Quote from: rocks on March 11, 2014, 06:02:52 PM

The issue with US authorities creating a colored coin system and tainting coins they don't like, is simply that Bitcoin is an international system and trying to get all of the world's authorities to agree to a common regulatory framework is simply impossible.

Consider what will happen if the US uses regulation to taint coins out of their control:
1) The US market will split in two, a white market and a black market. Many people will have both and there is nothing that can be done to stop it. White market coins will be used with reputable businesses, but at the same a thriving black market would be created around tainted coins. This will be similar to when alcohol was made illegal and the country simply ignored the ban, but the long term effect was the rise of organized crime which took the FEDs two generations to get under control.
2) US based bitcoin startups/businesses and silicon valley would howl that the US is missing out on the next great new innovation by limiting US firms' ability to compete. The US always wants to be at the front of innovation worldwide and does not like missing an opportunity.

At the same time, tainted coins would maintain their value because said regulation is not global and tainted coins would still have value in the EU, SA, Asia, etc. It might be necessary to pay a "service fee" to use overseas cash-out "services" and there would be some risk, but it would be a vibrant and competitive market. So the end effect would be tainted coins would not lose too much value.

The end result is a US tainted coin regulatory system would simply: 1) Hamper US business 2) Foster an underground black market that would be difficult to stop once it gets going and 3) have little practical effect on tainted coins value.

I'm not saying they won't try, but it is a long term futile effort IMHO.

I think you are making several mistakes:

1) Most nations are likely to follow the U.S.'s lead for a variety of reasons. Whatever methods the U.S. uses to promote taint will be followed by the aligned nations (or more offensively, our vassal states known colloquially as 'the free world') and the methods used by the non-aligned states will be probably even more draconian.

2) Nobody wants to lose value personally no matter what their stripe. Thus, with a tiny fraction of exceptions, everyone is going to want to have clean coins because they are most useful. They can be used on exchanges which handle fiat, traded at full value to Americans(+), used to buy shit on TigerDirect, etc, where as tainted coins cannot. I'll bet you'll be surprised at the level of devaluation this provokes. And again, if one is not checking for tainted coins it won't be long before that is all that they own.

The main thing influencing the value of tainted coins will be speculation that they will one day be untainted for a variety of reason. That will indeed produce a lively market, but it will be one which burns most non-sophisticated participants badly and regularly.