Relax. The Government Doesn’t Know Enough About Crypto.

Beyond the difficulties presented by the decentralization of bitcoin itself, governments and regulatory bodies have shown they lack understanding of technological topics, and bitcoin is one of the most complex. In the US, almost all the members of the House have no experience with Bitcoin or the crypto market. Their average age? Members of the 114th congress were 57 and that of senators was 61 years.

Insufficient Laws And No Real SolutionsAll that cryptocurrency investors are looking for is clarity. The Congress being indecisive doesn’t help as the fear of ineffective regulation is stopping the market from bouncing back from a full-fledged crash. To make things worse, if the legislators and their ineffective regulatory measure made unaware of crypto’s full potential could stall the flourishing of the industry for years.

A technology lobbyist says: “Until they decide to think radically differently about how to regulate financial services, I don’t know how this is going to get resolved so cleanly.” The regulators haven’t stopped attacking Bitcoin even though most of the financial laws that exist in Washington are old, outdated and insufficient to apply to the internet, let alone crypto.

According to the director of Mercatus Center’s, Brian Knight: “A lot of our laws are fairly old. They’re fairly dated. The regulators have been sort of writing rules on top of the laws, some of which may make sense, some of which may be outdated themselves.”

Historically, Governments Have Struggled To Understand TechnologyBeyond the difficulties presented by the decentralization of bitcoin itself, governments and regulatory bodies have shown they lack understanding of technological topics, and bitcoin is one of the most complexes. As governments struggle to ban technologies like Tor and encryption, it seems impossible to imagine them gaining the ability to truly impact bitcoin — and its altcoin contemporaries — in a way that could impede its progress.

If governments could effectively stop a peer to peer network, they would’ve shut down the illegal practices of torrent websites over a decade ago. Even the success of the hydra-like torrent sites isn’t a perfect analogy for bitcoin, though, because legal status is far easy to debate.

A fairer comparison would be the so-called dark web. Although individual sites, servers, and people involved with various activities on there may occasionally be arrested for illegal activities, it would be ridiculous to think any government could regulate the entire network. Trying to ban bitcoin or regulate it in a manner that allows actual oversight would be much the same. It’s impossible on a technical level.

“Cashing Out” Shall Be Most Difficult If Crypto Is Strictly Regulated

The most serious impact regulation could have on bitcoin, is in limiting the ability to “cash out,” converting the cryptocurrency into more traditional, fiat currencies like U.S. Dollars. Making that difficult could cause problems in the short term, though it would need to be a strategy that was enacted all over the world. Almost all global currencies can be traded online without difficulty, so if even one territory still facilitated a trade in cryptocurrency into local denominations, those could then be traded for and cashed out in turn.

If Bitcoin itself was regulated against, then users could simply trade it for another currency.

If bitcoin itself was regulated against, users could simply trade it for another cryptocurrency, and then cash that one out instead. With hundreds of cryptocurrencies now in existence and more emerging all the time, it would be nigh on impossible to stop unless all currencies were barred.

Non-Profit Groups In The US Fight It Out The Bitcoin Foundation is pressing the committee to remove the section on cryptocurrencies from the Senate bill or limit the language to digital currency exchanges. Applying the provisions to issuers of digital currency is misguided and the burden of compliance would be greater than the benefit from developing the technology in the U.S., the foundation said.

“This technological innovation must be allowed to develop, be rolled out and tested in real environments without material interference or overburdening regulations, especially at the initial stages of its adoption,” Llew Claasen, executive director of the Bitcoin Foundation, a non-profit advocacy group, wrote in a Nov. 30 letter to the Senate Judiciary Committee.

The bill includes a section that would expand the definition of “financial institution” to include an issuer, redeemer or cashier of “digital currency” and “any digital exchanger or tumbler of digital currency.” That would require bitcoin handlers to report suspicious transactions and shoulder the same anti-money laundering obligations that banks have as law enforcers raise concerns about digital currencies being used in illegal activity.

Relax. The Government Doesn’t Know Enough About Crypto. was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.