The news that New York State’s top financial regulator has announced the first-ever set of regulations for firms doing business in the BitCoin space shows just how deep the government misunderstanding of BitCoin goes.
On Thursday, Benjamin M. Lawsky, the superintendent of financial services, announced proposed regulations for virtual currency companies operating in New York. The “BitLicense” plan, which includes rules on consumer protection, the prevention of money laundering and cybersecurity, is the first proposal by a state to create guidelines specifically for virtual currency.
Let’s touch on something the media seems unable to mention in all of it’s countless articles on BitCoin: BitCoin at it’s philosophical core, is anti-government, anti-bank and anti-regulation. Attempts to regulate, limit or control it fly directly in the face of the very rationale for its existence — and fly in the face of the motivation of it’s supporters.
BitCoin is not simply, as one glossy-lipped CNBC tart put it, just “a great new way to buy stuff online“. To be fair, that might be true. And to be honest we’re not entirely sure how many of her friends are currently using BitCoin to buy Louboutin’s online, but it’s not exactly the value-added that BitCoin represents over government-issue.
While it is the hope of all holders of BitCoin that it’s use eventually radiates outwards from it’s core fan-base of geeks, anarchists and salivating hedge-fund boys, the reality is that the primary draw for aficionados is as a way of protecting themselves from the ravenous and oppressive cartel of national banking-system/goverenment duopolies the world-over.
Which is why we can’t help being amused at mainstream media efforts to philosophically-dilute BitCoin into some kind of new-fangled version of PayPal. Of course, many users may use it as such, but that’s hardly the ethos which drove it’s original supporters and miners. Nor is it the rationale which is leading an entire generation of the global digirati to move chunks of their cash into the digital currency.
While we are quite sure that governments are desperate to morph the digital currency into yet-another-government-sanctioned payment-platform, there’s good reason to believe that isn’t going to happen. The belief that such control is possible belies not only a deep misunderstanding of BitCoin’s decentralized, encrypted technology, but an almost humorous inability of the State to recognize the fundamental raison d’être for the birth of digital currency: The State itself.
So, back to the “regulators”:
Federal regulators have already been going after companies that allow payments in virtual currencies. In March 2013, the Financial Crimes Enforcement Network, a part of the Treasury Department known as FinCen, issued guidance stating that anyone operating an exchange for virtual currencies would be considered to be running a money transmitting business.
That designation means exchanges must collect information about customers, as required under Bank Secrecy Act regulations, which are intended to prevent transactions through anonymous accounts. FinCen went a step further in its guidance by including any person who puts into circulation a virtual currency, which means that the so-called Bitcoin miners are also subject to the regulations.
Let’s be clear: The competition to set up exchanges for BitCoin is intense. It’s not yet clear who the winners are going to be. But we hazard to guess that the winners will not be those that fall under the strong arm or watchful eye of big-government. Success in the virtual-technology infrastructure space will be Darwinian. But rather than survival of the fittest, success will likely be determined by survival of the least restrictive.
The US Government is of course infuriated by its apparent lack of absolute, global oversight. The problem with BitCoin, as they explain, is the free-will of other sovereign nations to do as they like. Oh the humanity.
Regulators are also concerned that exchanges based in foreign countries might not impose the same customer disclosure requirements as the United States. If someone can use a foreign exchange to conduct business outside the American government’s watchful gaze, then criminals could find ways to slip between the cracks and avoid scrutiny.
Let’s parse that: “If we don’t have absolute control, then criminals might be able to commit crime.”
Allow us to make an analogy: If “regulators” were to allow pedestrians to roam the city streets after dark, then criminals might likewise find ways to commit crime. One wonders if such a statement might justify a national after-dark curfew? Wouldn’t we all be safer stuck at home?
The position of the regulators is particularly galling in light of their absolute inability to actually regulate the services which are already under their purview: High-frequency trading for example, is as clear a mechanism of market fraud and manipulation as we have seen in decades. It represents such an overt danger to retail investors that it’s hard to listen to it’s defenders with a straight face. And yet there is no regulation. Evidence of market manipulation among dozens of mega-banks pours in on a near-daily basis and yet the “regulators” do nothing. We could spend hours documenting the thousands upon thousands of clear examples of fraud, manipulation and gross illegality practiced by banks today — all of which directly impact retail customers of banks. And yet the regulators do nothing. Clearly then, protecting customers is not their intent.
Their intent is control.
And control is exactly what they will not have due to the technological and logistical realities of digital currencies.
But here’s what else they will not have: A banking center for BitCoin located anywhere near New York — and quite possibly anywhere near the United States.
BitCoin businesses are springing up all over the world. As New York regulators attempt to restrict the practices of BitCoin companies, they are in essence making a poor bet on their understanding of BitCoin users:
Regulators are betting that BitCoin users will submit to a world of non-private, government-scrutinized, bank-connected digital-currencies, in exchange for a regulatory promise of “security”. We’re going to tread a bit further out on this limb and predict that New York will be the last place that BitCoin users will want anything to do with.
Almost humorously, these regulators are apparently so far out in another galaxy of logical-reasoning that they must believe that we users of regular, old government-issued cash somehow feel “protected” by banks and regulators. The mind reels.
One wonders if these regulators have ever gone through the bureaucracy of sending cash abroad? Or suffered the outright theft of discovering that one’s exchange rate just happened to be the worst level of the day? Or had the order of one’s overdrafts re-stacked to maximize one’s fines? Or experienced inflation? Or had the pleasure of discovering banking fees ex post facto? Or had a payment to an off-shore company or business supplier “frozen” because you (or they) just might be “terrorists“? (On that note, one has to wonder exactly what percentage of the world our delusional and power-mad “regulators” believe are terrorists.)
To put a finer point on it: For as long as there have been banks, there have been those who have sought to control and profit from the possession and movement of capital. We non-bank users of capital have been nothing more than sheep to be regularly shorn whenever we wish to exercise our universal, inalienable right to transact.
One also wonders what planet these regulators are living on, when it is the supposedly “regulated” banks themselves who are laundering cash for international crime-cartels, colluding with ponzi-schemes, sending money to sanctioned nations and committing wholesale fraud. The regulatory penalties for these overt offenses have been slaps on the wrist followed with pats on the back.
On a central-banking level of course, the ability of central banks to inflate currency is a pure and simple theft against the wealth of every holder of currency. Our private central bank, which works by their own admission to the benefit of the banking industry and is under zero government oversight other than the occasional Congressional kabuki, has the carte blanche authority to confiscate wealth at will — from everyone in the country. No, BitCoin is definitely not just some dot com alternative to your Visa card.
The rationale for BitCoin is clear.
The notion that regulators can not only feasibly control a decentralized, encrypted and anonymous system but that users somehow want it to be regulated just shows how out of touch regulators are.
Ultimately, their only accomplishment will be to drive yet another growth-industry outside the US. And in the event that some broad-agreement of like-minded nations should one day create a framework for cooperative regulation? The result will simply be another digital currency.
What government has not yet realized is this: Whether or not the digital-currency of the future is BitCoin or one if it’s many competitors, the philosophical and technological leap to non-government, non-oversight currencies has already been made. That genie cannot be put back in the bottle.