To paraphrase a famous quotation: “Every year, I get mad about the taxes I pay, until I realize that it is the admission ticket to the greatest show on earth: politics.”
Wherever you fall on the spectrum of regulation: always good, often good, neutral, often bad, or always bad, if you are interested in Bitcoin, you have a front seat to a really great show: the regulation of virtual currencies.
I attended a Miami Bitcoin meet-up last Tuesday, and there was a gentleman, friendly enough, though forceful, who would not let the issue go: “All of you who think that Bitcoin is free of government control are kidding yourselves. You are in for a very rude awakening.”
Yes, and…? I thought to myself.
For those of you who have been around long enough, you may remember the days when Bitcoiners would say, almost hopefully, that someday, maybe in the distant future – if Bitcoin were to become big enough – that it would get the attention of the government.
To be lectured about the inevitable involvement of the state was rather amusing, since it would have brought cheers just two years ago. “We’ve made it! Bitcoin is a success!”
And it is a success, by almost all measures. On Sunday a friend of mine overheard me talking Bitcoin with another friend: “Oh, didn’t that get shut down. Like, isn’t it over?” I said, “No, it’s up 1,000% since January.” She, being a well educated private equity professional, blinked a little bit quicker than normal.
So where are we today? FinCEN has progressively tightened their stance on the definition of “money transmitter,” now seemingly including anybody that deals in virtual currency in any capacity, and a California finance watch dog has shot a cannonball over the bow of the Bitcoin Foundation.
Unfortunately, this is having a truly negative effect on small businesses who are trying to grow the Bitcoin economy and play by the rules. Last week, I had my friend over, the CEO of coingig.com, by all standards an upstanding and ambitious entrepreneur, who was agonizing over the question: “Am I a money transmitter?”
He’s not alone, but Bitcoin businesses are just proxies to the backbone of the Bitcoin movement: Bitcoin owners.
If the ambiguous regulatory rhetoric is to continue, then it will eventually progress past these establishments, and take aim at Bitcoin owners themselves. You, know, the individuals who own a string of numbers that can change numbers on a little piece of software that keeps track of some numbers.
Typically, it is incredibly difficult and expensive to defy the regulators. The established avenue is through public appeal and the court system. Regulators know this, and a tried and true tactic of snuffing out new enterprise that doesn’t jive with the established market players is to ensnare hopeful entrants in a quagmire of red tape. When it becomes too much to sustain, they just give up. They have to.
Looking forward, it seems reasonable to me that someday, maybe in the near future, that we will get to witness a regulatory demand upon an individual who owns a significant amount of Bitcoins – maybe 1,000, or 10,000, or 100,000.
When an individual puts his or her foot down and says, “no,” it’s usually in vain, since conventional assets can be frozen, garnished, or confiscated.
But let’s be clear – and the regulators should understand this, since it would be a great embarrassment to try – that if they push hard enough, somebody is going to say, “no.” They aren’t going to say, “NO, DAMMIT YOU CAN’T HAVE MY BITCOINS.” They are going to say, “no.”
And when they say, “no,” then the answer is, “no,” unless the state takes the confrontation to the next level. If somebody gives up their Bitcoins because they were beaten by a monkey wrench, then we will know that we’ve unequivocally entered a new era.
So sit back and enjoy the show. After all, you’re paying your taxes, right?