Despite never having been linked to a single incident of terrorism, Bitcoin is once facing increased scrutiny from European politicians. The European Commission is set to update its anti-money laundering rules next month, which would force Bitcoin exchanges to comply with the same AML and Know Your Customer rules with which other financial institutions must comply. That likely won’t be the last time that Bitcoin faces scrutiny, as European governments are increasingly cracking down on Bitcoin, cash, and other payment methods that allow anonymity when making purchases. Every new terrorist attack in Europe is another opportunity for governments to crack down on Bitcoin and cash, sweeping more and more transactions within the financial system where they can be tracked and, most importantly, taxed. Talk of money laundering and terrorism is just cover for what ultimately are moves towards increasing revenue and enhancing control over people’s finances.
Benjamin Lawsky, the former head of the New York State Department of Financial Services and the man responsible for the implementation of the draconian New York BitLicense regulations, has begun to represent Bitcoin businesses seeking to do business in New York. Anyone who is familiar with the concepts of regulatory capture and crony capitalism should understand how something like this happens. After all, how else would the ex-regulator Lawsky make a living after government service if he couldn’t advise companies on how to comply with the regulations he created?
This type of thing happened in Virginia where Del. David Albo, whose law firm specialized in defending traffic law violators, was able to push through greatly enhanced penalties for drunk and reckless driving, which could have resulted in more business for his firm. Remember also former US House Financial Services Chairman Mike Oxley, responsible for pushing the horrendous Sarbanes-Oxley law, who subsequently criticized the overreach of the law and went on to lobby on behalf of firms seeking to get around Sarbox’s onerous requirements. And these types of reversals aren’t just found among those who profit from them. Don’t forget former Federal Reserve Chairman Alan Greenspan, who in the decade since leaving his position as Federal Reserve Chairman has on occasion showed signs of remembering the economic common sense of his younger days.
Lawsky’s actions demonstrate why those in the Bitcoin community who welcome regulation and bend over backwards to work with government authorities are thoroughly misguided if they believe regulations will assist the adoption of Bitcoin. Regulations aren’t intended to protect consumers, protect markets, or ensure a level playing field. They are implemented to protect incumbents or, in the case of new technologies such as Bitcoin, wannabe incumbents, and to provide the opportunity for regulatory capture and revolving doors.
The Cato Institute yesterday held a cryptocurrency conference whose keynote speaker was Patrick Byrne, the CEO of Overstock.com. His speech came in the wake of his announcement that he is stepping down as CEO for an indefinite leave of absence due to health reasons. Byrne looked a little disheveled, had a noticeable cough at times, and mentioned that this speech marked the end of his professional career. It would be a shame, because his talk focused on settlement systems, an important aspect of any sort of trading. It isn’t the sexiest topic, but it has relevance to money and banking.
The Scandinavian countries have long been at the forefront of the war on cash. Cointelegraph reports today that Norway’s largest bank, DNB, has proposed ending the use of cash as payment in Norway. Denmark is already well on the way towards a cashless society, with the government proposing the elimination of all cash payments, and Sweden is not too far behind.
According to the Cointelegraph article, Trond Bentestuen, DNB Group Executive Vice President for Personal Banking Norway, said:
Today, there is approximately 50 billion kroner in circulation and [the country’s central bank] Norges Bank can only account for 40 percent of its use. That means that 60 percent of money usage is outside of any control. We believe that is due to under-the-table money and laundering.
Notice the phrase “outside of any control.” Cracking down on the use of cash is all about control. The authorities want to know how every last cent is spent, and if they can’t do so then they have to eliminate any means of spending money outside of the banking system’s purview.
In what appears to be a knee-jerk reaction to last week’s Paris terrorist attacks, the European Union is planning to crack down on Bitcoin and anonymous payments. Never mind that nothing has been proven about how the terrorists funded their operations. European authorities are obviously intent on not letting a good crisis go to waste. But will crackdowns on Bitcoin and pre-paid cards really do anything to prevent future terrorist attacks?
Recent news of a patent application filed by Bank of America for a cryptocurrency wire system could be bad news for Bitcoin and other cryptocurrencies. Reading through the application, it isn’t really clear what makes the “invention” so innovative and worthy of patent protection. But if the future sees more of these attempts to patent cryptocurrency technology and services then the long-term success of cryptocurrencies is very much in doubt.
In case you didn’t see this a few weeks ago, here is an interview that Cointelegraph did with Cody Wilson, the founder of Defense Distributed and a prominent supporter of Bitcoin. The most important quote is below.
According to recent reports, 80 percent of Bitcoin’s volume is due to Chinese yuan transactions. That is a huge amount, and likely due to the continued restrictions the Chinese government places on the convertibility of the yuan. But as China continues to take steps to liberalize the yuan, will Bitcoin’s appeal in China wane? And if it does, what effects will that have on the future viability of Bitcoin?