The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

This bad bill will set a precedent that will be highly damaging to all software development and software business in the USA.

Twitter for example, could find itself being regulated; it transmits messages that are no different in nature to the messages that Bitcoin transmits; the only difference being the publicly maintained ledger and context and application of the messages. In fact, Twitter could turn itself into a Bitcoin company quite easily by adding a few fields to its message JSON schema to include a Bitcoin address for each of its users, adding a page to its client and running its own Bitcoin server pool. Would that extra text suddenly transform Twitter into a different company? Would that suddenly change the nature of each Tweet that is sent on their network? How is having a Bitcoin address integrated into your Twitter account different to making a promise by hand on Twitter to your followers or in a direct message?

One of the things Bitcoin allows you to do is make contracts with people without knowing them or signing paper; the network and software takes care of identifying and fulfilling the promise, all with cryptographically signed pieces of text. What the people calling for “BitLicenses” and the misguided and manipulated Senators behind S.1241 are asserting, is that because Bitcoin right now has a particular use, it should be exempted from the basic law of the United States of America. That is completely insane, and will have unintended consequences that would be absolutely disastrous for the American economy since almost everything today is mediated by or touches software and databases.

On the other hand, if Bitcoin is left to flourish and the market allowed to define the services and means of setting the value and resolving disputes, Bitcoin as an ecosystem will be extremely robust, widespread, and beneficial to Americans, just like the internet itself is today, after having grown for twenty years without any regulation or oversight from the Senate.

Furthermore, as I have said previously, the country that does not enact Bitcoin legislation will become the starting and endpoints of all Bitcoin transactions globally by first mover advantage. All other jurisdictions will see Bitcoin passing through them untaxed, and there will be nothing they can do about it, as Bitcoin is an unassailable peer to peer network.

We've seen a similar phenomenon with the legal position of encryption in France. SSL was regulated in France until Dominique Strauss-Khan removed the restrictions. They knew that “French e-commerce” would take place inside “le pays Roosbeef” if it were not possible to secure French websites with SSL on demand without friction. American Bitcoin businesses (since the endpoints will be in their jurisdiction) will be taxed on their profits, and this will be a percentage of the trillions of global transactions made on the network for every conceivable and inconceivable purpose.

The same is true for any other country. The United States looks set to cripple itself by enacting “BitLicenses” and declaring by fiat that Bitcoin is a currency, or a commodity or legal tender. As I describe above, Bitcoin is none of those things by nature, and the myriad number of applications it can be put to is only just being discovered. Our project Azteco is but one of them, with the potential to reach the 2.2 billion unbanked people in the world, and provide them with an easy way to access internet e-commerce, world-wide, with a system that makes payment fraud impossible. The potential benefit to the unbanked and the American websites that sell goods on-line is without precedent. Only a fool would do something that could harm the advent of this transformation.

No legislature will be able to keep up with the advances in software that are taking place; there are too many developers and efficient tools in the wild all over the world, all with equal access to the market. The best America can possibly hope for is to tax new businesses that use the new tools as they emerge, and encourage entrepreneurs to incorporate in their jurisdiction.

If America wants to drive away Bitcoin developers, new exchanges and new businesses, this is the way to do it. By all means, do so and take the consequences. There are many other places in the world where fast internet pipes have been laid and where the government is not so backward. Skype was founded in Estonia, not Silicon Valley, and this is for a reason. All the big Bitcoin exchanges are outside of the USA. There is a reason for that. No one wanting to start a Bitcoin business is planning to move to New York from anywhere, because they know that their business models will immediately be subject to million dollar set up fees thanks to the notorious and un-American “BitLicense”.

For those of you who are frightened of a free market in Bitcoin, rest assured, all the laws that currently exist to do with fraud, theft, misrepresentation and everything else, continue apply to all people and corporations who use Bitcoin. Bitcoin does not make laws or your personal or corporate obligations moot. When you deal with a company, you retain access to the law and recourse to it.

When someone makes a promise to sell you goods with Bitcoin, that promise is not nullified because you are paying with Bitcoin. Good Bitcoin businesses will build dispute resolution systems the way that eBay and Amazon have, so that you never have to go to court to obtain justice if there is a problem. Online, reputation is everything, and bad reputations can destroy your credibility and customer base over night. This is a far more powerful incentive to do right, which most people do by default in any case, rather than some arbitrary and absurd “BitLicense”.

All the “BitLicenses” in the world could not stop MTGOX from having a software problem, and no law can bring back the money lost either directly or through the disruption the event caused by the software error. Once again, entrepreneurs powered by the internet make life easier and better, not laws and regulations. Regulation does not make software correct; developers do.

I have one recommendation for the anonymous authors of S.1241. Don’t waste everyone’s time and money and resources forcing us to knock down this stupid idea. The EFF has better things to do with their time than teach the PGP “Munitions Case” lesson all over again. If it goes to court, your side will lose, and as a consequence, America will lose its head start as all Bitcoin entrepreneurs flee the USA for environments that will allow them to innovate, grow and prosper. Already Bitcoin businesses outside America are banning US Citizens. This is not a good thing.

What these S.1241 advocates actually want and believe they will get is a guaranteed market advantage. They want to prevent the “Golden BB” entrepreneur that might destroy their business, they want to slow down and stifle innovation, so that they can become the entrenched and unassailable gatekeepers. They want to bar new entrants to the market. It simply will not work. And it is un-American.

We Are Going to Win

We are getting a glimpse of how the courts are going to respond to a challenge to S.1241. Two judges in two different US jurisdictions have found that Bitcoin is not money, and have thrown out absurd “Money Laundering” charges against two men:

U.S. Magistrate Judge Hugh B. Scott ruled in a money laundering case in Buffalo, N.Y. that bitcoin is more like a commodity and is not a form of currency, according to a local news report.

He recommended the money laundering charge be dropped against the defendant since bitcoin isn’t money.

In another money laundering case last year, Miami-Dade Circuit Judge Teresa Mary Pooler stated it is very clear, even to someone with limited knowledge in the area, that bitcoin has a long way to go before it is the equivalent of money.

Bitcoin is not money. KYC/AML should not apply to it at all, and S.1241 should be torn to shreds and burned. The ruling of Judge Hugh B. Scott is highly significant, because it directly contradicts the idea of BitLicence and S.1241, and sets a welcome, and entirely America centric legal precedent. The is exactly why the judiciary was designed to be a separate branch of government, and is an example of the American system working.

The only way to approach Bitcoin is by telling the absolute truth about it. It is not money; it is a database. Clever analogies are for marketing, and not the law. It is not logical that WhatsApp and Apple’s iMessage and other 100% encrypted and private services are free to operate unrestricted and Bitcoin put under an onerous and un-American regime of un-Constitutional regulation.

Bitcoiners will go to court if the Senate passes this very bad, Crony Capitalist Bill, and the Bitcoiners will win. The public won in the 1990s with PGP in the outrageous Zimmerman case and Bitcoiners will win this one too in the end. The question is will America be the center of the new economy, or will some other country with more enlightened legislators be the winner?