The notion of Bitcoin as a decentralized currency was an integral part of Satoshi Nakamoto’s vision. It is also controversial; it seeks a radically different approach to money than we’ve become accustomed to, holding a promise of liberty, privacy and for some, even prosperity. Indeed, it has become a favorite tool for illegal commerce online, potentially untraceable to its real-world users and virtually immune to bank account freezes.
The concept has faced more of an uphill battle recently. Dark net sites are getting shut down, their operators arrested and facing lengthy prison terms. Governments are starting to regulate virtual currency, something which it was envisioned by many to avoid.
Bitcoin-as-a-currency is also becoming increasingly overshadowed by its own underlying distributed ledger technology, the blockchain, now envisioned for a myriad of practical applications whose business cases are provably economical. Among them are the improvement of the fiat-based systems, which perhaps ironically, some enthusiasts had hoped bitcoin would replace. The world’s attention and ‘money’ are getting increasingly diverted to this field of seemingly unlimited potential, reshaping the meaning of digital currency to the masses.
Nevertheless, advocates of the bitcoin-as-a-currency position have ample ammunition these days for their battle to prove that our fiat-based monetary systems have serious shortcomings: the Greece crisis(es), bank bailouts, the forex rigging scandal, and many others.
Erik Voorhees is passionately and unabashedly part of this camp, calling for the freedom of money from government to the population. He argues that there’s no such thing as a free market when money is centrally planned and controlled.
A well-known entrepreneur in the crypto industry, he served as head of marketing and communications at now-defunct BitInstant and served as CEO at Coinapult. He also helped develop SatoshiDice into one of the most popular Bitcoin games. However, he was fined by the Securities and Exchange Commission (SEC) for marketing shares in the venture, along with another called FeedZeBirds, without registration. Most recently, he came forward as creator of altcoin brokerage ShapeShift.io, which has raised over $2.5 million to date.
Finance Magnates spoke to Voorhees about recent developments in regulation and his thoughts on the future of Bitcoin:
Should digital currency be regulated in any way?
Digital currency already IS regulated – it is regulated by math. The rules that govern the system are mathematical in nature, predictable, and transparent. This is vastly superior to traditional finance which often relies on the regulation provided by politicians, which is fraught with problems.
So, should digital currency be further regulated by governments? I think that is not only superfluous, but also very dangerous at this stage in its development. Nobody knows how this industry will develop – much of the innovation will in fact not even be financial. Therefore, if regulations are crafted today they are likely to pigeonhole Bitcoin and restrict its ability to evolve.
What changes to the BitLicense would make it satisfactory in your eyes?
BitLicense is a horrendous piece of legislation which requires companies to spy on their users and endanger them, perpetuating the multi-billion dollar problem of identity theft. If the BitLicense were changed to permit individual privacy and safety, then it would be much improved.
Should governments treat bitcoin as money?
Governments should not be involved in money, just as they ought not be involved in speech, religion, or interpersonal relationships. Governments’ involvement in money has caused immense distortions in markets, and is an affront to the idea of a free society. As the most important good in a market economy, money itself ought to be left to the marketplace. Indeed, government central-planning of money is antithetical to capitalism itself.
Should it be regulated under standard money services and financial crimes laws?
Crimes are already illegal. By this I mean, theft is already illegal whether done with dollars or Bitcoin. Fraud is already illegal if committed with dollars or Bitcoin. Society doesn’t need yet more regulations making Bitcoin-specific fraud or theft illegal, because it already is. Unfortunately, regulators never advocate for the restraint of regulation, always for its expansion.
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And should bitcoin-denominated securities fall under SEC oversight?
Bitcoin-denominated securities already do fall under SEC oversight, to the extent that jurisdiction is established (ie – if the buyer or seller is American). There doesn’t need to be further redundant regulations to stipulate this same thing.
If Bitcoin isn’t money, should it be taxed for capital gains?
Bitcoin is a technology. It is often used as money, but Bitcoin and the blockchain technology behind it can often be used for non-money things as well (many of which haven’t even been invented yet). For this reason, categorizing Bitcoin as one thing or another is dangerous to its growth. It’s pretty clear, however, that Bitcoin is an asset, and thus if it appreciates in value, it is subject to capital gains tax (just as all assets are – again, no new laws are needed to establish this).
What is the number one threat facing Bitcoin in the future?
The number one threat facing Bitcoin is simply that a superior digital currency will supersede it, though I think this is unlikely. This would be bad for holders of Bitcoin, but indeed the spirit and promise of Bitcoin would then continue in the new system. Ultimately, the idea of a decentralized asset ledger is here to stay, with profound implications. Whether Bitcoin specifically remains as the predominant decentralized asset ledger is up for debate, but it really doesn’t matter, because the technology itself – the idea – cannot now be stopped.
What threats do you think exist that people aren’t aware of?
What worries me is that there are certain organizations/governments/companies that have a vested interest in preventing Bitcoin’s popularity. These groups have deep pockets, and will likely engage in various subtle and not-so-subtle antagonism with Bitcoin and its users. We’ve already seen some op-eds and advertisements from financial institutions that condemn Bitcoin, and there will likely be a battle for public perception of Bitcoin.
It’s easy for anti-Bitcoin institutions to throw around words like “terrorist financing” and “illegal drug marketplaces” to scare people away from the technology and tarnish its reputation. Ultimately, though, these attempts will fail in the face of the vast economic utility provided by a monetary system that moves money instantly anywhere in the world at almost zero-cost. Just as email was inevitable after its invention, so too is decentralized digital currency.
Up until the recent rally, it appeared that the world may no longer care about altcoins. Do we need them, and does the recent sentiment threaten ShapeShift’s future prospects?
Altcoins shouldn’t be thought of as one monolithic group. There are hundreds of them. Some are very cool, but most are worthless. They are important because they experiment with various attributes, and are indicative of a healthy cryptocurrency ecosystem. ShapeShift is important not because every altcoin deserves attention, but because there will likely be some number of valuable digital assets in the future, and they need a frictionless exchange platform.
How do you picture the ideal financial system?
The ideal financial system is the one which is developed by an open market, unmolested by the coercion of governments. This doesn’t mean such a system would be perfect, but it would be superior to any centrally-planned financial system, because markets are simply too complicated to be centrally-planned.
Should there be any oversight on how money is transacted- or should the population’s privacy take precedence?
Oversight in the realm of money is really no different than oversight in the realm of speech or religion. Money, speech, and religion can all be very dangerous things when in the hands of the wrong people, but we ought to permit the freedom of speech, the freedom of religion, and the freedom of money for the same reason – because individuals have a right to those aspects of their lives.
Where someone commits a crime (a real crime such as fraud or theft or harm), that person ought to be brought to justice – but we shouldn’t advocate wholesale spying upon and control of money just to make life a little harder for those criminals. Two people should be able to interact with speech or with money, in total privacy, even though both things are dangerous. Liberty for the peaceful is the ultimate human ideal, and is required practice for an honest market economy.