Obi Nwosu is the CEO and co-founder of Coinfloor, the UK's longest-running Bitcoin exchange. He has over 20 years’ experience building online marketplaces and bringing virtual currencies to tens of millions of people. Obi writes The Road to Bitcoin Hegemony, a weekly recap of some of the most impactful developments in Bitcoin.
According to legend, the Greek goddess Hera tried to kill the baby Hercules by sending serpents into his cradle. But she was too late: the infant was already too strong, and simply strangled the snakes.
There’s a lesson here for all those who want to place limitations on the behemoth that Bitcoin has become: the time has already passed when governments could hope to control its ascent.
There are many people who wish that Bitcoin had never been invented. It exists in its own ecosystem, outside the realm of regulators unaccustomed to a currency beyond their control. It shows up fiat money as an inflationary theft perpetrated on long-suffering citizens. So it’s only natural that governments around the world are rushing to place new laws and limitations on Bitcoin, such as the renewed efforts in the U.S. last week.
On Friday, the Chair of the powerful House Financial Services Committee, Maxine Waters, wrote a long wishlist to the incoming Biden administration. Among the demands was that the President-elect “rescind or monitor” all of the cryptocurrency-related guidance issued by the Office of the Comptroller of the Currency (OCC), including those allowing banks to hold customers’ crypto assets. In a separate but related development, Democrats are proposing an ill-considered bill to regulate “stablecoins” and outlaw any crypto that has not secured government approval.
So should hodlers be alarmed at these attempts to control Bitcoin? No. We should be wary and watchful, of course, but not worried. Because if you look just below the surface, you’ll see that no one, whichever side of the aisle they sit, believes that they can stop the Bitcoin juggernaut.
Take, for example, the comments from Brian Brooks, acting Comptroller of the Currency, who took a more emollient tone in conversation with CNBC’s Squawk Box.
“We’re very focused on getting [Bitcoin regulation] right, we’re very focused on not killing this,” said Brooks. “It’s equally important that we develop the networks behind Bitcoin and other cryptos as it is that we prevent money laundering and terrorism financing. So believe me, there’s a balance here and it’s going to work for everybody.”
Although there is much concern in the industry about what the OCC's new regulation will entail, the most interesting thing about Brooks’ and Waters’ comments is that they both reveal how the U.S. government really feels about Bitcoin. Yes, they want to control, regulate and co-opt it. Like the scorpion in the fable, it’s in their nature: regulators gonna regulate. But they no longer seek to ban Bitcoin, because they realize that the Overton Window has shifted dramatically and irrevocably.
Sure, the regulatory scorpions still have a sting in the tail. In attempting to establish a clear line separating “good” and “bad” uses of cryptocurrency, they will almost certainly seek to strip away the anonymity (or, more accurately, pseudonymity) that forms one of the pillars of the Bitcoin ecosystem.
This may have some temporary regional success, but they will run the risk of losing out to more forward-thinking nations in the race to benefit from this revolutionary technology. More importantly, Bitcoin’s central pillar, the one that continues to draw in investors from all walks of life, will always be the elimination of inflation that comes from having a fixed supply; and this is already beyond regulatory reproach.
Given that the Bitcoin fire has reached such ferocity that it’s now self-sustaining, the only question left for regulators around the world to answer is, how fast do governments want Bitcoin's hegemony to be reached? Lightly blow on it with balanced regulation and see it spread in a controlled manner? Or fan the orange flames with onerous regulation that only will highlight the advantages of free markets and monetary self-sovereignty, while making Bitcoin’s greatest asset—its scarcity—even more valuable?
As Ralph Waldo Emerson, the great American philosopher, wrote: When you strike at a king, you must kill him. So let U.S. regulators and representatives do their thing: if we continue to stay focused on our goals, they will lack the appetite and the ability to beat Bitcoin.
Let’s not be too harsh on the regulators. We’re never going to get their explicit approval about Bitcoin’s brilliance, so we shouldn’t blame them for being circumspect in their admission that Bitcoin can’t be killed. But if it’s eloquence you’re after, just follow the money.
And no one’s got more of that than BlackRock. When a $7.4 trillion asset management firm talks about Bitcoin, the world listens. Only a few weeks ago, I wrote about positive endorsement from the company’s Chief Investment Officer. Well, he must have coughed, because the Bitcoin bug appears to have spread to the CEO.
On Wednesday Larry Fink stated that Bitcoin has “caught the imagination of many” and could evolve into a global market. And, in remarks that should spook the Federal Reserve, he even wondered whether Bitcoin’s existence might challenge the U.S. dollar as a world reserve currency.
Don’t be fooled by the “could,” “might,” and “may.” Financial giants like BlackRock have to couch their utterances in a cloak of conservatism. If you had told me in January that the year would end with one of the Big Three index firms suggesting Bitcoin could replace the dollar, I’d have thought you were unrealistically optimistic.
The fact that this welcome news is merely surprising (rather than astonishing) shows the breathtaking pace of Bitcoin’s journey to hegemony.