I would strongly recommend against anyone trusting their private data to a company with physical ties to the United States. –Ladar Levison

Secure email providers Lavabit and Silent Circle have taken the heroic steps of shutting down their businesses in order to preserve their integrity. Unfortunately the definition of heroism necessarily implies that their actions are heroic because they are unusual. Their actions surprised us because most companies, when faced between choosing between continued operation and honoring the trust their users have given them, toss integrity aside.

Even though Levinson was speaking in the context of communication providers, his words apply equally well to Bitcoin. A police state is no less interested in controlling the flows of money between its subjects than it is in monitoring and controlling the flows of communication.

2013 was a great and terrible year for US Bitcoin companies. Several high profile companies received significant venture backing, which is good insofar as a recognition of their success and growth potential. However this also puts them in a hostage situation.

The investors backing these companies naturally want to not only receive a return on their investment, but to have the principle itself returned. This natural desire to get their money back serves as an effective means of control over them by bureaucrats who are capable of using their legal power to make the value of those investments evaporate on a whim. Because of this risk and others, venture capitalists normally insist on gaining significant control over the companies they invest in. This means that you should expect that when the US government says, “jump”, every venture-funded Bitcoin company will reply, “how high?” Hoping they will all have the courage of Lavabit is unrealistic.

From its inception, Bitcoin was destined to come into conflict with laws and regulators in the same way P2P file sharing did, and from its inception some people respond to Bitcoin’s potential by suggesting that it be changed to make it more compatible with the systems of legal control it was designed to evade.

Some of the proposals which have been suggested in the past include: adding the capability to reverse transactions, confiscation of balances, creating a central authority that can whitelist and/or blacklist addresses, and requiring all users to register their wallets with a government agency. So far none of these have been implemented into the protocol but the pressure to do so is will only continue to increase, especially by venture-funded companies, especially in the USA.

Ultimately it will be up to the international Bitcoin community to resist these pressures. The US government has a long reach, but non-US Bitcoin users have the ability to operate beyond it if they choose to develop that capability. It would be an enormously positive sign for Bitcoin if communities in Europe, Russia, China, and Latin America started their own development initiatives.

Bits of Proof and btcd are positive steps towards making the Bitcoin protocol resistant to arbitrary change by a small group. The best possible outcome for the network is to be composed of heterogeneous nodes, consisting of independent implementations which only implement protocol changes via a standardization process which involves near-universal consensus.

The single best step the global Bitcoin community could take to ensure this outcome is to create and fund projects that implement alternate Bitcoin implementations in a manner independent of any US person, company, or organization.

Bitcoin promises to be a neutral and international monetary standard, which provides a level playing field for participants all over the world. In order to realize this potential, it must be protected from the controlling influences of any single government, even if this causes some short term difficulty for Bitcoin users and companies under the control of one of those governments. It’s time for users around the world to step up and make sure not all their Bitcoin eggs are trapped in the US basket.