Declining to Regulate? Incredible.

by Jeffrey Tucker

When has a regulatory agency ever declined the opportunity to put the screws to a new business venture? It’s been a long time since anything like that slipped by in the United States. The country in question here is Canada, which, despite its many socialist structures, increasingly might be dubbed the “land of the freer.”

canada

I have claimed for years that there is no unregulated product or service in the U.S. economy, and I have yet to be proven wrong- and regulators are always looking for more chances to muck things up, particularly in new and innovative industries such as crypto-finance.

Well, this you will not believe. A company named QuickBt allows people to use their Interac debit cards to pay with the digital currency Bitcoin to any vendor or through email. Before opening its doors, QuickBt approached FinTRAC, Canada’s financial and monetary regulating that guards against money laundering.

QuickBt explained what it does in great detail. It “provides real time purchasing of small amounts of crypto-currency using an INTERAC debit card” and it “facilitates online checkouts where merchants accept Bitcoin while consumers hold debit card balances.”

Upon considering these features, this was the conclusion of FinTRAC: “it does not appear that your business is engaged as an MSB [Money Service Business] in Canada as per the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations. Therefore, you cannot register your entity with us.”

Jaw. On. Floor.

Of course the regulator is exactly right. Bitcoins are a tool of exchange that offer ridiculously low processing fees and a much better way of moving money from one entity to another. This is a major reason for its growing adoption and for its increasing use in real transactions.

With QuickBt, consumers are buying bitcoin and then transferring those to merchants. No harm, no real money exchange as traditionally defined, no sneaky financial trickery. It’s just business, and the Canadian regulators have said: it’s not our business.

Meanwhile, just South of the border, regulators are putting the fear of government into every conceivable cryptocurrency merchant. Congress is issuing warnings. The Financial Crimes Enforcement Network is exacting fees. The feds are shutting down services here and then and driving others out of existence.

It’s so bad that Bitcoin advocates themselves are reduced to Stockholm-like begging: ”please, regulate us as soon as possible.” They figure that even draconian regulators are better than the current fear-and-loathing environment that has so vexed the crypto-currency community.

To be sure, Bitcoin itself is nearly impervious to regulation, given its status as a peer-to-peer, open-source protocol that lives on a ledger kept on a system of distributed networks. What’s more, transactions in Bitcoin themselves are necessarily detached from personal identity through use of cryptography, making them nearly impossible to follow or trace  under the right conditions.

But there is one aspect of Bitcoin that is very vulnerable to regulatory control: the coming and going from Bitcoin to government currency. It’s like moving from jail to freedom and back again. The wardens and nightwatchmen are always going to have something to say about the terms. Once you are outside the gates, they can’t touch you but especially free migration between Bitcoin and government currency will be nearly impossible.

To this extent, the continued progress in the realm of cryptocurrency will depend on tolerant regulatory environments.

You might say, oh sure, this makes sense. The United States has a world-reserve currency called the dollar to defend. It can tolerate no competition. It must make life hard for any new monetary invention lest the dollar itself be threatened. Should that happen, and should anything fundamental befall the U.S. dollar, the world economy would fly into a tailspin and we’d all be doomed.

I don’t believe a word of it. If Bitcoin really does become a threat to the dollar, and the dollar were displaced, the world would be better off as a result. Money would be returned to the market whence it came and leave the grasping hands of the political and financial elite who use their monopoly to exploit the rest of us. No more inflation, no more business cycles, no more multi-trillion dollar bailouts. Money would be private property, with a complete separation between money and the state.

Also, what does it say about just how secure the dollar is that the U.S. government has to restrict and control any competitor? It suggests a certain vulnerability. If the dollar were really the choice of the market, competition would pose no real threat. But of course that’s not the case.

Whether the government likes it or not, Bitcoin and cryptocurrencies are the future of money. Just as email and texting displaced the U.S. post office, and cell phones have displaced the wall phone the government used to install for us, cryptocurrencies will certainly become the preferred medium for conducting exchange in the age of the Internet.

[We’ll be discussing this with experts at Atlanta, Georgia, October 5, 2013 at the CryptoCurrency Conference. I'd love to see you there.]

What does this prediction imply? If you were starting a Bitcoin business, and you were trying to get a sense of where you might find a marginal tolerant locale in which to operate, might you choose Canada over the United States? It’s an obvious choice. One always prefers a regime that is willing to let people try to new things over those that try to strangle innovation in the crib. This sort of regulatory competition can only result in good things for Bitcoiners in Canada.

