My answer to Point B in your original post;
B) Cannot be integrated into the existing financial system (i.e. lack of transparency and failure to adhere to KYC/AML requirements that all banks must comply with)
I have been reading some really good stuff on this sort of point by Andreas Antonopoulos lately (author of Mastering Bitcoin among other things, the first widely recognised bitcoin textbook for developers).
With technological innovations, “integration into existing systems” is a very interesting and oft-misunderstood element, greatly affected by “normalcy bias”.
For example, when motorcars came in, they were widely criticised because of their early struggles to actually get around on the existing road network. The network at the time was basically a series of muddy, rutted tracks that worked for horses, and there was no traffic control to speak of - it was not necessary due to the slowness of the horses. When motorcars started driving on this network they would frequently get stuck, break their wheels/axles, and have accidents at intersections. The common refrain was that they were useless because they were failing to integrate into the existing system. This is so silly when you think about it now. The existing system was designed for the old technology (horse and cart). It was not ready for a disruptive innovation like the motorcar. Fast forward and this was flipped on its head. The roads were changed to fit the better technology, and then we mostly kept the horses off them.
These historical examples are everywhere.
Residential electricity was derided as dangerous as houses were not safely equipped to house the technology – because it didn’t exist when the houses were built. Now we build houses with bigger cavities to house wiring, and safety features to reduce risk of electrical fire.
Internet struggled to operate at fast speeds through the telephone wiring system, because the telephone system was never built for that technology. The telephone providers derided the internet: “these wires weren’t built for this craziness”. This was flipped on its head – now we wire for the internet, and we build telephone services on top of that instead.
Furthermore, the new technological innovations have to be dumbed down to fit our normalcy bias, otherwise we struggle to understand them.
An example is that when the telephone functionality was built onto the internet system, there was an issue where if there was a moment of silence in the conversation, people would hang up, because the complete lack of sound resembled the line being dead. We had a normalcy bias that the line could not possibly be that clear, we were not used to it. So they literally built functionality to introduce a low static noise, so that the participants would not be mistaken in thinking the line was dead! This functionality is still in play today! That’s a great example of us dumbing down new technology so that we can understand it under the terms of our old technology.
That is where bitcoin is now. A bitcoin “wallet” is not a wallet at all. Bitcoin itself is not a coin at all either. We call them these things because that is our normalcy bias – that is how we understand money and value. If we have the mental impression that we have bitcoin in our wallet, then it feels like we have it in the same way as when we have physical money in our wallet. But under the hood, that is not how bitcoin works at all. Even the fact that we all think of bitcoin in terms of its value in dollars is a dumbing down. Bitcoin’s own unit of measure is far far better than that of dollars, it’s more consistent in supply, it offers a better gauge of overall value because of that. But yet we talk about how much it is worth in dollars - our normalcy bias, our safe place.
So basically, “failure to integrate into the existing system” is not any kind of issue or barrier. And regardless of that, bitcoin integrates into the system just fine.
I anticipate that we will flip this on its head like the other examples. The current financial system is very easily accommodated on top of bitcoin, and will eventually shift onto it when bitcoin reaches critical mass.
Regarding the bracketed part, that is all not true. To begin with, don’t conflate anonymity with transparency. Bitcoin is far far more transparent than the current banking system – it’s on a public blockchain. I can see every transaction I ever made on-chain, and so can everyone else.
Yes it is anonymous, but that’s easily broken down. Blockchain analysis is a fast-growing industry, and they are now working directly with law enforcement to analyse activity on the blockchain. Anyone can do this with a bit of technical ability. Transacting criminally in bitcoin is really silly, and will only be seen as a hallmark of the very early days – just like the internet was in its infancy.
Once a person is connected with a set of keys, you can connect them to everything they’ve ever done. Other cryptocurrencies (Monero for example) have been specifically designed for anonymity and disguising of transactions, and are the havens of criminals these days (well, the few criminals who don’t just use the fiat system anyway, since that is easier and more accommodating: See HSBC Mexico as a good example).
Regarding KYC compliance, most exchanges and other parties are indeed complying, to be above board, regardless of whether one feels that KYC is necessary (I don’t, but that’s besides the point). For example EasyCrypto, a Wellington based exchange for buying/selling, is fully KYC. I had to provide details to set up my account with them, and they provide the tools for tax reporting etc to IRD, so are completely above board. If I sell my bitcoin at a profit, the record is all there and I am liable for tax on the capital gains.
The issue you have here is that the governments have been so slow to look at bitcoin (and “crypto”), that they don’t have any regulation set down effectively. Exchanges etc are going above and beyond to try and do what they think they will need to do, while the government catches up.
In any case, failure to adhere to government laws of any kind is the same in any industry, or with any product/commodity. If you don’t do it, the government will get you, and that’s how it works. Blaming bitcoin for this issue is a bit like blaming cars for unwarranted vehicles. It aint the car’s fault, the owner’s gotta do it, and if he doesn’t, the government will come for him.
Sorry these responses are so long. It’s very hard to try and get my point across quickly, and I always rabbit on!