the logical conclusion that Bitcoin will allow greater regulatory compliance and better risk assessment than the fiat Shekel!
In the final part of the communique, Bank of Israel leverages a favorite device by warning citizens that “those who are unfamiliar with the still-developing marketplaces” for crypto-currencies are susceptible to “fraud and deceit”. Hence, best to remain unfamiliar, scared and not to attempt to learn because you might invite fraud and deceit.
According to the Jerusalem Post, the Bitcoin Association of Israel welcomed the bank’s efforts:
“We should remember that alongside the risk there is enormous potential for bitcoin, such as personal empowerment, economic efficiency, and business opportunities for Israeli start-ups,” the group said. “We should not give up on all it has to offer because of the current challenges.”
Last modified: January 25, 2020 9:59 PM UTC