This op-ed piece is in response to a recent article promoted by Nasdaq.com, who recently started using Bitcoin blockchain technology in association with Chain. Although not representing the views of NASDAQ, the Martin Tillier August 28th blog post titled “Why Bitcoin Supporters Should Push for International Regulation” espouses the virtues of establishment master control. Allow me to make equal time to show you the history of economic regulation, and why this must never happen for Bitcoin to ever reach its true, and best, potential, worldwide.
Issues with Bitcoin, the currency, have been pretty much contained to two things: Exchange risk, and the still nascent state of the technology, as private industry rushes to fill holes in the market. The Internet was no different in 1995, and it worked out just fine. At that time, the telecom industry was lobbying against the Internet’s innovative nature, to protect their private interests, against the greater good. No one has been able to show where Bitcoin itself is a problem, quite the opposite. Bitcoin successfully solves many problems that plague other currency payment systems today. It dramatically cuts costs of using the now antiquated remittance system of Western Union. The costs of sending money overseas have now been effectively dropped by over 90%, regardless of what part of the world you are accessing (Western Union fees vary based on country.)
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Things like identity theft will also become a thing of the past, as the transactions only feature a public key and amount sent, with no personal information included. The users’ security is never compromised, and that is a benefit Visa and Mastercard do not offer and cannot offer. In fact, the farther down the line we go, the more vulnerable ancient 1950s debit card tech becomes versus faster, stronger 21st-century computers.
Nations and appointed regulators want control, not to protect consumers. It’s never about protection. That’s a front to hide behind, like a TSA agent at the airport uses protecting passengers from terrorism as a front for what’s really going on. Target, Home Depot, and J.P. Morgan Chase lost tens of millions of consumers’ personal information and financial account information to hackers within the last two years. Have regulations changed for them? In the case of JP Morgan, regulators are looking for ways to take away privacy measures for consumers, not enhance it.
For Visa or Mastercard? For banks or large retailers holding millions of consumers information and financial account information? No, it is business as usual. No special license that restricts business has even been proposed like BitLicense was for Bitcoin in New York. These giants of industry, which tens of millions trust every year to protect consumer information haven’t proven to be “Too big to fail”, just too big to regulate. Regulations have targeted “the little man”, be it small businesses or the consumers themselves. The players at the top of the food chain have helped set the regs in their favor, and against the rest. The issue here is the playing field is not level for everyone.
In fact, it is the exact opposite. Major corporations get a pass when security issues arise, or even when federal laws are broken. Bitcoin does not, even though it is “not legal tender”. If it is not “legal tender”, where is the legal or moral ground to regulate it as such? Ethically, any government cannot have it both ways. They contradict themselves on this issue. It would be more ethical, and more honest, if a government banned outright for fear that “The People” will choose to trust an algorithmic currency over the Monopoly-money fiat currency system currently in use.
Take a look at the situation in Russia. Russia bans Bitcoin, in practice, and in doing so hides behind the narrative that Bitcoin is “used by terrorists”, with hardly any proof. So Rubles and U.S. Dollars are not used by terrorists? People buy guns, commit crimes and build bombs with dollars and rubles, but that’s fine? These politicians must think we are stupid. Banning Bitcoin just represents fear of a superior currency, not fear of terrorism. Terrorism certainly wasn’t invented on January 3rd, 2009, when Bitcoin “went live”. We can actually forgive Russia because it has a well-earned reputation as a place where people are far from free, politically or economically.
The real problem is Bitcoin is a threat, just it’s not to the users of the currency. It is a threat to the status quo, to the establishment, and to anyone who does not engage in sound money principles, like central banks, which control national governments. Being better threatens people, in government, and in any walk of life. Some governments are acting threatened, while others, like the U.S. and Australia, just see another tax revenue stream.
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Take a look at the last decade of economic regulation. Why would you trust regulators at all? Taking into account that when major corporations have tens of millions of user’s accounts compromised, on multiple occasions, and no regulation or punishment is metered out, the question is where does regulation actually start to come into effect? It’s obvious regulating Wall Street is not an option, after the 2008 economic collapse. The barons of Wall Street get to run amuck and spit in the face of any and all laws on the books.
HSBC and Wachovia helped launder hundreds of billions of dollars for Mexican drug cartels over the course of many years. After a small fine, and 19,000 money laundering violations that a federal crimes which require trials and jail time, they walk away not only free from persecution but making a handsome profit on their criminal activity. Regulators missed that, too. Now, regulators see an opportunity to get in front of is Bitcoin, which as a currency, has never hurt a consumer.
