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A regulatory paradox
I have often been asked, “How do we regulate this Bitcoin thing?”
Well okay not quite like that but you get my point. So it leads me down a conversation of let's talk about the definition of the word regulate. Bitcoin is a set of rules followed by a set of pseudonymous parties. How does one regulate regulation?
The first thing to point out is that Bitcoin is not alone so while we sit there trying to regulate Bitcoin we can do everything we want to manage that system while potentially overlooking how another system changes or subverts our intention. In other words by putting up a box of regulation around our existing self-regulated system we essentially create a power vacuum outside of it, in fact, we encourage it. This is obviously counterproductive and leads our regulators to an endless game of cat-and-mouse which serves none of us taxpayers any good, but certainly retains job security for our regulators.
Now I believe all regulators deserve a little bit of job security but I think that job should be to observe and inform the public. So they ought to learn how to observe the regulatory structure of any system like Bitcoin and inform the public clearly how they might define it or explain it, and allow us freedom-loving consumers to make our own choices. After all, these systems are consensus systems, so by their very nature of existence they express the consent of a constituency.
Another possibly more poignant point for our Regulators is that if they going put their box around this Bitcoin thing and then they go to put their box around a couple other things, when something fails it is now their fault. Nobody can give an ultimate approval, there are no 100% guarantees. Everything is a shade of grey or a scale toward a hundred percent, never to get there. We cannot rely on regulators to tell us what is good and bad. We should be able to rely on Regulators to tell us what they know, and to have a capacity to ascertain such knowledge and inform us of it effectively.
For now I would say it is safe to say to be highly suspect of regulators attempting to regulate Bitcoin or any other decentralized or even centralized blockchain implementations. There are no experts in the fields. There are certainly some highly qualified individuals, but not many of them, and not very many of them are in our legislature or regulatory bodies. As a student of the industry for many years now I can say there is an interest but a significant knowledge gap for many of our regulators and legislators to be creating or enforcing rules around blockchain and cryptocurrency technologies. The focus should be on enabling development.
It may also be redundant, after all, these systems are self-regulating bodies. If they're not so good they probably won't last because they won't gain participants, and if they are, it doesn't matter what the regulators say because they exist based on the consent of the constituents.
We have always referred to the law as a code, “the code of law”. It should not be such a stretch of imagination for “code as law” to be implemented.