I was thinking about this question of how to regulate global technology platforms that don’t recognise national boundaries, mainly in the context of crypto and digital currencies. How can you regulate a global currency that has no view of state or national laws? Obviously, you can only regulate it when someone puts national currency in or out of the digital currency, but what if they never have to do that? Today, there are a number of bitcoin millionaires who could probably stay within the bitcoin system, never cashing in or out and therefore never paying taxes. Equally, there are hundreds of Silk Road 2.0’s out there, so they could easily buy any illicit items, materials or actions they want, without ever being tracked, traced or caught.
It is a real issue and I cannot see how any government can deal with it, as the genie is now out of the bottle. But then I see the actions of the European Parliament in response to undesirable activities amongst the American internet giants and, for me, the issue is the same as what I described above. How can you stop Google and Facebook doing undesirable things?
Well the EU is having a go. First, they forced Google to introduce the right-to-be-forgotten. Then they’ve started to take action against Facebook, and content that incites hatred or radicalisation. Finally, they’re having another go at Google over its subjective searches on shopping that play to Google’s own shops.
So you can regulate global technology platforms like Google and Facebook, but there is one fundamental difference between them and the digital currencies like bitcoin I am focused upon. In the case of company that is running a global platform, you can go to the company’s head office and grab the CEO by the fundamentals and slap a fine on them. You cannot od that with bitcoin or any other digital currency, as they are decentralised structures. Same with ICOs and distributed ledgers. Once built and in the wild, these systems offer global technology platforms with no central operator. That is totally different to any of the internet giants, and if a government cannot find an operator, jhow can they regulate such structures?
They cannot in my view. Which brings us back to what people want decentralised digital currencies for anyway, and the term that everyone puts to them is that they want them as they are censorship resistant. Put another way, and they want them because they are not regulated.
Now unregulated currencies are great for shopping on the Silk Road 2.0, but for most people it is not necessary. Even more, an unregulated currency may be great for shopping for goods that want to avoid censorship, but as a store of value they are completely worthless. You see, an unregulated currency means that, if you lose it through bad actors, you’re stuffed. You can’t get it back. It’s gone. This means that censorship resistant currencies like bitcoin, as a long-term investment, are worthless. You might as well be putting dollars under the mattress in a real-world scenario.
OK, and I know some of the bitcoinisters are now going to be telling me you can secure your bitcoins using Trezor or something else. True … but only if you don’t lose the little orange post-it note where you wrote down the PIN for your Trezor wallet.
And if you want to know what that’s all about, read this Wired column:
And if you do read that column, what it tells you is that only the seriously nerdy techheads get bitcoin, whilst the rest of the world hasn’t got a clue but just wants to invest in them FOMO. I think I’ll stick with my dollars under the bed.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...