How Will Bitcoiners Regulate Regulators? -Bitcoin Magazine
This is an opinion piece by Niklas Kleinworthresearch assistant at the Idaho Freedom Foundation, which is a public policy think tank.
As Congress seeks to refine the federal government’s stance on cryptocurrency, be wary of policies that allow for the favoritism of bureaucratic interests over Bitcoiners. Although bitcoin itself cannot be regulated, federal oversight could set back the progress of orange nocoiners by making bitcoin less convenient to access and trade. Bitcoiners should support legislation that both simplifies the industry’s relationship with the US government and provides safeguards against bureaucratic excesses.
Senators Cynthia Lummis and Kirsten Gillibrand’s cryptocurrency legislation is a much-awaited and celebrated milestone in the industry as it recognizes the role bitcoin plays in the U.S. economy and provides a regulatory framework for many of the gray areas that plagued the government’s interactions with the bitcoin business. Among these, the bill would designate the Commodities Futures Trading Commission (CFTC) as the regulator for cryptocurrency matters, define bitcoin as a commodity rather than a security, and improve market transparency for stablecoins. This approach could lead to more innovation and greater adoption of bitcoin as it is applied to everyday transactions.
Despite the bill’s merits, Bitcoiners should be skeptical of this new policy direction in Washington, DC, because a regulatory framework is no more restrictive for bureaucratic agencies than the edges of a blank canvas for a painter. The Lummis-Gillibrand bill touts the creation of this framework but implements no protection against the very entity that is threatened by Bitcoin’s ethic of decentralizing wealth and rendering fiat obsolete: the federal government. By imposing a regulatory framework without putting in place safeguards against bureaucratic excesses, the industry will not be safer after the passage of this bill than it is today. In fact, it can be argued that the industry will be less secure because bureaucrats will be allowed to focus their regulatory efforts on the industry instead of fighting for control.
Although Senator Lummis has been discussing the passage of cryptocurrency legislation for some time now, the recent push for it to pass appears to be driven by investors fleeing to the government for relief following the liquidation crisis of these last months. Proponents of increased regulation are not ordinary HODLers who believe in the principle of decentralized wealth and financial freedom. Rather, it is modern-day gold diggers who attempt to take advantage of altcoin get-rich-quick schemes to increase their fiat wealth. Yet their calls for regulation are being framed as a cryptocurrency industry consensus, incidentally dragging Bitcoiners into the new regulatory arena despite their non-involvement in the crisis.
In Bitcoin’s truly trustless financial accountability system, no regulation is needed. For this reason, there is also no need to regulate the rest of the cryptocurrency market. Consumers hate nothing more than being scammed. As altcoin fads come and go, it becomes clear that bitcoin has power and eventually investors will stop supporting failed, unstable, and pseudo-decentralized coins. If there’s anything we’ve learned in the past two months, it’s that Bitcoin is the model for laissez-faire capitalism operating in a self-regulating system.
It is very dangerous to look to government as the ultimate solution to the problems that exist in a free market. Especially when the problems have been caused by poor product durability in response to market mismanagement by those same regulators.
The problem with further regulation of cryptocurrency exchanges is that the government would gain more personalized control of the market and limit financial freedom. This effect is particularly powerful as bitcoin enters the market by becoming a payment option for the average consumer. Businesses, not bitcoin, will become the target because few would be willing to risk the consequences for defying government excesses.
Bitcoin is designed to be the escape hatch from market mismanagement by the federal government. Right now, historic inflation makes ordinary activities like driving to work and eating three full meals a day virtually prohibitive. Meanwhile, the Federal Reserve is dangerously close to overcorrecting, threatening to send the economy into a recession that could rival the one we experienced in 2008. Given this track record, it would be unwise to grant current administrators of the American economy the least control. people’s access to their only means of escape.
While the Lummis-Gillibrand bill is a start to clarify the law and recognize bitcoin as a viable store of value, there must be provisions that protect the industry from regulators themselves. There should be protections that recognize your right to own and keep your bitcoin, limit the latitude executive agencies have when interpreting their role within the regulatory framework, and recognize the right to financial privacy guaranteed by the Fourth Amendment of the American Constitution. Regulating regulators would limit overreach and support financial privacy and property rights in their finest form.
It should be remembered that bitcoin is not intended to be an ordinary investment, but a movement based on the principle that financial freedom should be accessible to all and in the absence of market manipulation by a government, a company, group or individual. Investors voluntarily calling for the restriction of this right are holding bitcoins for the wrong reasons and are completely missing the point of this grand experiment.
Bitcoiners should not just HODL their bitcoin based on their belief that it is a superior store of value. They must also apply this principle to the sphere of public policy: “politically HODLing” on the basis that bitcoin requires no regulation as a superior trustless system. It is important both to support public policies that clarify the law, encourage innovation and open up the market, while opposing those that create inroads for bureaucrats to regulate as they please. Without this political vigilance, Bitcoiners risk losing the culture war between the Fed and true financial freedom.
This is a guest post by Niklas Kleinworth. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.