I think in the short term at least, this is beneficial for Bitcoin, if it's recognized as money, and businesses and "normal" people start trusting to use it without fearing repercussions from the government, as long as they "follow the rules".
This could lead to more centralized exchanges, which again is good in the short term - the more the merrier, so people can easily get Bitcoin with their dollars.
But I think the end game for Bitcoin is to be a "real currency" that gets used everywhere and people get paid in it, to the point where a lot of people won't need to exchange to dollars necessarily.
At that point you could start living entirely with Bitcoins, and you won't need centralized services anymore either. You can just use your own local wallet, whether it's on your PC, smartphone, or NFC ring.
Tracking the transactions through services like Coinbase or Mtgox is obviously going to be trivial for the authorities, since they can just request the data tied to people's names.
But it's going to be a lot harder to see them when you're using local wallets, unless the IRS is still receiving help from the NSA at that point, because you'll probably need something like the mass surveillance system of NSA tracking every transaction from the whole Internet, and using Big Data to identify who's buying what. But hopefully by then we'll fix the NSA "problem".
Right now we're mid-game with btc. It appears that the implicit strategy by the authorities is to treat it as a functioning currency. Fine then; that is good for btc's long-term success. It also implies that the tax-man is coming. btc is not going to live as wildcat currency used by the fringe, untaxed and destroying economic supremacy (That is to say, I disagree with the idea that btc will destroy the economic system that some people favor).
Also, the blockchain is 100% public. So if you can tie a btc address to a real person (perhaps via tax returns requiring you to declare your virtual currency addresses), then the entire pseudo-nymousness of btc goes out the door.
Local wallets is not a really accurate term - all BTC transactions go in the public ledger. It's kinda one of the flaws of bitcoin, there's no such thing as an offline transaction.
This could lead to more centralized exchanges, which again is good in the short term - the more the merrier, so people can easily get Bitcoin with their dollars.
But I think the end game for Bitcoin is to be a "real currency" that gets used everywhere and people get paid in it, to the point where a lot of people won't need to exchange to dollars necessarily.
At that point you could start living entirely with Bitcoins, and you won't need centralized services anymore either. You can just use your own local wallet, whether it's on your PC, smartphone, or NFC ring.
Tracking the transactions through services like Coinbase or Mtgox is obviously going to be trivial for the authorities, since they can just request the data tied to people's names.
But it's going to be a lot harder to see them when you're using local wallets, unless the IRS is still receiving help from the NSA at that point, because you'll probably need something like the mass surveillance system of NSA tracking every transaction from the whole Internet, and using Big Data to identify who's buying what. But hopefully by then we'll fix the NSA "problem".