Oh sh-itcoin! Crypto-dosh swap-shop Coinbase empties punters' bank accounts Digital currency exchange Coinbase said it inadvertently charged punters for transactions they never made, effectively draining money from their bank accounts. It has promised to refund the money taken. For the past few days, netizens have been complaining that funds had vanished from bank accounts linked to Coinbase without …
The real problem was speculating in an unregulated market with almost all your money. If you are going to speculate make sure you can afford to lose all of it even in regulated market. In some ways a casino offers more reliable rewards even if the games are skewed in favor of the house. Cryptocurrencies have no intrinsic, fundamental intrinsic so unlike speculating with gold or real estate there is tangible property.
As an aside, Libertarians are not Anarchists. Libertarians realize there is a need for laws and regulations for a properly functioning society. But we object regulatory creep by agencies and a tendency for top-down regulation. Rather we prefer finding the right balance to maximize freedom while protecting society from miscreants and to as much as possible push the laws and regulations to the local level as it is closer to the people. Not say getting these balances right is easy, its not.
...Rather we prefer finding the right balance to maximize freedom while protecting society from miscreants...
Leaving aside the two extreme positions where you either have no rules at all or total slavery, EVERYBODY wants to 'find the right balance' between individual freedom and state power. Even those who advocate an extreme would claim that their proposal was 'the correct balance'.
I think that the point about libertarians is that they will choose individual freedom over state power if at all possible, and specifically that they believe that the current balance errs too far in favour of state power....
"The real problem was speculating in an unregulated market with almost all your money."
The problem here doesn't seem to have been punters speculating with almost all their money. It was the payments processor taking more money than had been speculated.
I hope the refunds will also compensate for any consequent damage to those who were driven into the red.
it might be better to point out that for every 'get rich quick' scheme there's one person at the top who takes money from everyone underneath, then walks away with it leaving "that kind of a mess" behind.
I suspect that the crypto-currency investment was sold as a 'get rich quick' scheme, which it might be for someone who's extremely lucky enough to get in at the right time, then get OUT at the right time.
But for the rest, it's like a zero-sum game. For every winner there's a loser. Or maybe more than one loser. That's not really 'investment'. That's more like a ponzi scheme.
https://en.wikipedia.org/wiki/Ponzi_scheme
In this case, a handful of investors carefully manipulate the value until it starts going up, and then sell the idea of investing to a whole pile of people, and it continues to increase in value, until it hits a peak. Then the original investors sell a bunch of their investment, and the price drops. Then it drops more as more people do the "oh crap panic" and sell off THEIR investments, leaving a whole lot of people who bought in late with a big bag of nothing.
This is not new. Old George Soros has been making ZILLIONS this way for DECADES. [at least, that's how _I_ see it]
"In this case, a handful of investors carefully manipulate the value until it starts going up, and then sell the idea of investing to a whole pile of people, and it continues to increase in value, until it hits a peak. Then the original investors sell a bunch of their investment, and the price drops"
That's not a Ponzi scam, that's a boiler room scam. Or pump and dump if you prefer. No person or organisation is guaranteeing you a profit, you are directly speculating in an instrument.
Pensions, social security and fractional reserve banking are Ponzi schemes. They can only continue to make the future payouts if there is a constant inflow of new "investors". The key feature is there is an opaque central fund which is claiming to be making a profit, whereas in fact the money is just being cycled.
"In this case, a handful of investors carefully manipulate the value until it starts going up, and then sell the idea of investing to a whole pile of people, and it continues to increase in value, until it hits a peak. Then the original investors sell a bunch of their investment, and the price drops"
Sounds like a bog-standard Tech IPO to me.
Here you're not describing a 'Ponzi scheme', which is a scam whereby an investment is issued with very attractive claimed returns. These returns do not exist in reality, but are funded by the money from the initial investors, who pile it to buying the instrument because the returns smm so good. While the investment base is expanding the pretence can be kept going - eventually, of course, it falls over....
