Today, as human society progresses onward, Coinmap broke 5,000 global business listings, South African payment processor Payfast enabled their 30,000 merchants to accept Bitcoin, and the NY Dept. of Financial Services made financial privacy a crime, supported (at least superficially) by some leaders in the Bitcoin industry.
The proposed digital currency regulation from Benjamin Lawsky, the Superintendent of 20 million/6 billion people’s financial decisions, has been on the horizon for months. New York is known for dictating how people live, and so as more people are incorporating Bitcoin into their lives, New York bureaucrats would inevitably attempt to place it under surveillance and control (with the best intentions, naturally).
According to the new mandates, you will soon be unable to lawfully purchase a Bitcoin from any company that A) has any customers in New York and B) doesn’t keep an aggregated surveillance list of all customers, including name, address, photo ID, and “other identifying information,” regardless of the amounts transacted. And if the company you’d like to buy from does satisfy New York’s rules, you will then be required to add yourself to this surveillance list, having to then trust not only the company, and not only the government, but also every other 3rd party that may obtain such information, not to abuse it.
Consider now that an Italian, wishing to buy $100 of Bitcoin from BitStamp in Slovenia, will now be forced to provide all his personal details, which will go on file with the United States government (and any 3rd parties able to obtain that file) because BitStamp has some customers in New York. The American government, not satisfied with continually carving away the freedoms of its own people, now heads abroad in search of freedoms elsewhere to slay.
Ironically, one of the most highlighted pretences for NY’s new regulations is “consumer protection.”
And indeed, these new mandates attempt to assure you of your state-sponsored safety, by requiring background checks on the company’s founders (another American myth: the presumption of innocence), requiring expensive bonds and insurance (goodbye college start-up), and forcing companies’ IT security to satisfy government standards (which should make us all feel safe). So you are assured of your safety, but then of course it is wrested back away upon compulsion to expose your personal details.
How can it be in the interest of a consumer to force them to reveal their identity, submitting personally identifying documents directly to private companies, and then indirectly to various government agencies, and then periodically to hackers and 3rd parties who otherwise inevitably obtain it? How does that protect the consumer?
Let’s be truthful, this exposes the consumer. It renders him a serf upon a farm of information production – used for purposes both benevolent and vile, without any say in the matter.
The information you expose, to anyone, does not remain solely with the recipient of that exposure. If the government forces the exposure of your personal information, will it also do you the courtesy of guaranteeing the safety of the same? It cannot.
Let’s examine the credit card industry, which is highly regulated by the same wise and benevolent agencies now groping Bitcoin. Have we already forgotten Target Corp’s breach leading to millions of peoples’ personal information being compromised? And is that an isolated incident? Or the billions of dollars in losses every year due to identity theft? This is real harm, both personal and economic, being done perpetually to the American public, because they have to divulge all their personal information to engage with each other economically.
Finally, at long last, Bitcoin provides a way to make at-distance economic exchange without surrendering personal info, and Benjamin Lawsky rides in on his white horse (taxpayer funded) to make that privacy illegal, and once again wrest society back into the dark ages of financial technology. His justification is that he may be able to freeze some criminal funds, so endangering 350 million Americans is justified, because he is protecting Americans.
The premise that such regulations foster consumer protection is absurd. Do consumers not deserve the right to remain private if they have not been accused of a crime? And do they not deserve privacy on both sides of the transaction – buying the Bitcoin, and spending it? Do they deserve to be forced to reveal who they are, where they live, what they look like, how to get in contact with them, and in what manner they choose to make financial decisions? Is this the mark of a society that values the liberty of its citizens?
That it may make it easier for the State to fight crime if every citizen reveals who they are and what they’re doing does not justify such intrusion. This is the impetus by which evil groups come to dominate and subvert, regardless of whether they were evil to begin with. An honest America must now change its slogan from “Land of the Free” to “Papers, citizen.”
This is not consumer protection. This is explicit surveillance of private citizens who are not accused – nor even under suspicion – of committing a crime. Or, perhaps, suspicion is now assumed in all cases? A foundational legal principle of American society – the presumption of innocence – is, through such mandates, humiliated and desecrated, all by people who believe they are “advocates of the law.” Are we now presumed to be criminals, and thus must permit ourselves to be watched in whichever way the State deems appropriate, so that our activities may be blessed before we proceed?
Is this not exactly the financial censorship for which Bitcoin was intended as the antidote?
Some don’t seem to think so.
Bitcoin “visionaries,” Cameron and Tyler Winklevoss, responded to the announcement with the following,
“We are pleased that Superintendent Lawsky and the Department of Financial Services have embraced Bitcoin and digital assets and created a regulatory framework that protects consumers. We look forward to New York State becoming the hub of this exciting new technology.”
Cameron and Tyler, this is shameful.
Lawsky has “embraced Bitcoin?” Really? Dozens of diktats which mandate State surveillance and censorship is the very antithesis of Bitcoin. This is not an embrace, it is the chaining of a generation’s most important invention to the failed financial infrastructure for which Bitcoin was an explicit refutation.
