California Legalizes Bitcoin Use

http://johnrosenbaumlaw.com/2014/07/california-legalize-bitcoin/
California Legalizes Bitcoin Use
California has legalized the use of BitCoins along with other digital currencies in the state through removing certain wording within California’s Corporations Code which prohibited use of “anything but lawful money of the United States.”
The shift represents a growing trend among states to explain digital currencies as well as their legitimacy as use for buying items. Some noted that before signing this bill (AB 129) many other currency forms were technically illegitimate, such as “Amazon Coins” or “Starbucks Stars”.
The last weeks have seen other strides towards digital currency adoption, with business juggernauts such as NewEgg.com, 1-800-Flowers.com and Expedia signing up for the BitCoin bandwagon by accepting the e-currency for payments. BitCoin has become so widely accepted, that a family has taken to the road on a BitCoin-oriented test at living off the currency as exclusively as possible. To date they have been very successful, being able to pay for gas, food and hotel with BitCoin.
At this point I recognize that just a small portion of the reading audience really knows what exactly BitCoin is. Sure it’s a trending term many have heard often, but most have little idea as to the specifics.
Quite simply, BitCoin is a peer-to-peer currency which holds no tangible value (for example, the gold standard). Instead the price of BitCoin is rooted entirely in the value that the market places on it. Currently, a single BitCoin is worth just under $650. It’s for this reason that generally transactions are carried out in fractions of a BitCoin, the most popular denomination being the “millicoin” (or rather, one 1/1000 of a BitCoin, about $0.64 at the time of writing this).
Many people are left scratching their heads at the point of this kind of system, or why someone would spend money on it when there are lots of viable options out there for tangible investments. It’s a legitimate concern, and to answer the question it’s the opportunity for huge benefits.
The benefits of BitCoin are that each transaction is pretty anonymous, that you could send money from one side of the world to the other with no accrued fees, and immediately. The currency transcends international borders, being used and traded in just about every country of the world. It has no central system that can manipulate it (i.e. the Fed), instead the system is really as strong as each user.
Sounds great huh? Well for all the advantages, additionally, there are disadvantages. Without rules the system is hugely volatile. There are currently 13,000,000 BitCoins in circulation. The most there'll ever be is 21,000,000. This number is fixed. As opposed to the quantity of dollars within our system, there cannot ever, by design be more than 21,000,000 BitCoins produced. But take into account that this number will be lower provided that BitCoins can be quite easily lost, not to be recovered. Of course, US Dollars can as well, however the difference is a new one can be printed, and everyone moves on with their life.
So, with that in mind, if BitCoins are to gain mainstream popularity their value will certainly skyrocket. Great for those holding them, undesirable for those not. Yet another problem with this is that there will be inherently a group of people whom are already with BitCoin (back before the value was less than a dollar). These people hold 1000s of them, and anytime can flood the system and cause the value to plummet. This has happened, when from December 5 to December 7 the value of a BitCoin dropped from a high of $1,140.00 per coin, to a low of $585.00.
The legitimization of digital currencies in California and elsewhere is an exciting thing. How we will be conducting financial transactions five or ten years from now is yet to be seen, but there is a good chance that the laws we see addressing the problem now are a strong indication for things to come. Investors who take the time to discover the systems now, will discover themselves at a great advantage if digital currencies ever become the law of the land.