New York, California, Texas – home to high-tech incubators and venture capital firms, these are states you expect to issue statements regarding a disruptive technology like digital currency. Alabama? Perhaps not.

But, if you were surprised by the Alabama Securities Commission’s recent warning about Mt. Gox and the dangers of digital currency investments, its director Joe Borg suggests you shouldn’t be.

The motorcycle-driving, mustachioed regulator boasts about bringing more securities violators to trial, executing more foreign extraditions and obtaining more prison time for financial criminals “than most of the other states combined”. In case that didn’t paint the picture, he headed the investigation to take down Jordan Belfort, the real-life inspiration for The Wolf of Wall Street.

That’s why when issues at troubled Japan-based bitcoin exchange Mt. Gox began to build, Borg decided to take action to inform the public.

In an exclusive interview with CoinDesk, Borg recounts the run-up to the warning and why he felt he needed to act:

“To be honest with you, the Mt. Gox thing was obviously a disaster about to happen. When a broker-dealer suspends payments, that to me indicates that they’re about to go out of business. Now, I didn’t say that in the [release], but that was my feeling.”

Most notable about the warning was Borg’s call for securities regulators to act as “cop on the beat” in the digital currency space in order to protect and promote consumer welfare.

But, that’s not to paint Borg as a Joe Manchin-style regulator calling for the demise of bitcoin. To Borg, the major issue with bitcoin is not its technology, it’s the lack of consumer awareness about the risks involved.

Bitcoin in Alabama

To fully understand the issue of consumer protection regarding bitcoin, Borg explains you need to first understand Alabama, a place where God and football come before all else. Here, like much of the rest of America, consumers aren’t exactly savvy investors, he says.

As evidence, he cites the turning point for bitcoin in Alabama. Borg said that it wasn’t its explosive run-up in value or even growing awareness about the groundbreaking technology it uses. Rather, it took a college football fan who earned $20,000 for waving a sign for locals to pay attention.

“When that happened, we got calls about ‘How do we get into this bitcoin thing?’ They had no idea what they were talking about […] They assume there’s some company that issues it. Obviously you have no business being in the bitcoin market if that’s how you think it operates.”

Retail investors, Borg argues, simply aren’t paying attention, not just to bitcoin, but to any investments, whether it’s “Apple stock or FlyByNight.com”, and that because of this, they could be severely harmed, especially in light of “questionable actions” by exchanges.

More education needed

Such stories, Borg said, negate one of the most often cited claims of bitcoin defenders, that retail investors know bitcoin is a high-risk investment. In his letter, Borg railed against the bitcoin world for not taking such concerns seriously, and for operating without regard for traditional financial safeguards.

Read the letter:

“I’m not understanding about how great this can be if the basics, like getting your money back in a timely and orderly fashion, aren’t in place.”

In the interview, Borg reiterated his past statements, citing his observations as proof investors aren’t as well-informed as the bitcoin community claims:

“If that’s the case, then why are all these protestors out here saying ‘Where’s my money?’ Why are all these ‘folks who know’ they could lose their money overnight filing complaints. I guess they weren’t expecting to lose all their money.”

But, Borg isn’t ready to throw the baby out with the bathwater. Though he admits his personal understanding of bitcoin isn’t nuanced, he cautions that he’s “not against the technology.”

“I think the technology has outrun its ability to educate and put some controls on this thing,” he said.

Borg suggested that because the stock market offers protections for these consumers, many assume the same protections apply to this new market.

If a retail investor from Alabama were to have a broker-dealer disappear, he said, they would have recourse from organizations like the US Federal Deposit Insurance Corporation (FDIC), which is dedicated to strengthening the US banking system.

“There’s nothing like that in this market,” Borg said.

Bitcoin business heads South

For these reasons, Borg said his organization has looked at more than 100 applications for bitcoin exchanges that are seeking to do business in Alabama. But in two years, he hasn’t approved one to operate in the state.

The problem, he said, lies in the fact that many don’t do the due diligence to follow traditional regulation.

Said Borg:

“We sit down and we go, ‘OK have you talked to FinCEN? Tell me how your security works.’ We talk about, what happens if we do this, and they look at me like. ‘Oh, well we hadn’t thought about it.'”

Though, he noted the applications are improving, and that he’s not opposed to applications that take the right precautions.

Borg said he was particularly impressed with one from a certain outfit out of New York. Though notably, this was put on hold due to the ongoing Mt. Gox scandal.