One of the key questions in the development of cryptocurrencies we highlighted yesterday, see, was whether the central banks and regulators would react to “losing control of their money supply”. The authorities in each country are reacting very differently. In the USA, the home (if it has a home) of Bitcoin and certainly where it is most widely used, have been pushing for more oversight. So much so that, on 17 August 2017, Llew Claasen, the Executive Director of the Bitcoin Foundation, the world’s oldest and largest Bitcoin advocacy organization, announced that the Bitcoin Foundation had retained counsel to advise it in its effort to push back against increased federal and state regulatory efforts to control and stifle the adoption and use of so-called “virtual currencies” such as Bitcoin.

First priority

The first priority in this effort will be to engage into a more open and diverse dialogue with the U.S. Congress, especially as it relates to the introduction of a bill bringing Bitcoin in the scope of money-laundering enforcement (see S. 1241-Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017).

This approach was recently reflected in the Bitcoin Foundation’s recent opposition to the adoption of the so-called “Uniform Regulation of Virtual Currency Businesses Act” by the Uniform Law Commission (“ULC”).  The Bitcoin Foundation remains opposed to this proposed model act because its approval by states would discourage inclusive financial innovation arising out of blockchain technology and cryptocurrencies like Bitcoin.  Furthermore, the Bitcoin Foundation continues to reject the proposed statute because states already have significant disagreements and approaches as to how to classify or regulate Bitcoin, and because the proposed statute is subject to significant legal uncertainty due to the current legal challenge against the New York “BitLicense” before New York courts.

Essence of decentralised currencies 

In The Independent yesterday, Claasen explained why he opposes regulation, “it is not possible for governments to take the view they want to regulate Bitcoin. It’s important to understand that a decentralised currency means one which is not under control by anybody.” (This is essence of the debate about cryptocurrencies: who is in control and how do businesses and consumers need protecting.) Clasen continued, “I understand that regulators need to protect the currency and people from risk. [In the future] regulators will probably regulate at the end points of the cryptocurrency network. I get that, it’s inevitable. Around the world the view is the same. But governments and financial services are already struggling, as in Venezuela, and people need an alternative way.”

Positive technology?

In some ways, it all comes down to: “Do you believe or not” in cryptocurrencies. Clasen, in The Independent yesterday concluded that,  “Aside from other things, [Bitcoin] is a positive technology. It is not one that seeks to destroy or disrupt. It’s a pity when regulators view it as something that is dangerous.” 

Yet only last month, two of the dark web’s largest markets "Alphabay" and "Hansa" were seized in a joint effort from European police, Interpol, the FBI and the DEA, to stop users selling drugs and chemicals via Bitcoin to protect their identities. 

---

CTMfile take: Cryptocurrencies are here, and are huge (Bitcoin is now worth more than PayPal). Clasen accepts that they need to be regulated at some stage, but he says it is too early as we don’t understand what we dealing with. If not now, when?