What you have actually described is a 'Pump and Dump' scheme. VERY common for imvestment scams. And the idea has been going a long time - read this from the age of early railway investments... http://www.dtc.umn.edu/~odlyzko/rrsources/glen6.pdf
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"Teaching libertarians and ancaps why financial regulations exist since 2009."
Coinbase took money from customer's bank accounts. Or their payment processor did. But either way, a company was able to, without any customer input, withdraw money from a bank account.
Now, if coinbase had done that to another crypto wallet, it'd be headline news. But because it's a "feature" of the current banking system, the only news is that a crypto dealer did it.
I'm also very glad that these financial regulations keep us safe from bank runs. Except when, you know, a bank run actually occurs, and then the rules change. If you think your first 100k is insured, then have a look at what happened in Cyprus when they tried to use that regulation.
Update posted by Coinbase:
"We have determined that the erroneous credit and debit charges are the result of Visa reversing and recharging transactions. This was not done by Coinbase. We are working with Visa to ensure all affected customers are reimbursed.
Over the last few months, large banks and card issuers requested that card networks change the MCC for purchases of digital currency. Visa changed the MCC for digital currency purchases to a code that allows large banks and card issuers to charge consumers additional fees."
More details on what exactly is meant here: https://www.thebalance.com/what-s-a-credit-card-cash-advance-960691
TL;DR: last year VISA and major banks implemented a new MCC that allowed them to charge "cash advance" fees when their card holders buy cryptos, by unusually re-qualifying those transactions as ATM cash withdrawals.
Where's your God^Hregulation now ? Oh right, it is busy polishing a few banksters' dicks so they can rear-end you better when you make purchases with a credit card. But, hey, let's bash on libertarians for no good reason, because muh political agenda.
> Teaching libertarians and ancaps why financial regulations exist since 2009
To my knowledge, all cryptocurrency transactions are "push-type" so the issue wouldn't have occurred in the first place and therefore whatever banking (not financial) regulations may exist would not be applicable to the case at hand in an hypothetical cryptocurrency-only world, assuming current technology.
I have no opinion on cryptocurrency stuff per se, but I do not understand your logic either.
Some libertarians, like me, realize that markets must be regulated to prevent theft through collusion and market manipulation. Unfortunately, regulators can be corrupt so there is a need for transparency. Free markets are under attack from people who want government to set prices and allocate resources. Free markets are also under attack from proponents who want to be free to collude and manipulate.
A card which everyone should be using especially with online and larger purchases as it provides you with additional protections. The credit card company is the one liable for all faults and fraudulent transfers. They are also liable for any problems with anything your purchase as it was purchased via them, as it was on credit, they are the sellers. So if where you bought it from will not fix it, the credit card company has to.
Also if you have your details stolen, unlike a debit card, all your money isnt taken out of your bank, its the credit card company and they have to do a chargeback.
Its a card that you should have limit on which you can pay every month so that you will not have any problem paying it all.
Don't worry though, they're not poor, they're just temporarily embarrassed millionaires, living the American Dream®.
I'm in shock that anyone would trust a Bitcoin exchange with access to their actual bank account. Given the history of Bitcoin exchanges - this seems insane!
At least in the UK we have the Direct Debit Guarantee. So anything taken from my bank account by DD, by an authorised company must be returned to that account on the day I complain to the bank, with no evidence required. Then they have to prove they had the right to take the money or it stays in my account, and they owe the bank (who have more lawyers than me).
Now maybe this is just the occasional payment system cock-up. But it really has the horribly fishy-smelling MO of the Bitcoin exchange scam.
Thing goes on "undetected" for a few days.
People's Bitcoin/money goes walk-about.
Exchange emit suspiciously vague press release about how there's been a minor glitch, everyone will get their cash back (honest!) and more details to come in 24 hours.
We've not been hacked and our systems are working fine.
...
Profit!
Sorry, I mean oops we've been hacked, it's terrible! We're so sorry! OK, admittedly our security wouldn't have stopped a 3 year old with Leap Pad and a couple of crayons... But trust us! You'll get your money back!
