Lack of sensible regulation and state-level clapback threatens blockchain innovation
There’s an old cliché that’s perhaps overused in the world of crypto: first, they mock you, then they fight you, and eventually, they join you. I think it’s pretty clear at this point in the ongoing adoption curve of cryptocurrency and blockchain that we are in the “fight you” stage.
We’re seeing an increase in the frequency of state-level clapback in the form of emphasis, new indictments, and, in some cases, individuals being held without any charges being leveled against them. I predicted this imminent government targeting of bitcoiners and operators in the blockchain space as regulators storm into the “they fight you” part of the cycle.
A recent example includes the arrest of Alexey Pertsev, one of the developers of the decentralized crypto mixing service Tornado Cash, by Dutch authorities after the service was sanctioned by the US Treasury Dept. He is currently being held without charge in the Netherlands. His only crime is creating open-source code that allows people to maintain privacy on the blockchain.
There’s also been intensifying focus by the US government on people subject to federal prosecution, even though their organizations reside outside the United States.
The ex-CEO of the BitMEX off-shore crypto derivatives exchange was sentenced in May due to his part in what prosecutors claimed was the exchange failing to properly implement anti-money laundering and “know your customer” programs. He was sentenced to 2-years of probation, six months of which he must serve under house arrest, and $10 million in fines – although the platform transacted hundreds of millions.
I was myself on the receiving end of this state-level clapback, too. As you may have realized if you’ve looked at crypto Twitter this week. I posted a thread last Tuesday that went viral that described the two-year battle that I’ve been waging on behalf of my family for the crime of selling bitcoin.
I won’t get into the details, but Bitcoin Magazine has done an excellent job of recapping my case, as well as some of the ramifications of what happened.
I was charged under 18 USC 1960, which requires anyone trading cryptocurrency peer-to-peer to register for a money transmitters license. This is an existential threat to anyone who is transacting in cryptocurrency, such as when they buy goods with bitcoin — like purchasing a truck with crypto, or if I split dinner with you and pay for your half with bitcoin, you’re committing a federal crime.
I’m not saying, for my part, that mistakes were not made. Absolutely mistakes were made, but I think you can zoom out a little bit and put my case in the context of these other ones and see that it’s very indicative that we are entering a new phase of cryptocurrency adoption.
This is just another stage of the ongoing battle for privacy and innovation in the tech space. It is something that I’ve been reporting on for the last 20 years.
At the dawn of the web, it was necessary to establish commonsense regulation alongside standards that protected our freedom of speech. Now we must look to establish standards for privacy and control of capital to protect the control of personal capital at the dawn of the cryptocurrency age.