And here’s the thing about Bitcoin: it weighs nothing and takes up no space. It takes only a few seconds to send unlimited amounts from any place on earth to any other place on earth. It’s not like the old days when you had to slog gold around from place to place or move large buildings with pillars around. Business in the internet age — especially those involving an internet money — can be anywhere. Capital is more mobile than ever and will, over time, tend to seek out liberal jurisdictions over those that regiment every aspect of commerce.

The U.S. has a very bad habit, one that stands in complete contradiction to the very idea of liberalism. Its most fundamental tenet is that anything that is not heavily regulated probably should be completely illegal. The notion that stuff should just be permitted to happen and take its own shape in the course of trading and competition and the like is just not part of the mindset of an imperial paranoid state like the U.S..

The U.S. can slow down the trend but it can’t stop it. Cryptocurrency will find a home and it will be the one that is most welcome. The nations that punish it will die and those that welcome it will thrive. Ultimately, cryptocurrency could erase borders and free humanity from the chains of state economic control. Look to those regions like Canada that are, for now, open to genuine progress.

By Jeffrey Tucker
Jeffrey Tucker

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14 September 2013 at 9:09pm[…] LTB. Canada Declines to Regulate ...LTB. Canada Declines to Regulate | bitcoinvancouver
28 October 2013 at 8:10am[…] Lees het volledige artikel op Let’s Talk Bitcoin. ...Bitcoin ongemoeid in Canada? - Bitcoin in het Nederlands
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  • King_Oberon

    TL;DR Watch out for a future of coin banks and digital “fiat”.

    I see a number of threats to crypto currencies. Banks, much as people dislike them, provide a level of security and more importantly accountability that online wallets and services currently do not. On top of this, I’ve heard of people losing wallets and passwords too many times lately. To offload this complicated technology onto the user is expecting far to much of mom / pop, gran and grandpa. This, along with the need for off chain confirmation services, is going to encourage people to start building bitcoin banks, providing those services for a fee, and we’ll have recreated the problem all over again. Worse still, banks themselves, provide wallets and charge fees similar too fiat. Over a time you’ll have massive pools of wealth, dictating how the market behaves. You can already see big money moving around the blockchain so I would be surprised if this isn’t already happening.

    The more obvious threat is the need of convenience. All that USD or any fiat needs to do to combat this emerging market is to come out with their own digital fiat equivalent, locked to their real world value. Once again, the banks would provide their own wallet services. You could say they do this already. All they need to do is make it easier and faster to move money around with smaller fees. Fiat exchanges would provide mediums of exchange for their foreign counterparts. I guarantee that while crypto currency wouldn’t die as a large medium of exchange, certainly it’ll thrive in international exchanges, there’d be very little need for people to accept it as a local currency any more.

    I’m a pessimist in general about a lot of things, but, as much as I’d like to see a single world currency or even a world of only open source crypto currencies, I don’t believe it will happen. However, I do see certain people in prominent positions of wealth and power losing out on quite a bit of both.

  • steffen:)

    “All they need to do….” You make it sound too easy. There is no way the heavily regulated USD market is going to come up with a cheaper, faster, more conveninent way of xfering money than what they have today. In fact, i expect the government to crack down even harder on USD xfers etc. as the economic situation gets worse.

    And again its not the banks that are the problem. Its not their fees. Its not the service they provide. Its the way in which government has regulated them, and granted certain monopolies to certain banks. I for one, welcome a bitcoin bank, but i dont want government to decide what it should look like, how it should act, and how it should treat its customers. I dont want a/the government to force people to use its services and so on. I want complete freedom, and the ability for people to choose which bank/wallet they want to use, and for the banks to take on any shape they want. Complete freedom. Some people object to this because they fundamentally dont believe in freedom. That people cant be free. But thats a completely different discussion. We can clearly see that regulation has wreaked havoc on the traditional financial system, and that people, around the world are trying to come up with alternatives.

  • http://unSpy.info/ Mark Matthews

    Jeffery, that was “100% balls on actuate.”

    That is a line Marisa Tomei used in “My Cousin Vinny.”

    The money junkies on both side of the political aisle love being able to create money out of thin air and parlay this debt into political support for their agenda. They focus on the short term benefit to themselves and not how their actions sell future generation into debt slavery. It is called corruption, and it was made possible by the Federal Reserve Act which corrupted what we call “legal tender” making it into their own Monopoly money.

    This corruption of money has allowed political leaders to bribe voters with social programs that rob Peter to pay Paul while fueling the military industrial complex. The on-going policy of endless war is the direct consequences of this corruption of money and it is that which fuels the American Empire and her ongoing proxy wars.

