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.