Recently, WIRED contributor and faculty associate at the Berkman Center for Internet & Society at Harvard Primavera De Filippi published article explicating the importance of regulating bitcoin while at its infant stages to ensure the proper growth and scaling of the digital currency.
A part of his article entitled “We Must Regulate Bitcoin. Problem is, We Don’t Understand It” read, “Bitcoin network does not reside in any given regulation, and can therefore be constructed to be agnostic to any jurisdictional rules.” Filippi suggested that the decentralized nature of Bitcoin which many consider is the network’s utmost advantage could be detrimental to the long-term health of the digital currency due to the emergence of criminal activities and money laundering.
Singapore-based Bitcoin POS terminal manufacturer and merchant payment service provider Coin of Sale founder Tomas Forgac criticized Filippi’s superficial analysis of the regulatory environment surrounding bitcoin and his inevident assumptions.
“When read carefully, the text does not really provide any cogent argument for regulation. Rather it milks the same buzzwords and repeats the same unsubstantiated claims, which we are supposed to take for granted because they come from academia and the press,” explained Forgac. He raised another question, “how will we define the point when it is appropriate to draft rules which might have a potential impact on millions of businesses, billions of people and trillions of transactions?”
Forgac’s question is directly applicable to the current regulatory ecosystem of bitcoin. The lack of knowledge of many regulators including the New York State Department of Financial Services has led to awkward policies and regulations that have substantially delayed the development of bitcoin and bitcoin startups in most regions.
More importantly, Forgac emphasized that regulators have a terrible track record in developing regulatory ecosystems for emerging technologies and financial issues.”Which of the existing financial regulations lowered the risk of fraud or negligence we have seen over the past decade? SEC did nothing to stop Bernie Madoff. Some top global banks got away with as little as a wrist-slap for laundering hundreds of billions of dollars,” Forgac explained.
One part of Filippi’s statement remains true. That is, “Problem is, we don’t understand it.” That’s is accurate. Thus, regulators must not try to regulate or limit the development of an innovative technology without fully understand its advantages and disadvantages.