A PARALLEL UNIVERSE? THE NEXUS BETWEEN BITCOIN AND DRUG POLICY REFORM
What on Earth could a geek-driven, venture capital-funded, shadowy, money-laundering-connected, volatile, digital currency have to do with drug policy? Aren’t drug policy reformers a bunch of stoners who want to spend their days getting high? Well, there’s much more than meets the eye here. Both digital currency advocates and drug policy reformers are typically stereotyped and reality is less black and white.
The digital currency, Bitcoin, invented in 2009, has recently been in the news following the January arrest of well-known Bitcoin advocate, Charlie Shrem. Last year, the notorious website, Silk Road, was shut down by the federal government. Allegations are that Silk Road was nothing more than an online market for illegal drugs. The sole medium of exchange on Silk Road? Bitcoin. More recently, Tokyo-based Mt. Gox, the most well known of the bitcoin currency exchanges, went off-line and is now defunct. Many individuals who trusted Mt. Gox to hold their bitcoins are out of luck. What’s worse is that they have no recourse against Mt. Gox because Japan did not have systems in place that regulated the bitcoin environment to prevent or deter such a disaster before it had a chance to blossom out of control.
Fortunately, there are many venture capitalists and business people who can envision and have already embraced the promise of bitcoin. One of the major innovations that bitcoin brings to bear is the possibility of a revolutionary change in the global payments system. The bitcoin system is designed to facilitate transactions on a peer-to-peer basis anywhere in the world without a third-party intermediary. Bitcoin transactions can be facilitated at a fraction of the cost of what banks and credit card companies charge.
Business people invested in the bitcoin environment eagerly testified during both the recent congressional hearings, as well as the hearings held by New York’s Department of Financial Services. None of them spoke against regulation. Instead, they adopted a tone urging regulators to adopt robust regulations based on an understanding of the bitcoin environment. What they do not want to see is the draconian application of existing regulations that were designed for application in a “brick and mortar” environment, applied to the bitcoin. Doing so would amount to a waste of time for regulators who would spend huge amounts of time attempting to figure out how to apply the regulations in an environment for which they were not meant. These bitcoin advocates want regulation and are willing to work closely with regulators to fashion creative and effective regulatory solutions that protect consumers against unreasonable risk of loss and to effectively guard against money laundering.
Now, what’s all this have to do with drug policy reformers? Don’t they all just want to get high? Remember, it’s not so black and white. With that said, let’s examine the parallels between those advocating for bitcoin and for those who advocate for drug policy reform. Drug policy reformers, at the forefront of the marijuana legalization movements in Colorado and Washington state, emphasized the need for legalization and regulation.
Legitimate business people realize that with regulation comes accountability. Legal marijuana dealers in Colorado are no more interested in selling marijuana to minors than a bitcoin exchange operator is interested in being involved with money launderers or child pornographers. However, absent meaningful regulation, chaos reigns. In the bitcoin world, a regulatory vacuum has led to bitcoin being used as a medium of exchange on Deep Web drug markets, the collapse of a major bitcoin exchange, the loss of consumers’ funds, and money laundering. In the drug world, lack of regulation has meant sales of marijuana to minors and gunplay in the streets as dealers fight over control of over unregulated distribution markets.
Outright bans rarely work when the subject of the ban is highly coveted by large groups of people. In the case of marijuana, an outright ban on it created lucrative criminal underground production, supply, and distribution networks. A ban on bitcoin would serve to ignore the promise of a revolutionary sea change in the way the global payments system operates, while still resulting in bitcoin serving as an effective medium of exchange for illegal drugs, child pornographers and others of that ilk.
It’s our choice. To me the choice is clear.