Money 2.0 Stuff: Everyone is an expert on Japanese courts


The Gox Saga Gets Even Weirder

“Never trust a financial services website named after Magic: The Gathering” is probably a pretty good rule of thumb to follow for people attempting to purchase cryptocurrencies.

In spite of some very obvious branding issues with re-starting an exchange associated today with sheer incompetence of Bitcoin’s early anarchist entrepreneurs, cryptocurrency billionaire and top-5 purchaser of bedazzled cowboy hats Brock Piece is attempting to start it back up, this time passing on all potential proceeds to creditors.

In a phone interview with The Block, former Mt. Gox operative Mark Karpeles disputed Pierce’s claims, noting that no purchase by Pierce could be perceived as valid without shareholder approval. His skepticism is warranted: with much speculation around Mt. Gox, Brock Pierce may potentially start another exchange (with associated ICO) around its resurgence as part of a movement called GoxRising.

While I am a mere desperate creditor and not an expert on the intricacies of Japanese civil law, there appear to be obvious issues with Pierce’s plans to return every cent of profit to patient Mt. Gox victims. His one-pager is straight to the point, outlining 5 goals to be submitted to the Tokyo District Court:

  1. Pierce’s first goals are focused on returning proceeds to creditors by striking bitcoin at the right market price, capturing forks, etc. While this seems admirable, this has largely already been achieved by groups like Mt. Gox Legal.
  2. Outside of returning funds, Pierce proposes “[providing a] bid for intangible assets and a vision for a new Mt. Gox Exchange” specifically aimed at using profits to restore creditors with a “full recovery.” This suffers from obvious issues because it rests on the claims…
  3. … that Brock outlines in his final goal, in which he aims to recover any residual stolen or lost bitcoins. This is simply fiction: there is no credible way to claim or attempt a recovery of the remainder of Gox’s coin. In the mean time, Brock wants to allow creditors to swap their claims on missing coins “in return for a new coin that will be tradeable on the new Mt. Gox Exchange.” After years of waiting for bitcoins, I’m sure creditors will be happy to settle for Brock Pierce token issuance #5.

He also makes other promises like contesting CoinLab’s $16 billion lawsuit, though these claims have already been contested by the current trustee.

The “why” is confusing til it appears to take a turn for the downright-crazy. Brock Pierce claims that he is the sole shareholder of Mt. Gox, having purchased the exchange in a 2014 transaction, which appears to have no shareholder support (or court approval, as the exchange had already entered legal proceedings).

In a thread in which notorious cryptocurrency printer Rhett Creighton noted that Brock Pierce actually owns all of Mt. Gox, Pierce claims that “the [Mt. Gox] trustee said the shareholder, which I’m arguably the sole shareholder, gets the surplus.” which sort of, well, indicates exactly what he’s going for.

In spite of his seemingly altruistic-populist argument that Pierce, savior of Puerto Rico, is helping lost creditors get all of their bitcoins back, it appears he still believes that remaining shareholders in Mt. Gox can capture some portion of the surplus leftover from earlier confusions with the sale of Mt. Gox’s bitcoin reserves.

As details unfold slowly, poor creditors are caught in a pickle, with the option of believing an ayahuasca-sipping unicorn herder who appears to have a sinister greed for any satoshis leftover post-refund or a formerly incompetent operator who may be reckoning with his own jail sentence after embezzling customer funds.

The Venezuela Rally

“But Venezuela!” is cryptocurrency enthusiasts’ own “but we haven’t tried real communism yet!”

Given Bitcoin’s extremely high volatility, it rarely makes sense to place one’s day-to-day sustenance on the ebbs and flows of its charts. However, the pipe dream has always been that countries with incompetent central banks or kooky authoritarian rules will see adoption of Bitcoin as an alternative. I’ve tried my own rendition, noting:

In my view, the only thing that can drive crypto adoption is (1) bitcoins or other cryptocurrencies serving as an escape valve for people who are in uncertain monetary regimes (and willing to stomach Bitcoin’s volatility), e.g. Venezuela, Iran, etc., (2) people buying into the idea that Bitcoin is effectively a call option on becoming a future store-of-value, or (3) people buying the idea that Ethereum, Dfinity, Tezos, and other crypto-networks represent a radical shift in the way computing works (“Web 3.0”) ahead of what will likely be a multi-year validation process.

