In mid-November, the New York State Department of Financial Services announced in a release that it was going to hold a public inquiry into digital currencies and that it was considering licensing requirements for Bitcoin businesses in the Empire State.
They were the ones who coined the term “BitLicenses,” here.
This moves comes a few months after the state subpoenaed 22 Bitcoin businesses to ask them about how, exactly, they were operating. These companies included Coinsetter, Coinbase and Winklevoss Capital Management.
Patrick Murck, from the Bitcoin Foundation, said at the time, “The requests are onerous and set a poor tone for New York as a home of innovation.”
Being unwelcome to innovation is one thing. But let’s be clear: These are power plays, however clumsy, by the State of New York.
New York City is the center of US banking, and the state has long profited from that. Regulations are in place, and taxes are paid.
Regulations for virtual currencies would ensure both control and a cut of all that trading activity. That’s why subpoena power was exercised. In that light, these moves by the state look much less like inquiries and more like someone trying to catch a slippery fish.
The release goes on to mention criminal activity such as drug smuggling, money laundering, weapons dealing and child pornography. The “cloak of anonymity” provided by digital currencies may allow such things to flourish, it implies.
Elsewhere, there is mention of creating “appropriate guardrails” to protect consumers … as well as “root out illegal activity and safeguard our national security.”
Bitcoin investors need guardrails no more than tourists in Las Vegas need wallet-minders. And appeals to national security are just farcical.
One of the major benefits of Bitcoin is that it is unregulated and thus not susceptible to state manipulation. This includes the protection racket of guardrail installation.
Of course, it is the nature of power to maintain the status quo. Regulation of financial transactions has been New York’s territory for a long time, so it cannot take kindly to some upstart dealing on its corners.
The state has to push back. Let’s stop trying to embrace regulation for legitimacy’s sake and call this what it is — control.