Regulators also think they are smarter than Bitcoin. For example, it seems that regulators big idea on how to improve security for Bitcoin users is for Bitcoin users to add their identity to every transaction. This is so pathetic that it is laughable. One, this introduces identity theft into the equation where it does not exist. Two, it makes Bitcoin harder and more inconvenient to use. Three, it doesn’t solve any known problem with Bitcoin transactions. Bitcoin current problems may include sending Bitcoin to the wrong address by mistake, or not getting a product after sending a payment. Regulators are just showing how little they understand what’s going on with “The Future of Money”.
Compromising user privacy and security with every online transaction would only make Bitcoin more like the identity theft haven that is debit cards. That hasn’t worked with debit card transactions, so why would it work with digital currency transactions? This goes back to my point about are regulators trust-worthy. This would help regulators be regulators, but it wouldn’t help consumers at all. It would hurt consumer protection.
Bitcoin sends the public key and the amount. That’s by design, and far superior to anything currently in mainstream use. Do regulators really want to help, and not just make up regulations? Get mainstream market leaders to use Bitcoin’s much more advanced technology of tomorrow, and move away from the clearly inferior methods of today.
The scale of the problem also flies in the face of regulators. Bitcoin exchanges have hurt thousands of consumers, not millions like the American corporations I just mentioned, but Bitcoin exchange risk does need to be addressed. Just not be American regulators, who have proven to be derelict in their duties, and potentially corrupted into protecting the established players from innovative new players.
Regulators, like central banks, also seem to operate with no accountability or oversight. They missed all the crimes I’ve already mentioned, and nothing happens to them. I don’t even know if anyone bothered to fire anyone, change a name of a non-working regulatory body or new laws passed against potentially corrupt regulators.
The problem is that regulations, in the United States, attack the smallest home business or innovative new industry but ignore the biggest fish with the most influence, power, and consumers under management. This is the exact opposite of their intended function. They are not protecting consumers. They are protecting the establishment from having competition or having to innovate. This is why you are still using debit cards designed in the 1950s today, in 2015. Regulators don’t do their job, even after countless instances where market leaders, in multiple industries, are taking advantage of consumers, not protecting them.
Could insiders at Target, Home Depot, or JP Morgan be at the heart of those identity theft heists? We assume they aren’t, but who really knows? No regulator does. If there are no repercussions, what’s to stop a major inside job from taking place? Why should anyone trust any regulatory body at this point? It’s like trusting a central bank. They look after themselves, have no oversight, and have not done anything that they have sworn to do. So why trust them? I do not.
In focused, small doses, regulations can be very helpful to a fledgling industry like Bitcoin. A regulation can help improve trust in the digital currency industry. Look at the FDIC in banking. This is a private corporation that insures bank account holders against theft or bank closure up to $250k per account. This private sector corporation may have since been commandeered by the government, but things that work best come from the private sector nine times out of ten.
Bitcoin exchanges need oversight, preferably from within the Bitcoin community. If an exchange works like fiat currency banks do, a system like the FDIC insurance program would help a lot. It may have stopped the Mt. Gox collapse in 2013, in which over 800k Bitcoin were “lost”. That is a great place to start and stop, Bitcoin regulation. Exchanges charged with holding funds as a third party clearly need oversight.
The only problem is regulators never stop regulating. It’s like asking cancer to stop feeding on a live host. Regulations are like a virus. Either they are growing or they are dying. There is no middle ground. Regulators care about regulations, not freedom, or innovation, or business ethics.
As Ben Lawsky has proven, with the infamous “BitLicense” in New York State, government regulation has proven incompetent, potentially corrupt, and out of control nine times out of ten. Regulators can’t be trusted and don’t even understand the digital currency industry to begin with. How will you regulate what you don’t understand?
Growing up in America, I only have a solid history in America regulatory chicanery. Maybe outside of the U.S. regulations have a much better track record. I would be all for regulation if it were fair, effective, and accountable. In the U.S., these objectives have not been hit for a long, long time. Micromanage the identity theft issue that plagues about 5% of all debit card and banking users. Get that under control first. Then look at Bitcoin. This is like spending months working on a pothole on a side street, and an earthquake has torn a major highway in half, but you don’t fix that until the side street is “repaired”. Bitcoin doesn’t need repair. The status quo certainly does.
Bitcoin is a new global, decentralized currency that protects consumers from identity theft, inflation, predatory remittances charges, and banking fees worldwide. The currency that the world should be working to emulate, not be attacked with torches and pitchforks by the minions of The State, to protect the establishment’s thiefdom instead of consumers’ interests.
The Bitcoin community and private industry can solve any current Bitcoin problems. Regulators, with their track record, have proven that they can only make things worse. Getting a gang of global pencil pushers together can only strengthen their virus, and serve to overwhelm the cure.