If Bitcoin wants to be legitimate, then it’s going to have to pull its socks up!

Are you sick of hearing this?

Being a BlockZombie and never being able to get enough blockchain Bitcoin info, the Bitcoin UK podcast recently caught my ear.

The production is good and the host, Freya Stevens is knowledgable, well spoken and easy to listen to. The content is also pretty good and I’ll keep listening! The format so far contains plenty of interviews with experienced Bitcoin people from the UK.

What struck me about the interviewees featured in episodes 3 and 4 is the pervasiveness of a strong prescriptive sentiment on the topic of regulation and what seems to be an over-confidence in the impact of legislators in specific jurisdictions, notably the UK. While there are plenty of points to be made in this vein, I consider the effective influence of regulators on Bitcoin to have been overstated and the potential “damage” to the “success” of Bitcoin greatly exaggerated. I’ve also heard this kind of argument a lot elsewhere.

On the podcast, two or three of the interviewees demonstrate way too much faith in the influence of regulators and insufficient appreciation of the magnitude of forced change Bitcoin already represents. Disruptive technology is going to cause disruption and we’ve barely seen the beginning. It’s not just going to be a slightly better PayPal.

As with the internet, no matter how desirable or how many of us nice people agree that it is right and proper for all published content on the internet to meet our reasonable standards, censorship of the internet has been an unequivocal and resounding failure around the globe, not just in the UK but in China, Syria, Venezuela and Turkey where desperate and otherwise damaging measures are taken.

Having probably forgotten and mostly abandoned rhetoric about forcing “publishers” on the internet to be licensed and to “take down” objectionable content and pirated copyrighted works, polite society maintains a flimsy facade online hoping to avoid conversations about illicit material, presumably until the internet censorship wagon is again, pointlessly, wheeled out to placate the odd media mogul or facilitate a quick game of political football.

Let’s reflect on this: Bit Torrent traffic is one out of every six bytes online.

Forget the vast uncountable blobbybytes of pirated stuff on the web, or the hidden web, just consider bit torrent. While, yes, it’s also used for legitimate stuff, you’d have to admit publishing on the internet is so utterly unregulated and ubiquitous it’s hard to even know what publishing is anymore. It doesn’t matter whether you think that’s good or bad, it’s reality.

The fact remains, as one of the podcast guests declared, most of the world’s economy, both in dollars and in people, is in contravention of regulations. It’s the black market, the grey market, the shadow economy, System D. Funny thing is, he said this in the very next breath after declaring how Bitcoin must be regulated. In fact, there is plenty of evidence to suggest that, as with The Streisand Effect, making hard regulations against large populist forces only adds fuel to the fire. As with “The War on Drugs” regulations can result in increased financial pressures that drive prices up and create lucrative yet untaxed money flows for organised crime that would otherwise not exist.

I’m not saying that there ought not be regulation. Let’s say we agree that there ought to be! The fly in the ointment is that pesky reality that Bitcoin the currency will not stop what it is doing, look up and heed the wagging finger of an officious, disapproving, bespectacled bowler hat! People may heed it, but only to the extent that the benefits of Bitcoin are not worth the hassle with the law, and then only in that particular jurisdiction. Think globally, add a little bit of imagination and vision about the near future of decentralised blockchain technologies and one can expect hasty, ill-conceived regulations being met with mass, casual non-compliance and being dismissed as an embarrassing and unenforceable anachronism like so many of the world’s stupid laws.

In many people’s eyes, Bitcoin may need regulation in order to obtain “legitimacy”, however – and this is going to be a bitter pill – in practice, regulations too are going to have to seek legitimacy from Bitcoin.

My prediction is we will see a two-sided negotiation between those who have a huge amount to gain from Bitcoin and those who have a huge amount to lose. Will we meet in the middle? Only if it’s an even match of relative power.

The thing is, if zealots like me are even half right about the scale of Bitcoin’s impact on this world, we all have a lot more to gain than even the considerable profits that the legacy financial sector stands to lose. Over-reaching regulation will simply divert the flow of Bitcoin’s benefits to less constrained countries and, of course, to System-D.

Let’s also remind ourselves that information is flowing faster and more freely than ever. Ask the NSA how easy it is to keep their secrets from leaking. Regulations are going to have to grapple with a very different reality than the one from the 20th Century. In the 21st Century the Bitcoin genie is out of the bottle. If distributed cryptocurrencies are not transformative enough to cause this kind of impact, then Bitcoin doesn’t deserve to even be called a disruptive technology.

We shall see. The way I see it, if information wants to be free, then so does money.