FinCEN, the department of the Treasury responsible for fighting financial crimes has already issued guidance on how it views Bitcoin. Now it looks like the Commodities Future Trading Commission may also seek to regulate Bitcoin. More regulation is coming for Bitcoin.
I think that this is a good thing.
I do not believe that the US Government is out to stop Bitcoin. Some in the Bitcoin community may call me naive. But I believe that the arms of the US Government are primarily interested in their stated functions, not in some grand conspiracy to stop Bitcoin from becoming an alternative currency and payments system. And I think that those stated functions are typically good for society, and good for Bitcoin.
For example, FinCEN is set up to fight money laundering, and to a lesser extent, terrorist financing. I think most people would agree that these are worthwhile aims.
The CFTC’s mission it to “protect the public from fraud, manipulation, abusive practices and systematic risk in commodity future and options markets”. That sounds like a worthwhile aim as well. And the Bitcoin ecosystem has seen plenty of fraud, manipulation, abusive practices and systematic risk in the past. If some degree of regulation can help make Bitcoin a cleaner, safer and better lit place to do business, that can not but help to make Bitcoin a more acceptable alternative for a broader cross section of the public.
The biggest long term driver of value in the Bitcoin ecosystem is its use in transactions. And the biggest driver of widespread use of Bitcoin in transactions will be Zero(ish) transaction costs. But before the public is willing to accept Bitcoin, they need to trust it. And that trust in Bitcoin is largely absent in the broader public right now.
There are many elements that can drive trust. But whether you like it or not, governmental oversight is one of them.
Two of the early drivers of Bitcoin adoption were its decentralized nature, and its anonymity. Governmental oversight will mean sacrificing both of these characteristics. Many of the early adopters of Bitcoin won’t like this. But I think it is necessary if Bitcoin is to achieve widespread use.
Regulation of course carries many dangers. Bitcoin has a PR problem right now. It is thought of either as a wild speculative commodity, or an enabler for illegal or unsavory activities. If the Bitcoin ecosystem does not improve its reputation by rapidly enabling and showcasing a number of positive usecases (perhaps saving the newspaper industry, or ending hyperinflation in a developing world country), then the risk of over-reaching regulation, is high. I worry even more about over-reaching legislation or prosecution driven by ambitious politicians or state AGs, looking for an easy target to beat up on. But that is on us as an industry. We need to enable and celebrate positive usecases, and quickly, for Bitcoin to survive and thrive.
So what do you think? Am I naive, am I a tool of the government overlords, or is more regulation an inevitable part of the path towards widespread Bitcoin adoption?