Bitcoin is promoted as an alternative to currency, and even at times as an alternative to money, but neither Bitcoin’s development nor its promulgation emerge from thoughtful analyses of money or currency as they currently exist, let alone the thought and history that have figured in their development.
The grounding problems that Bitcoin advocates consider central are not the ones that major thinkers about money or currency, from the Right or the Left, have deemed important. On the contrary, those grounding problems are largely ideological: the desire to bypass the (apparently lawful) credit card and PayPal “blockade” of WikiLeaks, on the one hand (usually mentioned as the instigating event in the widespread use of Bitcoin), and the desire to bypass central and/or commercial banks for either the creation of money (as many of the more rabid advocates insist) or the provision of financial services (the main interest of Satoshi Nakamoto’s original Bitcoin paper), on the other. The former ideas emerge from a libertarian, anti-state politics familiar from much of the WikiLeaks story. The latter ideas emerge from the profoundly ideological and overtly conspiratorial anti-Central Bank rhetoric propagated by the extremist Right in the US, and which despite its overt “anti-bank” rhetoric, on most thoughtful analysis, serves rather than resists the interests of banks and big finance (much as despite its anti-bank rhetoric, Bitcoin itself is now promoted by banks, investors, and venture capitalists).
Scholars of money like Mary Mellor and Ann Pettifor have suggested meaningful alternatives to the current money system, but Bitcoin has very little in common with their proposals, which would require societal assent as well as technical innovation. The lack of any thorough, non-conspiratorial analysis of existing financial systems means that Bitcoin fails to embody any true alternative to them. The reasons for this have little to do with technology and everything to do with the existing systems in which Bitcoin and all other cryptocurrencies are embedded, systems that instantiate the forms of social power that cannot be eliminated through either wishful thinking or technical or even political evasion: the rich and powerful will not become poor and powerless simply because other people decide to operate alternate economies of exchange. Lacking a robust account of transforming these systems of power, even without Bitcoin’s flaws, a “perfect” cryptocurrency would exacerbate, rather than address, the existing serious problems with our monetary and financial systems. Because it operates without such an account, Bitcoin’s real utility and purpose (and that of the cryptocurrency movement in general) can be better understood as a “program” for recruiting uninformed citizens into a neoliberal anti-government politics, understanding the nature and effects of which requires just the attention to political theory and history that Bitcoin enthusiasts rail against.'Bitcoin Financial Regulation: Securities, Derivatives, Prediction Markets, and Gambling' by Jerry Brito, Houman B. Shadab and Andrea Castillo in (2014) Columbia Science and Technology Law Review comments
The next major wave of Bitcoin regulation will likely be aimed at financial instruments, including securities and derivatives, as well as prediction markets and even gambling. While there are many easily regulated intermediaries when it comes to traditional securities and derivatives, emerging bitcoin-denominated instruments rely much less on traditional intermediaries. Additionally, the block chain technology that Bitcoin introduced for the first time makes completely decentralized markets and exchanges possible, thus eliminating the need for intermediaries in complex financial transactions.
In this article we survey the type of financial instruments and transactions that will most likely be of interest to regulators, including traditional securities and derivatives, new bitcoin-denominated instruments, and completely decentralized markets and exchanges. We find that Bitcoin derivatives would likely not be subject to the full scope of regulation under the Commodities and Exchange Act to the extent such derivatives involve physical delivery (as opposed to cash settlement) or are nonfungible and not independently traded. We also find that some laws, including those aimed at online gambling, do not contemplate a payment method like Bitcoin, thus placing many transactions in a legal gray area.
Following the approach to virtual currencies taken by the Financial Crimes Enforcement Network, we argue that other financial regulators should consider exempting or excluding certain financial transactions denominated in Bitcoin from the full scope of their regulations, much like private securities offerings and forward contracts are treated. We also suggest that to the extent that regulation and enforcement becomes more costly than its benefits, policymakers should consider and pursue strategies consistent with that new reality, such as efforts to encourage resilience and adaptation.'Bitcoin: The Wrong Implementation of the Right Idea at the Right Time' by Andrés Guadamuz and Christopher Marsden comments
This paper is a study into some of the regulatory implications of cryptocurrencies using the CAMPO research framework (Context, Actors, Methods, Methods, Practice, Outcomes). We explain in CAMPO format why virtual currencies are of interest, how self-regulation has failed, and what useful lessons can be learned. We are hopeful that the full paper will produce useful and semi-permanent findings into the usefulness of virtual currencies in general, block chains as a means of mining currency, and the profundity of current ‘media darling’ currency Bitcoin as compared with the development of block chain generator Ethereum.
While virtual currencies can play a role in creating better trading conditions in virtual communities, despite the risks of non-sovereign issuance and therefore only regulation by code (Brown/Marsden 2013), the methodology used poses significant challenges to researching this ‘community’, if BitCoin can even be said to have created a single community, as opposed to enabling an alternate method of exchange for potentially all virtual community transactions. First, BitCoin users have transparency of ownership but anonymity in many transactions, necessary for libertarians or outright criminals in such illicit markets as #SilkRoad. Studying community dynamics is therefore made much more difficult than even such pseudonymous or avatar based communities as Habbo Hotel, World of Warcraft or SecondLife. The ethical implications of studying such communities raise similar problems as those of Tor, Anonymous, Lulzsec and other anonymous hacker communities. Second, the journalistic accounts of BitCoin markets are subject to sensationalism, hype and inaccuracy, even more so than in the earlier hype cycle for SecondLife, exacerbated by the first issue of anonymity. Third, the virtual currency area is subject to slowly emerging regulation by financial authorities and police forces, which appears to be driving much of the early adopter community ‘underground’. Thus, the community in 2016 may not bear much resemblance to that in 2012. Fourth, there has been relatively little academic empirical study of the community, or indeed of virtual currencies in general, until relatively recently. Fifth, the dynamism of the virtual currency environment in the face of the deepening mistrust of the financial system after the 2008 crisis is such that any research conclusions must by their nature be provisional and transient.
All these challenges, particularly the final three, also raise the motivation for research – an alternative financial system which is separated from the real-world sovereign and which can use code regulation with limited enforcement from offline policing, both returns the study to the libertarian self-regulated environment of early 1990s MUDs, and offers a tantalising prospect of a tool to evade the perils of ‘private profit, socialized risk’ which existing large financial institutions created in the 2008-12 disaster. The need for further research into virtual currencies based on blockchain mining, and for their usage by virtual communities, is thus pressing and should motivate researchers to solve the many problems in methodology for exploring such an environment.