Bitcoin's In Danger From The Bureaucracy

I’ve long been less than enthusiastic about the future prospects of Bitcoin.


I simply don’t think that it’s offering something important enough for people to change their ways to use it. Others differ: which is fine, it would be a very boring world if we all agreed all the time. However, I’m increasingly seeing what I take to be a large and present danger to Bitcoin, the bureaucracy. Here’s just today’s example:

With mounting pressure on online money exchanges from US regulators, payments processor OKPay has announced that it is suspending processing for all Bitcoin exchanges, including industry leader Mt. Gox.

Dwolla has already stopped processing payments going into the Bitcoin ecosystem. There are many other stories about smaller Bitcoin organisations finding themselves suddenly unbanked: banks simply insisting that they do not wish to provide them with accounts any more.

In order to succeed, in the sense of becoming a widely used medium of exchange, Bitcoin needs to be convertible into something else. It could of course simply be into commodities, but it would have to be generally and widely accepted for that to be sufficient. In the absence of half the stores on the planet taking it that means that Bitcoin must be convertible into fiat currency: pounds, dollars and euros etc. And that means that there has to be some entrance into the current international financial system: which is where I see the problem as lying.

Almost anyone at all in that international financial system has a connection into the US one. And if the US bureaucracy that oversees that US financial system decides that it doesn’t like people who deal with Bitcoin, or even doesn’t like people who deal with people who deal with Bitcoin, then Bitcoin just won’t have access to the international financial system. It’s not a matter of pure legality either. Bitcoin itself certainly isn’t illegal, paying for something with it isn’t, changing $ into $B isn’t and so on. But there are enough regulations about who may do what with whom in the financial system that any determined bureaucracy can freeze someone out of it.

As, for example, happened with Wikileaks. It’s not a coincidence that the world’s banks slowly stopped being willing to process donations to Wikileaks. It wasn’t as crude as “What a nice US bank you’ve got here, be a shame if something happened to it” but it doesn’t need to be that crude. Just the merest hint that there might be more audits than usual would be enough to steer a bank away from handling Bitcoin (or Wikileaks) transactions. And look where the Wikileaks matter ended up: at one point the only way you could donate was through Bitcoin (or physically travelling with cash).

Now, I don’t know that the US bureaucracy has it in for Bitcoin: but that is the way I’m beginning to read these various refusals and withdrawals of banking services. Pressure is being put on people not to handle the currency. I think that this means that it will fail.

On the other hand, Bitcoin boosters should be rather happy about my gloom. They’ve been telling us all along that Bitcoin doesn’t actually need all the rest of the financial system: it’s so good that it will be able to replace it. Great eh? Looks like we might find out whether it can.

source: http://www.forbes.com/sites/timworstall/2013/05/29/bitcoins-in-danger-from-the-bureaucracy/

Bitcoin's In Danger From The Bureaucracy