European Central Bank President Christine Lagarde gave an interview this week, claiming that Bitcoin has been used by criminals for money laundering and needs to be regulated.
What her comments miss is the fact that Bitcoin is already the most regulated currency in the world.
Unlike all other currencies, Bitcoin is governed by a predetermined set of consensus rules. These rules are publicly available, transparent, and enforced by a decentralized network of tens of thousands. There are no closed-door meetings in Bitcoin, no discussions about how to use the system to bail out fraudulent bankers, and no unexpected issuance to fund whatever politically-driven desires come to mind in a given year. None of that is possible in Bitcoin. In other words, Bitcoin is already regulated because it is self-regulated in a way where corruption of the protocol is simply not possible.
The transparent nature of the Bitcoin ledger – where the entire history of the chain can be viewed by anyone at any time – has made it easy for law enforcement to catch Bitcoin criminals. Per this New York Times article, “illicit activity accounts for only 1 percent of all Bitcoin transactions”. Still, even that article takes a generally negative tone when analyzing Bitcoin, as many in the mainstream continue to fear what they do not understand.
Remember – there was a report (here) this past September that revealed that over $2 trillion has been laundered through the traditional, regulated banking system over the last 20 years. It sure would be nice if our current system were as transparent as Bitcoin, right?
The reason why our financial systems need regulation today is that they were built with flawed incentive models, giving those in power the ability to change the rules of the systems to benefit themselves and their friends. With Bitcoin, that is not possible.
Sean Cover 