But let’s not hastily cast the Winklevii among Bitcoin’s true enemies. After all, Occam’s Razor might suggest that the brothers simply don’t want regulatory scrutiny brought down upon them (as they’re trying to get their fund approved), and thus feel compelled to not only comply with these absurd mandates, but to advocate on behalf of them. But then what does that say about our great nation? That industry leaders cower before the Superintendent and lend their reputational support, so as not to draw ire? Does this sound American to you? What does the American ideal (and the Bitcoin ideal), stand for if not stalwart resistance to this very encroachment of the state into private industry?
But it’s worse. To all Bitcoin industry entrepreneurs and advocates – this new regulation makes private ewallets illegal. Read this sentence again!
If you spend your time, money, and creative energies building a platform in which users may securely deposit and store their digital assets, you must now require them to send you personally identifying information. You must take their name. You must take their address. You must get a photo ID of this person verified against government checklists. You must watch their transactions and decide whether they are suspicious. You must package all this information into a database to which State agencies are permitted unlimited oversight and privilege.
But even before initiating your Orwellian spy list, you must submit yourself to a process of applying for a State-sponsored license. You must bribe the government with money or they will shut you down (called a bond or licensing fee). You must invite State-approved IT security forces to review your system. If they wish to insert a snippet of code into your software, you shall comply or be tried for money laundering and conspiracy to commit all manner of crimes (think I’m making this up?).
Please, how can anyone involved in Bitcoin morally support this?
You are being forced to spy on your users, and report private information to Government agents, with neither accusation nor even suspicion of a crime. How can you advocate the innovation that Bitcoin brings and simultaneously support such a decree? Do you have no line in the sand? At what point do you stand up like someone who knows right from wrong and assert your opposition to one of the most corrupt organizations on the planet? Not today, you say?
Are you listening Jeremy Allaire? Are you listening Armstrong and Ersham? Are you listening Winklevii and Andreessen? You are leaders of the industry – well, where are you leading it? Don’t want to bring negative attention upon yourselves? Fine, I understand that. But why are you going out of your way to publicly endorse this anachronistic legislation? Doing so means your explicit approval of all Bitcoin users being under perpetual surveillance. By what moral perversion do you justify such advocacy? [Decided to edit Allaire out after his post on Aug 13th, https://www.circle.com/2014/08/13/thoughts-new-york-bitlicense-proposal/ If you're reading this, Allaire, thank you for the opinion you expressed.]
Further, it will now be mandated that any bright engineer obtain a State License before releasing his new digital currency, and may only then innovate in a State approved manner. No digital ledger system may be published for the world to view without State approval, according to the NYDFS. “Controlling, administering, or issuing a Virtual Currency” is now a government-approved, and thus government-censored, enterprise. Industry leaders, do you really support this?
This would mean Satoshi Nakamoto himself would have committed a crime if his genius released Bitcoin today (unless he explicitly barred New Yorkers from using it). To do it “lawfully,” he would have been required to register, obtain approval, and make his identity known to all. You approve of a background check on Satoshi Nakamoto? You approve of him being forced to put up a bond before he’s permitted to release the genesis block?
Bitcoin would not have been released legally if this legislation existed in 2008. Why do you support it being released in 2014? This is the “fostering of innovation” now levied by NYDFS, and you are supporting it. Cryptocurrency innovation (aka business) must first be approved and anointed by the State of New York. Is that your idea of monetary progress for a world so desperately in need of it?
How can you support this?
Alas, what conclusion can be drawn from Lawsky’s proclamation other than the following: Bitcoin shall be tossed into the same unethical regulatory mess that currently governs the legacy banking system. It shall comply with the same mandates, be governed in the same way, by the same people. It shall be censored with the same prejudices, and serve as an Orwellian tool of law enforcement in the same corrupt and deleterious manner.
Its protection of privacy, illegal. Its advocacy of neutrality, ignored. Its efficiencies, minimized. Its decentralized, market-based governance forced to revert to centralized, State-based coercion. Why? Because the men with guns say so and the men with the businesses don’t really want to make a fuss about it.
“Examinations of licensees will be conducted whenever the superintendent deems necessary.”
- NY Dept. of Financial Services
Consider whether this quote is more befitting of legislation in The United States of America, or Soviet Russia? Is it befitting of Bitcoin? Are we all inspired to build a system in which “examinations will be conducted whenever the superintendent deems necessary?” Is that what we’re bringing to the world? More of that?
I don’t expect those who make their living through coercion to understand or appreciate this distinction. But I do hope that respectable people, good citizens, men of character, honest Bitcoin innovators and businessmen, take it to heart in both their words and actions. If you don’t want to speak out against this nonsense for fear of retribution, fine, that is understandable. But if you speak out in advocacy of the very injustices from which Bitcoin is trying to lead society, I’d advise you to check whether you’re veering dangerously close to incompatibility with a free and open financial system, and consider whether you will end up on the right side of history.
Let’s hope the builders of this most important technology don’t continue to embarrass themselves by forgetting what they’re building. Fortunately, a technology like Bitcoin will lead humanity in its own direction, despite the most eloquent proclamations from kings of any country, or the cowed grovelling of their entranced subjects.
To those of you out there speaking and struggling for freedom, thank you.