Topic: 2013-08-20 Politico: ... Bitcoin policy primer ... leading to Mercatus report (Read 2160 times)

Don’t Restrict Bitcoin
Because Bitcoin is essentially online cash, some who trade in drugs and other illicit goods online have found it to be an ideal medium of exchange. Confronted with this fact, the initial impulse of some policymakers will be to call for restrictions on the technology. There are many good reasons, however, to resist such an impulse.

First, as a technology, Bitcoin is neither good nor bad; it is neutral. Paper dollar bills, like bitcoins, can be used in illicit transactions, yet we do not consider outlawing paper bills. We only prohibit their illicit use. Furthermore, there is only anecdotal evidence about the extent to which bitcoins are utilized in criminal transactions. It would be wise to put the criminal use of the technology in perspective alongside its legitimate uses. As the bitcoin economy grows, legitimate uses of bitcoins will likely dwarf criminal transactions, just as we see with paper dollar bills.

 Second, any attempt to restrict Bitcoin technology will only harm legitimate uses while leaving illicit uses largely unaffected. Because it is a decentralized global network, Bitcoin is virtually impossible to shut down. There is no Bitcoin company or other entity that can be targeted. Instead, Bitcoin and its ledger exist only in the distributed peer-to-peer network created by its users. As with the peer-to-peer file-sharing service
BitTorrent, taking down any of the individual computers that make up the peer-to-peer system would have little effect on the rest of the network. Therefore, making the use of Bitcoin illegal would not undermine the network; it would only serve to ensure that law-abiding users are denied access to the technology. As a result, society would forgo enjoying the many potential benefits of Bitcoin without seeing any drop in criminal use.
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Finally, even if the United States prohibited the use of Bitcoin, it is likely that many other countries would not, recognizing the technology’s many potential benefits. The Finnish central bank, for example, has stated that the digital currency is not illegal, and as a result many Finnish businesses have begun to accept bitcoins. By prohibiting Bitcoin use, the United States could put itself at an international competitive disadvantage in the development and use of what may be the next-generation payments system.

FIRST LOOK: BITCOIN POLICY PRIMER FROM MERCATUS -- As Washington gets to know Bitcoin better, the Mercatus Center at George Mason University is releasing a “primer” for policymakers Tuesday. Mercatus senior research fellow Jerry Brito and program associate Andrea Castillo warn that applying existing rules to the digital “cryptocurrency” could impede its development. Bitcoin doesn’t fit into any existing regulatory category – it’s not a foreign currency, traditional commodity or a payments network – and they said policymakers may want to consider a new regulatory category.

They also urged policymakers not to “overreact” to illicit uses of Bitcoin and said regulators need to consider the criminal uses alongside its legitimate uses. In addition, they said lawmakers and regulators should consider whether it’s necessary to preempt state-by-state licensing for Bitcoin businesses — what they call one of the technology’s “greatest obstacles.” The full report: http://bit.ly/19C3rod

BITCOIN 101 — Don’t know what a Bitcoin is, much less why the government is interested? POLITICO’s Zachary Warmbrodt breaks it down: http://politi.co/1bK5PGB

As we have seen, Bitcoin does not easily fit into existing regulatory boxes. That is often the hallmark of a disruptive technology.  Indeed Bitcoin is a revolutionary technical achievement that heralds amazing potential benefits to human welfare.