The future of Bitcoin regulation

Monday, 29 April, Year 5 d.Tr. | Author: Mircea Popescu

People (and not just clueless noobs) are doing a lot of talking about Bitcoin and regulation. Whether it's good, whether it's bad, whether it happens sooner or later or whatever else. There's however a few major points everybody seems to eschew :

  1. Regulation does not necessarily mean statal regulation. That's right, there's no guarantee that any of the current actors with delusions of self importance (such as for instance a claim to sovereignity) will be the ones to regulate Bitcoin. For all you know an emergent actor is going to be the sovereign power that dictates Bitcoin regulation and with it statal policy for each and every state. "It couldn't happen" ? Sure. Until it does.i
  2. Statal regulation does not necessarily mean English, or US, or white regulation. That's right, there's no guarantee that the regulation will be written in English, or to the liking of the United States, or by white people. Obviously for white English speaking United States citizens alternatives are unimaginable : everyone they know, aye! everyone they could hit by throwing a rock out the window is an English speaking US citizen. This is the whole world, until it isn't.

In practical terms, the largest factor deciding the eventual impact of English speaking regulation in the future of Bitcoin is the involvement of English speaking investors in financing Bitcoin projects today. The largest factor deciding the eventual impact of US regulation in the future of Bitcoin is the involvement of US based investors in financing Bitcoin projects today. This is not a matter open to much debate : money talks and bullshit walks.

It's true that the US has, unlike most of the world, a very strong entrepreneurial culture, and a good chunk of worthy projects in Bitcoin are started over there. However the way business works is that funders decide, founders obey. There's already a clear trend of US born, US citizen founders leaving their country to satisfy the dictates of their investors (or, in more palatable terms, to allign their status with the likely future status of Bitcoin regulation). Nobody has yet asked for or even wanted a US passport in order to start a Bitcoin business. Plenty have relinquished their residence and soon their passports to be with their Bitcoin business. In short, the hope that entrepreneurs may be the conduit of regulation is baseless.

For their part, the performance of US investors is appalling so far. There's a lot of talking about investing, there's a lot of planning of announcement and announcement of planning and generally speaking dicking about.

When it comes to the hard facts however things are anything but rosy. A year ago an English speaking, US based company announced its intention to develop and market an ASIC mining device. This company was showered with attention and significant investment capitalii. This company has also failed to deliver anything to date (if you don't count the copious humour of showcasing an empty box of fans at CES 2013).

The two companies which are in fact delivering ASIC miners are both located in Asia, staffed by Asians, speaking Chinese. They're making a lot of money, both for their founders and for their investors. Which investors aren't - at the risk of repeating myself - neither Andreessen Horowitz nor Sequoia nor Greylock nor etc.

This situation is by no means singular. Leaving aside The Freakshow and the bizarro "gurus", investment is sparse (500k does NOT constitute an investment round) and poorly directed (more on this topic from Sindhya Valloppillil, if you really need more on this topic).

To sum up : what we have so far are a few millions invested in hopeless start-ups that have no talent, no business model, aren't solving a problem and generally speaking don't exist other than as a tag on an orange calling it a potato. This constitutes no basis of future importance whatsoever. The story here is quite simply that unless we see billions of dollars pouring into viable Bitcoin companies within a year or two, the US and the English speaking world generally will have missed this boat.

Nobody will care that the original paper may have been written by an American and the original discussion on the long forgotten original Bitcoin forum was carried in English. I can deal just as well with Russian investors, I can deal just as well with Chinese investors, Bitcoin is completely neutral from a cultural perspective. This neutrality means that cultures will have to compete. So far the US is losing this competition at this level. If things don't get fixed soon the only thing that we'll be able to say for sure about Bitcoin regulation will be that it won't be written in English, and it won't consider US interests or sensibilities.

This is possibly the last chance to take those piles of fundamentally worthless US dollars and use them for something with any sort of future value.

  1. There's an instructive historical anecdote which recounts how Maximilian had the wheels of his artillery pieces padded while crossing through Fugger's town so as not to inadvertently wake him up. Maximilian was indeed the king, but Fugger was the banker. []
  2. The fact that they represented that as "pre-orders" at the time is about as relevant as tagging oranges with "Tomato" tags. []
Category: Bitcoin
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28 Responses

  1. The more widely distributed the better. Concentrating resources or power within the US is not good for us or for anyone else. I like the thought that private regulation could become more significant than state regulation. That is, the interlocking contractual arrangements between owners of key pieces of infrastructure (e.g., mining pools, exchanges) will be more important than local money transmitter licensing in some random province.

  2. Mircea Popescu`s avatar
    Mircea Popescu 
    Monday, 29 April 2013

    Taking that notion a few steps further, it's possible we'll end up with the first ever regulation as emergent phenomena, rather than the top-down "gifts from above" that the socialist mind favours.

  3. Michael`s avatar
    Monday, 29 April 2013

    I see this article as a continuation of the excellent one on GPG contracts.

  4. Mircea Popescu`s avatar
    Mircea Popescu 
    Monday, 29 April 2013

    I guess in a sense it is. Sort of taking a different route only to end up in the same hollow.

  5. Yes! GPG contracts piece is genius! This is all great stuff, keep it coming.

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