    This corruption of the political process will cease only when people demand a return to the principles of sound money. The good news is this: It doesn’t take any political will to accomplish this. All it will take is for bitcoin to reach critical mass, then governments the world over will be forced to curtail their corruption and reinvent themselves.

    As my Cousin Vinny Gambini said, “Forgetta ’bout it”

    My bitcoin tip is on the way!

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  • All Things Bitcoin

    Thanks Adam & Jeffrey!

  • Beautyon

    I just donated Bitcoin to this post. Its about time someone told the truth about the repulsive, anti-human “Compliance” and “Regulation” mania. They are both evil, and the people who are for them and begging for them are absolutely misguided.

    No true entrepreneur wants regulation from anywhere but the market; only low brow crony capitalists who want to violently keep the competition away from the field ask for it. Anyone who calls for “Regulation” or “Compliance” is immoral, unethical and inherently violent; they want to use force to stop people who are more intelligent, innovative and nimble than them from competing and destroying their businesses. With Bitcoin, all calls for Compliance and Regulation will ultimately fail, just as attempts to control Bittorrent have come and will always come to nothing.

    Canada, by taking this stance on Bitcoin has made itself the number one destination for all Bitcoin entrepreneurs. Anyone can incorporate there, base their servers there and run a global operation from there, and do so as a pure entrepreneur on a flat, global playing field. All American Bitcoin businesses instantly have a crippling disadvantage and higher costs of entry and operation, making their services less profitable more expensive and less attractive to users. Even on the level of having to fill out invasive forms just to spend your own money on Bitcoin, their services will be inferior from the off, because they will be less quick and simple to use.

    What is most wonderful about all of this is that you can start a business in Canada, and operate it from anywhere in the world. Your boxen can sit in a secure colo in Montreal, and will be protected by Canadian Law, while you develop deploy and run your services from literally anywhere. Who needs backward, totalitarian, anti business, anti liberty jurisdictions? No one. With Bitcoin, the entire world and its billions of phone users are your oyster, and as we have already seen with CDMA vs GSM, the USA will have no choice but to knuckle under and go along with the rest of the world in the end, if it wants to have any part in the new global economy.

    The world is changing. The only question now is which side are you on, and do you have the skill, foresight, moral fibre and backbone to take advantage of this revolution to its fullest extent.

  • Damien Trog

    Governments around the world are struggling with Bitcoin and how to define it. As Trace Meyer points out, even the US has trouble defining its own dollar [1]. This to me is one more telltale sign of proof how revolutionary this technology is and how it is changing the global economics as we speak. Another interesting read is that of a French Bitcoin miner asking his government how to account for his income [2]. Legislation will come, but I hope the Bitcoin Foundation succeeds in their mission to avoid ad-hoc legislature all-over the place. Nice read and thanks for the post!

    [1] http://tiny.cc/8v282w
    [2] http://tiny.cc/zu282w

  • http://www.kisskissdiary.com/ Katrina Elisse Caudle

    There are some super rad things going on up here in Canada right now. Bitcoiniacs the physical brick and mortar exchange, promised us in Vancouver one of those nifty atms.

    I’m pleased but also not really relieved about this. FinTRAC deciding to regulate bitcoin could have even been seen as a plus by some because it would be validating. This also doesn’t mean they won’t change their mind about it. But there are some great things going on here if you want to start run a business.

    “I don’t believe a word of it. If Bitcoin really does become a threat to
    the dollar, and the dollar were displaced, the world would be better off
    as a result. Money would be returned to the market whence it came and
    leave the grasping hands of the political and financial elite who use
    their monopoly to exploit the rest of us. ” Great, great point.

  • Alex

    I just left a tip– first time I’ve ever done it! That’s how much I like this article!

  • Let’s Talk Bitcoin!

    What do you think of the experience?

    The tip widget isn’t working on this article, but you can see the tip address here – https://blockchain.info/address/1JyyTNi3kZPM7CR8s6AdBa4bbqPHXFnxLR – Jeffrey has recieved 14 tips amounting to about .33btc so far from this article.

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  • http://twitter.com/salwilliam Salvatore Delle Palme

    Don’t believe everything you read. Canadian banks are shutting accounts down and are also discontinuing the Interac service (if they see significant volume). However, it’s much looser overall here as compared to the USA.

  • gestet

    Great article. Unfortunately QuickBt only allows one to pay up to 0.3 Bitcoin instantly with your Interac® debit card. As of typing this it amounts to $42.37 CAD for .3 BTC delivered instantly. At least it’s a start. It remains to be seen how much longer this lasts if Bitcoin adoption becomes widespread across Canada. Sounds too good to be true compared to US regulations.

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