As Silk Road 2.0 Pops Up, The Government Needs To Avoid The Temptation Of Moral Panic
from the moral-panic-a-coming dept
The Senate Homeland Security Committee, officials tell TIME, plans on holding hearings on Bitcoin within the month. The committee sent letters to nine federal agencies in July asking for their thoughts on Bitcoins and other virtual currencies in the hopes of developing a holistic approach to the so-called cryptocurrency that neither stifles the currency’s potential nor enables criminals to abuse it.This should be cause for concern. After all, it wasn't that long ago, that Senator Chuck Schumer absolutely flipped his lid about Bitcoin, claiming that Bitcoin itself was "money laundering" after some of the first news stories about the original Silk Road came out. The fact that he so immediately conflated the dark web with Bitcoin should be problematic already -- though, one hopes that he's since learned some more about Bitcoin and has realized his original statements were exaggerated.
Of course, any time Congress gets involved, especially with the kind of story that can be portrayed the way Silk Road has been portrayed, you almost expect the moral panic and grandstanding to reach a fever pitch. The one (minor) good sign in all of this is that the Senator who is putting together that hearing on Bitcoin, Tom Carper, seems to be going out of his way to make it clear that he isn't looking to have a kneejerk reaction to all of this -- especially if it might stifle important innovations. After news broke of the new Silk Road, he was quick to put out the following statement:
“This new website – launched barely a month after Federal agents shut down the original Silk Road -- underscores the inescapable reality that technology is dynamic and ever-evolving and that government policy needs to adapt accordingly. Rather than play ‘whack-a-mole’ with the latest website, currency, or other method criminals are using in an effort to evade the law, we need to develop thoughtful, nimble and sensible federal policies that protect the public without stifling innovation and economic growth. Our committee intends to have that conversation – among others - at our hearing this month on virtual currency.”That's a whole hell of a lot better than Schumer's "it's money laundering!" grandstanding from two years ago -- but that doesn't mean that others in Congress will be as willing as Carper to take a careful, measured and informed approach to all of this. While it sounds good to create policies that "protect the public without stifling innovation and economic growth," in practice that's often a lot more difficult than most people think -- and Congress often has an uncanny ability to say one thing and put in place policies that do the exact opposite.
While some people like to mock concepts like the dark web and Bitcoin, there's a tremendous amount of important innovation happening within and around each of them. While they may initially be used, in part, for illegal activity, that's going to become less and less of the predominant use, and all sorts of powerful new tools and services are likely to develop -- if allowed. Bitcoin, in particular, has many powerful uses beyond just being a currency (in fact, that may be one of its least interesting characteristics), but overly regulating it based on moral panics might kill that off. I already know a few entrepreneurs and investors who are unwilling to commit to some really interesting Bitcoin projects, just because they know the regulatory situation might destroy the space overnight. Hopefully, Congress will avoid that temptation to go on a full out moral panic -- but their track record with these kinds of things isn't that great.