Politicians in the United States frequently talk about the transfer of wealth to China. Jobs are moving from the U.S. to China due to lower costs. Most of the manufacturing jobs that formerly existed in America have been transferred to China, Vietnam, South Korea and other Asian countries. There is, however, another transfer of wealth that is occurring that is not so apparent to government authorities. The future of banking jobs, financial institutions, and anything involving money transactions are also beginning to move to countries outside of the U.S. Currently the value of the U.S. dollar is strong compared to other currencies, but this will soon change. The U.S. has too much regulation, overhead, and red tape over the transmittance of money. If it were not for needless U.S. regulation more successful bitcoin companies would have been created on U.S. soil, thus creating more jobs. Instead companies such as “Mt. Gox”, based in Japan, and “Bitcoinica”, created in Singapore/China, are completely dominating the bitcoin market. The U.S. is destroying itself from the inside because of excessive regulation.
In America, credit card companies, banks, and PayPal charge high fees when compared to other systems. Expect to pay 2-3% fees for purchases that are under $10. Some may argue that these fees protect the consumer from fraud because it allows credit card companies to perform charge-backs on the merchant. In China, however, the banking system works differently and favors the merchant instead of the consumer. Most transactions in China are irreversible when using a system like Alipay. Alipay is the most popular payment website in China with hundreds of millions of active users. According to Zhoutong, founder of Bitcoinica:
- "...the root of all reversibility is the Visa/MasterCard credit card system used by Americans. Chinese banking system is entirely different. Chinese people don't use Visa/MasterCard for domestic purchases. [Online payments] require strict authentication, banks are usually not responsible for fund losses, etc. Everything is very Bitcoin-like, and non-reversible. More than half of Alipay's transactions are escrows."
Why do Americans continue to use Visa and Mastercard if these credit card companies are practically stealing from them? Big banks and credit card companies control the financial plumbing of United States by lobbying Congress and state legislators to create laws which make it difficult for small start-up companies to be competitive. A small business attempting to go into the business of transmitting money would have to hire expensive lawyers to follow federal and 50 state laws. There is a general fear among American entrepreneurs of breaking laws, paying hefty fines, and/or going to prison. These feelings of uneasiness and fear has stifled innovation in the financial sector. For example, FaceCash, has been involved in a dispute with the California government over the Money Transmission Act (MTA). For over seven months Aaron Greenspan, founder of FaceCash, has been trading snail mail with government authorities who have no idea how the MTA laws should be enforced. In that same time frame Bitcoinica and Mt. Gox grew from practically nothing to trading around tens of millions of dollars worth of bitcoins a day.
Another small company named BitInstant is being forced to move from New York City to New Hamphire because they cannot afford lawyers to take care of all of the legal paperwork. Erik Voorhees, the Director of Communications for BitInstant says:
- "We've not even been in business for a full year, and yet we've spent tens of thousands of dollars hiring lawyers to consult us on which licenses we need, in which states, and more important, they advise us on which areas of business we must stay away from because those areas open up new requirements and huge financial costs. Unfortunately, in practice this means many of our best ideas have simply been thrown into the waste bin - not because they would be illegal, but because our lawyers have said that pursuing them means paying hundreds of thousands of dollars in license fees, and much more time on the lawyers' invoices."
Over-regulation is beginning to destroy another American dominated sector. The U.S. will lose the bitcoin race to other countries since most bitcoins will be owned by companies beyond the borders of the U.S. In addition, not only will Asian companies own more bitcoins but Chinese individuals may own more bitcoins than American people. Why? Because the Chinese are now able to buy bitcoins with Alipay while Americans cannot with PayPal. PayPal, Mastercard, Visa, and even Google Checkout have rules which make it impossible for merchants to sell bitcoins. It is ridiculous that Chinese individuals have more freedom to buy bitcoins while citizens of the United States are forced to buy bitcoins through “non-standard” methods due to excessive laws.
The pace of financial innovation is occurring faster outside of the United States and it is due to a mountain of outdated laws, piles of paperwork, inefficient government, and a lack of understanding of technological concepts by legislators. Will the United States continue to let this virtual gold slip through its pockets?