I contribute to LinkedIN community discussions on Bitcoin and other cryptocurrencies. That’s because in my day job, I am a principal at the standards organization that defines and promotes a framework of best practices and safety valves for this rapidly growing community.
You might think that a digital currency standards organization is comprised of Bitcoin miners, economic anarchists, Geeks and “bleeding-edge” adopters. If you do, then you would be mistaken. Our founders come from a background of compliance, anti-money laundering and Internet services. Interest from prospective members points to a broad cross section of government, academia, banks, brokers and exchanges.
Today, the event host for an industry forum posed this question (abbreviated version):
Why are regulators and governments afraid of Bitcoin?
Based on the elaboration, it seems that he is focused primarily on the US government.
I may be a minority voice in this particular discussion, but for what it is worth, I respectfully disagree with the fundamental assumption in the question…
Certainly, in some countries governments are concerned that Bitcoin presents a threat to banks, the reserve mechanism, commercial and consumer protection, and the centralized control of monetary policy & supply. But the US is not among these countries. The few official policies that have hit the streets advise caution (especially among banks and speculators), but recognize that Bitcoin is an asset—and in some states, even a currency. A few regulators have even suggested that in the long term, cryptocurrency may represent more of an opportunity than a threat.
Banks, card service collaboratives and regulators are warming up to Bitcoin. The evidence is legion. Influential individuals are tentatively embracing Bitcoin or waiting with an intent to jump in when they sense an alignment of interests, education, regulatory guidance and safety mechanisms.
These individuals are among the strongest voices calling for standards and well defined practices. Standards—even ones that are voluntary but verifiable—are the key to safety, and thereby to adoption and growth.
CRYPSA is an independent standards organization gaining attention within business and government. It is moving quickly on a plan that does not exclude anyone. In fact, the voluntary standards and applications that CRYPSA produce will not weaken the allure of Bitcoin to early adopters, including “Libertarians” or those who value privacy above the rule of law. That is, new standards and mechanisms do not force disclosure or impose rules on P2P transactions between trusted parties.
But what CRYPSA and other best-practices organizations hope to achieve is added trust, security, and even insurance—by demonstrating standards compliance in real time. Ultimately, they will make Bitcoin safe for the rest of us.
It’s not very different from the wild west. Gold, minerals, buffalo and opportunity abounded. But, in the early days, plucking this bounty was limited to the most strident thrill seeker. For all others, the risk of becoming a homesteader was too high. Threats came from all directions: Natives, rattlesnakes, gunslingers, stage coach gangs, and scam artists.
Gradually things change. The wild west was tamed.
The federal government deployed a network of sheriffs and marshals. Risk abated and productivity spread across the west. With Bitcoin, the solution won’t come from the federal government, because one of the key tenants of Bitcoin is a inherent decentralized and personally-empowering architecture. But the government is not blind to this, and a surprising number of politicians even recognize that an empowered consumer can be an asset to national financial health. For this reason, regulators are gradually moving from “wait-and-see” to “How can we help?”
For some, these observations defy the popular conception of government, because governments typically try to consolidate, regulate and enforce. But with Bitcoin, the CRYPSA staff is finding that representatives of government are generally receptive, and even acknowledging that the role of a Federal Reserve or of central banks may be greatly transformed in the next decade.
As with many of the members, I was surprised with the open and friendly nature of discussions. My conclusion is that a popular conception of government with its head it he sand—or one that is unwilling to work with “facts on the ground”—does not apply to US policy makers and regulators. The people in these roles are prepared to embrace change and they want to facilitate the process for everyone’s benefit.
So, the top-line question, “Why are governments (or regulators) against Bitcoin?” is a bit like asking “When will you stop beating your mother?” It is not possible to answer, because in my opinion, the question is based on a false assumption. Bitcoin is gaining steam, and legitimate objections are rapidly falling away.