Share

Policy: Technology

People who don't understand Bitcoin want to regulate Bitcoin

By |
Beltway Confidential,Opinion,New York,Ashe Schow,Economy,Technology,Bitcoin

Bitcoin, the digital currency people can't stop talking about, is thus far free from direct meddling from the federal government. So naturally, Big Government wants to regulate it.

This isn’t particularly surprising, as new technology that disrupts the status quo is often misunderstood — which scares those who like government-enforced stability.

Speaking of those who like government-enforced stability, meet Benjamin Lawsky, New York's superintendent of financial services, who is seeking to regulate Bitcoin. A former aide to New York Gov. Andrew Cuomo, Lawsky seems to be a zealous financial regulator fashioning himself in the Image of Eliot Spitzer (well, without the whole prostitute thing).

Lawsky is setting himself up to be the first person in the country to have the power to regulate Bitcoin and other cryptocurrencies. While regulating Bitcoin might not be the worst thing in the world (to some), giving Lawsky that power would be like having Inspector Javert from “Les Misérables” as your parole officer.

Lawsky has already proven that he would openly overstep legal bounds to attack financial institutions he doesn't like, like online lenders.

Now Lawsky has set his sights on Bitcoin. And tech experts are not happy with the idea of someone who doesn’t understand Bitcoin trying to regulate the currency.

“The problem is our financial regulators don't understand Bitcoin well enough to regulate it,” Robert McMillan, senior writer for the tech blog Wired Enterprise, said. “That became increasingly obvious during the hearings, and it's not at all surprising.”

For example, at a hearing about regulating Bitcoin, Deputy U.S. Attorney for the Southern District of New York Richard Zabel confused Bitcoin (which displays financial transactions publicly) and tumblers, Bitcoin-mixing services that allow users to hide their transactions.

Lawsky jumped on the anonymity angle, saying essentially that banning the use of tumblers would be something included in any Bitcoin regulations.

“You could almost hear a collective groan from the Bitcoin community,” McMillan said. “If services that merely ‘enhance anonymity’ are banned by New York financial regulators, then it will actually scare away legitimate businesses, and maybe an entire industry.”

Lawsky wants to target a genuinely free currency, doing what countless regulators have done before him — muzzle new technology with the power of the state.

View article comments Leave a comment