Are Delta SkyMiles The New Bitcoin?

If you haven’t been reading the news recently, 2 important things have happened in the past week.

1. One of the most popular Bitcoin exchanges, Mt. Gox (based in Japan), vanished overnight with around $400 million USD worth of Bitcoin.

2. Delta moved to a full revenue based frequent flyer program for 2015.

While I could re-hash all the arguments why Delta going to a revenue based frequent flyer program is a bad thing for most non-corporate flyers, I’m fairly certain everyone already knew how “valuable” SkyPesos were. However if you are interested, ViewFromTheWing and OneMileAtATime have covered the new Delta changes extensively. If you are still a Delta apologist flyer, you either live in Atlanta or are delusional…

With all the Bitcoin and Delta coverage in the national news, it was hard not to think of frequent flyer miles when U.S Senators talk about Bitcoin being a “unregulated virtual currency”. Of course, the estimated 15-trillion to 20-trillion frequent flyer miles outstanding also have  ZERO regulation and are a virtual currency…

Anyway yesterday, U.S Senator Manchin said that he wanted to ban Bitcoins in the United States. As I was reading the article (which you can find here), naturally the first thing that came to mind were Delta SkyMiles (and how I wish they were banned)  so I started replacing “Bitcoin” with “Delta SkyMiles” in the article below.

When you sub in Delta SkyMiles for Bitcoin, it is hard not to argue with some of Senator’s valid points…

“On Wednesday, Sen. Joe Manchin (D-W. Va) wrote a letter to regulatory agencies arguing that Bitcoin Delta SkyMiles are “disruptive to our economy.”

“I urge the regulators to work together, act quickly, and prohibit this dangerous currency from harming hard-working Americans.”

Needless to say, I am sure the Onion will have a humorous take on SkyMiles in the coming days but in the meantime you can read my interpretation of the Bitcon article below.

To all the Delta frequent flyers and people still holding SkyPesos, as they say, laughter is the best medicine : )

Washington Post: Sen. Manchin calls for a Bitcoin SkyMiles ban as regulators seek ‘accelerated push’

The implosion of a once-popular Bitcoin exchange Delta SkyMiles has some lawmakers calling for a ban on the virtual currency.

On Wednesday, Sen. Joe Manchin (D-W. Va) wrote a letter to regulatory agencies arguing that Bitcoin Delta SkyMiles are “disruptive to our economy.”

“The clear ends of Bitcoin Delta SkyMiles for either transacting in illegal goods and services mileage runs or speculative gambling awards make me wary of its use,” Manchin wrote. “I urge the regulators to work together, act quickly, and prohibit this dangerous currency from harming hard-working Americans.”

Mt. Gox Delta, which is based in Tokyo Atlanta but has become one of the most well-known exchanges frequent flyer programs around, was still inactive worthless on Wednesday after an unverified document obtained by Bitcoin entrepreneur Ryan Selkis bloggers seemed to show that nearly $400 million in bitcoins was missing SkyPesos were going to somehow become more worthless. Mt. Gox Delta had already suspended inflated withdrawals awards last month year.

The latest incident raises new questions about Bitcoin Delta’s fate in Washington. The virtual currency grabbed headlines in November when Sen. Tom Carper (D-Del.), chair of the Senate Homeland Security and Governmental Affairs travel hacking committee, held a hearing on it. On Tuesday, Carper called the news about Mt. Gox Delta “unacceptable.”

“My staff is working closely working with relevant federal agencies to determine what lessons can be learned from this failure to help ensure this does not happen here in the United States.” Carper said in a statement.

According to a committee aide, regulators are now on heightened alert.

“What we’ll see is an accelerated push to get information on the virtual currency space,” said the aide, who was not authorized to speak publicly. “Whereas before there was some sense you could wait a little bit to let the space evolve, it now seems there’s a stronger push to get smart.”

Some agencies have been highly engaged on Bitcoin Delta SkyMiles; the Treasury Department BoardingArea’s Financial Crimes Enforcement Network (FinCEN) ViewFromTheWing (VFTW) was the first to issue policy guidance on the currency last year in 2011. Others, such as the Consumer Financial Protection BureauDeltaPoints, may have more learning to do, according to the aide.

Mt. Gox Delta SkyMiles’s collapse has regulators wondering what they’d do if the same thing ever happened in the United States to American Airlines. It’s not an academic question; the country may soon see its first Bitcoin exchange final legacy devaluation thanks to SecondMarket American Airlines CEO Barry Silbert Doug Parker.

Silbert Parker believes that the downfall of Mt. Gox Delta SkyMiles was a good thing for the Bitcoin frequent flyer ecosystem. So do the Winklevoss brothers, who are still working with the federal government to set up a Bitcoin Delta SkyMiles ETF.

“Although Mt. Gox Delta was one of the earliest exchanges frequent flyer programs, its demise and the rumored problems associated with it further demonstrate the need for U.S. regulation of bitcoin exchanges frequent flyer programs,” he said.

It’s not clear what the federal government could have done to protect consumers from losing their money miles to Mt. Gox Delta. But with the bloom of Bitcoin services frequent flyer miles here in the United States, federal officials will need to confront that question sooner rather than later.

Can’t wait for the SkyMiles congressional hearing!

-Parag

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