The opening talk at the Bitcoin 2013 conference in San Jose was given by the Wilklevoss twins, purported owners of 1% of the world’s existing Bitcoins. They addressed the burning question of whether and how much Bitcoin ought to be regulated by government.

Their primary message: “I don’t think anyone wants a fight — I think everyone here wants to build Bitcoin, to work with regulators… Cooperation is really the way forward.”

That was the opening salvo.The Bitcoin Foundation’s executive director also weighed in. “It’s time to engage with regulators and have a good, productive conversation,” Peter Vessenes told Cnet. This comment, and the Foundation’s intention to hire a lobbyist, prompted widespread calls from the rank and file for the Foundation to be dissolved.

And yet, apparently many people in the financial world agree with this nascent Bitcoin establishment. From their perspective, every regulation confers a welcome legitimacy on the currency/payment system, and grants it greater chance for market success. Already, people at the event this past weekend’s conference were discussing whether the Commodity Futures Trading Commission or the Securities and Exchange Commission would be the best overseer.

In private discussions with people who are pushing for this approach, the pro-regulation people view intervention as inevitable, and so therefore it is better to get out in front and push for rules that are not harmful but beneficial.

The presumption is that there are only two options here: government prohibition or government management. The third option — our forgotten and disrespected friend called laissez faire — is not even considered a realistic option.

Some people just think that being controlled by the heavy hand of the state is part of the maturation process. Despite the evidence of all of human history, the pro-regulation side here just assumes that public policy will be benign and even helpful, and, in the end, actually help support more development.

And yet, it has the framework of laissez faire that led to Bitcoin’s creation and adoption in the first place. The creator going by the name Satoshi Nakamoto didn’t propose his invention and submit it to the patent office or seek out some government R&D funds. The early adopters weren’t alerted to the opportunity by any government jobs program. The new businesses that have sprung up around Bitcoin didn’t go crawling to the Small Business Administration.

Essential to the magic and wonder of Bitcoin — and you can actually say this about most technologies in human history — is that it came about spontaneously within market process that encourages and rewards creativity, risk taking, trial and error. There have been no barriers to entry, and anyone can get into the market. This feature has been crucial to its success.

That was also true with planes, trains, and automobiles — all of which fell to the heavy hand — but there is something special about Bitcoin that makes it inherently resistant to government control. It is built on code. It lives in the cloud. It is globalized and detached from the nation state, has no own institutional owner, operates peer to peer, and its transactions are inherently pseudonymous. It cannot be regulated in the same way as the stock market, government currency markets, insurance, or other financial sectors.

Government has lots of practice at controlling the physical world, and not so much at doing the same in the digital world.

In that end, that might be Bitcoin’s most redeeming feature (among many). It’s as if its creator anticipated this moment, that coming together of the old-line money business, the revenue-seeking government, and a would-be new establishment that wants to maintain industry dominance. The protocol itself resists regulation in the old-fashioned sense. That is built into its very structure.

On the other hand, even the attempts at government regulation can do damage. Earlier this year, the Financial Crimes Enforcement Network of the U.S. Treasury Department weighed in to make clear that every Bitcoin exchange must registered as a money service under the Bank Secrecy Act. Already, some exchanges had made themselves compliant. But within days, three exchanges shut down.

How many new exchanges might have been deterred from starting up, we can’t know. And already Canada is working to court refugees from this law.

This intervention was just the beginning. The first round of regulation will continue to target the exchanges, and focus on reporting requirements and consumer protection. But it won’t stop there. Users will be next, with a focus on moving money from here to there. There will be dollar-based triggers on how much in Bitcoin funds can be moved without self reporting. Then of course the tax authorities will be involved to get a cut of every transaction.

Just think through how many different sectors are covered under Bitcoin’s reach. After all, we are talking about an innovation that defies every previous categorization. It is a payment system and a means of payment itself. It is an emerging money. It is a financial instrument and a proto-commodity. It will be subject to capital-markets speculation. In the future, It could take on take on new functions in insurance, loan markets, labor contracts, and international trade.

In other words, there is probably no bureaucracy in Washington that won’t be able to dream up some rationale for sinking its teeth into Bitcoin in some way. Strangling innovations and adding more costs on institutions doesn’t seem like a good path forward. In fact, one of the great reasons we need Bitcoin right now is precisely because government’s control over the dollar has created such wreckage all around. Why would anyone think it would turn out differently under Bitcoin?

The real danger of all these attempts to regulate digital currency is that they will encourage the emergence of parallel sectors in the Bitcoin world, one fully compliant and one thriving in the gray and black markets. After all, the feds have not even been able to stamp out unregulated behavior with old-fashioned dollars. They face an impossibly more difficult task with digital currency.

These approaches could end up sending the emerging Bitcoin commercial world abroad, and causing the industry to self regulate in a way that excludes American consumers. Already, the major Bitcoin gaming site Satoshi Dice has announced that it will no longer permit access from U.S.-based IP addresses.

Even now, the use of Bitcoin abroad is arguably more developed abroad. It’s big news in the U.S. when a house for sale is priced in Bitcoin. But in a country like Argentina, it’s common for rental and buying contracts to be priced in the digital currency. At this rate, the U.S. could find itself falling far behind the rest of the world in continued digital currency development.

We live in a global economic environment, and every Internet user has the tools to get around even the most egregious regulations. For my part, over the long run, I’m not worried that Bitcoin can be killed or even slowed by all this of these misguided attempts. But they will create opportunities for arbitrary enforcement and unnecessary invasions.

Remember that every act of government ultimately reduces to an act of violence against person and property. When you see the word regulation, think of cops with clubs and tasers. Think of fines, courtrooms, jails. These are the essentials means by which government operates to control society.

It might be a pointless plea, and feel free to tell me to get my head out of the sand, but I’ll just ask the question anyway: why not give freedom a chance? We have a wonderful opportunity here. Let’s not screw it up, again.