...Silence...
And you're left wondering whether there really were hackers, or the people running the exchange took it. In Eve Online it was a often a combination of the two. Either a cock-up or miscreants meant they'd lost a considerable amount of their cash - and some tried to up their profits to pay people back, but others just decided "Sod it! We'll keep the rest." I know someone who ran one of the medium sized Eve banks, and he ran it honestly and successfully for at least 5 years. Then got bored one day, paid back all his friends and corp members, and kept the rest.
At least in the UK we have the Direct Debit Guarantee. So anything taken from my bank account by DD, by an authorised company must be returned to that account on the day I complain to the bank, with no evidence required. Then they have to prove they had the right to take the money or it stays in my account, and they owe the bank (who have more lawyers than me).
I think someone's finding out that that isn't quite how it works in practise....
And the concept is applicable to any biller, not just cryptocurrency exchanges. I have my own shit list of shady billers that may only charge accounts I have dedicated just to their ilk. I replenish those accounts automatically with a carefully-calibrated trickle of funding.
Sorry, but anyone who used their smarts and researched virtual currencies (which existed waaaaaaaaaaaaay before BitCoin was a glimmer in someones eyes) would not have seen them as any more of an "investment" than regular currencies.
Incidentally, if you like buried treasure hunts, there's a few billion locked up in forgotten wallets in BitCoin. (My gut tells me this will be the next get-rich-quick scheme .... )
Little tip if you want to "dabble" in virtual currencies is to buy a modest spread of a few (not BTC, but starting with ETC, maybe DARF) and hold them, ready to lease them to folk who will want to access blockchain via Proof of Stake rather than Proof of Work.
Kindly explain to me how the "bottom line" in a scenario where a banking error draining people's accounts of money is IN ANY WAY RELATED to virtual currencies being a good investment.
Hell, this whole scenario could just have easily happened with Tesco online grocery shopping.
Crowing on social media about being "investors" in crypto. Mocking people for "not getting it and missing easy money. Banging on about securing their futures by being a genius.
Yet doesn't have the cash in the bank to cover a months rent? Absolute choppers, the majority of them.
Putting what little you have into something as volatile at bitcoin and risking eviction is just stupid. A bitcoin exchange is not a bank, where you can expect that if you put money in and want it back a a month or two later, it will still be there. Even a mattress is safer for short term money storage! If you put your paychecks into bitcoin a couple months ago and want it back now, you're only getting half. Hope your landlord is OK with paying half the rent, or you can get by without food and gas for a month.
I'm sure they felt smug while it was going up, and like all believers in bubbles they think this is just a blip and bitcoin will shortly resume its rise on the way to 100,000 or 1,000,000, because reasons.
You are making the assumption that they put all their money into BC. Is the whole issue not that due to a banking error, their BANK accounts were drained? Are these two statements not fundamentally incompatible?
ie, if they took all the money from their bank and put it into BC, then how did they lose anything in the banking error?
You missed the point. They left enough behind for the rent. In a bank. Their cryptocurrency investment might well have appreciated for all you know. Many might also have other substantial but illiquid assets. You sound like someone who is just sore because they never invested in cryptocurrency.
"Yet doesn't have the cash in the bank to cover a months rent?"
What seems to have happened is that unauthorised deductions took away the money that was there for the rent. If this was your bank account would you blaming yourself for the purchase that was charged several time without your say-so?
It seems that these people made a small, affordable investment in some pink unicorns.
The pink unicorn holder then grabbed a lot more money than the people invested.
That's more generally called "theft".
It doesn't matter whether pink unicorn meat is a good investment or not, Coinbase took unauthorised amounts.
This is why I keep separate bank accounts. No payee has access to more than one or two of my credit/debit/ACH numbers. I don't fully trust Coinbase. I don't fully trust banks. Was screwed once by Citibank 40 years ago, and since then, I do not borrow substantial sums from the the same institution where I keep deposits.
It is this attitude that enables me to appreciate the value of cryptocurrency and it is why it is part of my asset portfolio.
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