Regulators are determined to come after #Bitcoin.
Although many in the community are opposed to regulation in its entirety, my view is that that if regulation is coming (or already here), we need to do everything we can to make sure it is good and decent and does not impede the proper operation of the most important aspects of #Bitcoin . We discussed this approach recently on What Bitcoin Did, in the links below.
Having said this, why is it so hard to create, and lobby for, good and thoughtful regulation?
Firstly, in the UK, the instinctive reaction of regulators (and in particular the FCA) has been aggressive and one of reactive and unhelpful opposition to #Bitcoin, coupled with an unwillingness to listen to those at the coal face of the industry. Scroll through their publications or public statements and you will find the same old chestnuts: “it's a speculative asset with no use case”; “it has no intrinsic value”; “it is not backed by anything” (this last one being a particularly amusing, when you consider that a large number of the British public still labour under the misapprehension that the pound sterling is backed by our gold reserves).
Instead of levying these (frankly childish) allegations at #Bitcoin , they should instead take advantage of the very large number of people working in the industry who are ready to give up their time to assist the FCA in understanding, as far as it is possible to do so, what exactly Bitcoin really is, and what its properties really are.
Secondly, we unfortunately see poor and ineffective regulation emerging as a direct result of this reactive opposition and their failure to pay attention to advice.
Without understanding what Bitcoin is, regulators cannot regulate it, or its buyers, in any sensible fashion.
By way of example, take the ludicrous categorisation of #Bitcoin as a restricted mass market investment, which has required exchanges to impose ‘cooling off’ periods, and customers to answer questionnaires before they can buy on exchanges. Or, if you don’t want to do this, you can easily circumvent the FCA’s laughable attempts at preventing access to #Bitcoin by buying the asset simply and easily in a peer-to-peer and KYC-free manner with an app on your phone.
Utterly ineffective regulation is not good regulation – it is in fact idiotic and makes a mockery of the entire process.
It is symptomatic of a resolute failure to engage or to understand that this asset is unlike anything they have dealt with before, that its properties are unique – and that furthermore, it is impossible to write rules for the way that both people and the legal system interact with #Bitcoin if you do not at least attempt to understand its properties first.
If a regulator proposes a rule enabling Bitcoin to be confiscated from self-custody, they need to understand this is impossible without either keyholder cooperation or actual physical violence.
If a regulator proposes that UTXOs be frozen, then they need to tell us how.
If a regulator attempts to ban Bitcoin, we need to show them that users will keep holding and using it regardless.
Most importantly of all – I would exhort the FCA and all other government regulators to make use of the many volunteers in the industry who will give up their time and expertise to assist them in making good and effective regulation. Don’t consult them only to ignore their expertise.
I quote from the FCA’s recent policy statement released in response to feedback they had from the industry: “On our proposals for cryptoassets, respondents generally disagreed with our proposal to categorise cryptoassets as Restricted Mass Market Investments (RMMI)… Having considered the feedback, we intend to proceed as consulted with categorising cryptoassets as ‘Restricted Mass Market Investments’.”
Suggestion: if you’re learning to drive a car, it’s best to follow the advice of your driving instructor. Don’t simply try to make up a new Highway Code as you go.
No one else will pay attention to it.
