The world’s leading bitcoin advocacy group, the Bitcoin Foundation, announced that it had retained legal counsel to seek advice on how to fight back against stifling federal and state level regulations that are hindering the progress of bitcoin and other digital currencies as an innovative new financial technology.
According to a press release by the Washington-based nonprofit organization that seeks to “standardize, protect and promote the use of bitcoin cryptographic money for the benefit of users worldwide,” Executive Director, Llew Claasen, stated that the priority will be to, “engage into a more open and diverse dialogue with the U.S. Congress,” regarding the introduction of a new bill that aims to bring digital currencies within the scope of money laundering enforcement.
The Bitcoin Foundation has previously announced its opposition to the Uniform Law Commission’s “Uniform Regulation of Virtual Currency Businesses Act” as its approval by states would threaten the existence of fintech startups nationwide that are involved in developing new financial solutions involving cryptocurrency and blockchain technology. The foundation continues to reject this proposed bill as states across the US already have significant disagreements on how to best regulate bitcoin and other digital currencies and because this Act “is subject to significant legal uncertainty due to the current legal challenge against the New York “BitLicense” before New York courts.”
“This increased regulatory push by federal and state authorities, if it continues, is sure to threaten the existence of the fintech industry nationwide. Just as the fintech industry’s use of cryptocurrency was stifled in New York by the adoption of the so-called Bitlicense, it is highly likely that increased regulatory and legislative burdens will have a similar negative impact. These innovative businesses will migrate to more welcoming jurisdictions and weaken America’s ability to compete in the emerging field of fintech,” Bitcoin Foundation’s Claasen stated.
To aid the Bitcoin Foundation in its efforts, Ciric Law Firm, PLLC has been retained. The law firm is already in the process of challenging the New York Department of Financial Services‘ virtual currency regulation (Part 200 of Chapter 1 of Title 23 of the New York Codes, Rules and Regulations) for the small business owner, Theo Chino, who is the plaintiff in the case filed to the New York State Court System in late 2015.
Bitcoin’s Dark Web Association is not Helping its Regulation
One of the key reasons why bitcoin is unpopular with US regulators and lawmakers is its unfortunate association with criminal activities on the dark web. Only a small percentage of bitcoin transactions are believed to be linked to criminal activities. However, it is widely known that bitcoin has emerged as the go-to currency for ransomware payments as well as dark web transactions, despite the fact that the digital currency is not entirely anonymous as its transactions can be linked back to its account holders.
In 2017, we experienced two major ransomware attacks, WannaCry and Petya, that both involved paying the ransomware fee in bitcoin to regain access to the files encrypted by the malware.
Furthermore, this year, we witnessed the closure of two major illegal dark web marketplaces, Alphabay and Hansa, where bitcoin was one of the commonly used currencies to transact in illicit goods and services.
In response to the crackdown on the two dark web marketplaces, US Attorney General Jeff Sessions, “This is likely one of the most important criminal investigations of the year.” He also added: “The dark net is not a place to hide. We will find you.”
Despite bitcoin being able to slowly drop its “the currency of the criminal underworld” image, many US lawmakers and regulators still agree that the digital currency is used in these instances and also regularly cites its fear that the pseudo anonymous digital currency could be used in terrorist financing. Of course, if you are in America and you mention the word “terrorism,” anything goes in terms of legislation that is restrictive to the individual as we have witnessed since the 9/11 attacks.
Regulation is Welcome But Not Yet
Bitcoin Foundation’s Claasen believes it is simply too early to start regulating bitcoin in a manner that is restrictive to the development of this technology.
He told The Independent that “state and federal legislation creates hurdles for innovation, well in advance of knowing what the impact of the technology is going to be – or what it enables.”
“[The Bitcoin Foundation’s] view is that it is not yet clear what bitcoin and cryptocurrencies are. But by regulating the technology prematurely, you put it into a box it might not fit into later on. It’s not that we don’t believe there’s a time and place to regulate Bitcoin, we’re just saying that it’s too early and that regulation will just do harm to very innovative businesses and technologies.”
While the majority of the bitcoin community agrees that there should be some level of bitcoin regulation to provide clear guidelines that bitcoin and blockchain startups can follow as they develop innovative new solutions, a “tough on bitcoin” regulatory framework would undoubtedly hinder progress. Startups would then have to focus on spending their time and resources on complying with new laws and regulations as opposed to delivering on their mission statements.
Furthermore, as the technology itself is still evolving, it would be better for financial innovation overall to continue to let it evolve by using more of a “laissez-faire approach” than crippling its development early on and, therefore, potentially falling behind other nations when it comes to financial technology innovation.
Whether the Bitcoin Foundation will succeed in its efforts of lobbying for more bitcoin-friendly regulation remains to be seen, but it is a good start to challenge lawmakers before bitcoin-negative proposed legislation is passed.