More optimistic cyber-token enthusiasts like Overstock CEO Patrick Byrne see the impact of Blockchain Technology as extending even further. Squabbles over governance are a thing of the past in our technologically advanced epoch. All it takes is six laptops, Byrne specified:

“We could step into Venezuela with six laptops and create not only a functioning society but arguably one with the most advanced government systems in the world,” [Byrne] said. “We could bring them a central bank on the laptop. Everyone in Venezuela downloads a free app, and suddenly you have the most advanced monetary system on the planet.”

While Byrne attempts to piece together a plan to fix authoritarian regimes, Bitcoin is steadily gaining liquidity in Venezuela with LocalBitcoins volume reaching all-time-highs this week. Covered by The Block’s Larry Cermak in an extensive report, it’s clear a growing amount of Venezuelan wealth is seeking refuge in Bitcoin. The magnitude of this trading volume isn’t to be diminished—bitcoin volumes exceed volume on the country’s largest stock exchange.

To those who haven’t been following the Venezuelan governments cryptocurrency antics, they’ve already proposed that the fraudulent “Petro” token replace the struggling bolivar with further transaction size limits enforced on its use.

As long as prices continue to double every 19 days in Venezuela, nearly any amount of bitcoin volatility seems to be an appealing prospect for regular people. And although dollars represent a more stable option, cryptocurrencies that are easily divisible and resistant to capture present a far better option to some. While exponential growth of local trading volumes are startling, the prospect of “hyperbitcoinization” has been professed by Bitcoin’s strongest proponents for years.

Though Bitcoin has always held libertarian product-market-fit, its perception as more than “gold for nerds” has evaded a lot of Western macroeconomic cognoscenti. These experts often focus on the fact that they present a potential tool for oppressive regimes rather than an option to allow innocent citizens’ exit. In many ways, this is the beauty of Bitcoin: it’s money for everyone and apolitical.

One of the warnings presented by critics is that the majority of the money being used to purchase bitcoins is from corrupt citizens or Maduro’s socialist regime even as human rights activists note its value in avoiding sky-high wire fees, taxes on FX, and potential seizure. Also unclear in today’s data is how much bitcoin is being used for wealth storage (leading to potential bitcoinization) rather than merely serving as a payment rail used for settlement in dollar-based remittance.

While eventual dollarization is the likely end-game of Venezuelan’s decades-long struggle with uncertain monetary policy, bitcoin offers a battleground and Venezuela’s opposition to it poses an important test. Currently, while seizures of mining equipment and potential asset seizure remains a threat, it’s unclear what a true attempt at a government crackdown would look like (say, if Bitcoin growth was an order of magnitude bigger than it is currently)—enforcing restrictions on merchants or local brokers dealing in bitcoins. While always thought to be “censorship resistant”, Venezuela’s premiums could be pushed much higher with further top-down action.

Other Stuff Happened

  • Chainalysis raises a monster $30m round to expand heavily into the UK, a country already known for mass surveillance. As a clear leader in on-chain forensics, a pricey Chainalysis subscription could be table-stakes for governments and financial services companies even as cryptocurrency fungibility and privacy improves.
  • Morgan Creek Digital, a firm headlined by Twitter sensation Anthony Pompliano, raised over $40m in its first venture capital fund focused on cryptocurrency infrastructure. Most notably, the fund saw participation from a wide range of institutional investors, including public pensions, a university endowment, and a hospital. 
  • Jack Dorsey continues his press tour, seeming optimistic on potential Lighting Network integration in Cash App.

The post Money 2.0 Stuff: Everyone is an expert on Japanese courts appeared first on The Block.

Money 2.0 Stuff: Everyone is an expert on Japanese courts written by Arjun Balaji @ February 14, 2019 Arjun Balaji

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