Last updated on January 2nd, 2018 at 12:00 am
NYDFS Changes its Mind on Releasing Additional Information in Regards to Proposed Bitcoin Regulation
The BitLicense saga continues with yet another exchange between the New York Department of Financial Services (NYDFS) and the Bitcoin Foundation. In a grand display of what could either be bureaucratic arrogance or ineptitude (or a mixture of both), the NYDFS has notified the Bitcoin Foundation that it will not be releasing the extra information recently demanded by the Foundation until December. Previously, the Department had agreed to release undisclosed data, which was gathered in the research stage of the NYDFS’ Bitcoin regulation venture, within 20 days—so that the public could analyze this data and consider it when submitting their formal comments on the BitLicense proposal.
But now, the Department is saying that the additional information will not be available for another 120 days, meaning that the public will not have access to it until December, after the commenting period has ended. While the Foundation, and other pro-regulation groups, may be surprised at this decision from the NYDFS, this author finds nothing about this development to be surprising. In fact, this announcement serves as further confirmation of my belief that asking governments for “reasonable” Bitcoin regulation is farcical.
Bitcoin Foundation’s Jim Harper Responds to the NYDFS
The Department made the announcement, privately, by sending a letter to Jim Harper, the Global Policy Counsel for the Bitcoin Foundation. Harper is responsible for initiating the exchange between the Foundation and the NYDFS; he wrote an open letter to the Department in early August, in which he demanded that the public commenting period be extended, and that any undisclosed data be made available to the public.
Harper, in response to the letter he received, wrote a blog post and published it on the Bitcoin Foundation’s official website. In this post, he said that he was “disappointed” at the NYDFS’ decision to withhold this important information:
Alas, the NYDFS’s initial promise was cancelled (sic) in a brief letter I received yesterday. Instead: “it is anticipated that a response will be forthcoming within 120 days from the date of this letter.” That’s in December, well after comments will close, even with the welcome extension that the NYDFS recently issued.
The Foundation’s Global Policy Counsel attempted to remain optimistic, however, stating that this correspondence from the Department “is tacit confirmation that the research and analysis we requested exists,” and if there was no additional data, the Department “would simply inform us of that, and we could move forward knowing that there isn’t any systematic study to justify the regulation.” Harper also extended his optimism to Bitcoin regulation in general, saying that “Open government laws could really produce their fullest public interest benefits if the community could access this information.”
Optimism Isn’t Enough, Governments will Pass Whatever Bitcoin Regulation they Want
While Jim Harper and the rest of the Bitcoin Foundation deserves respect for remaining diligent and hopeful in the face of a stubborn, disconnected bureaucratic agency, it must be understood that their optimism will not get them anywhere with Benjamin Lawsky and his minions. In fact, maintaining optimism and continuing to beg bureaucrats for mercy will not lead the Foundation—or anyone else—anywhere in the fight against Bitcoin regulation.
The letter from the Department to Harper, informing him that the NYDFS would not be giving up the additional information in time for it to actually be useful, is just another instance of the New York state government’s disregard for public opinion and its lack of desire to compromise on Bitcoin regulation. Just a few weeks ago, the Department decided to partially give in to Harper’s demand to extend the commenting period and overhaul the drafting process, granting an additional 45 days for the public to submit its formal comments. While many people saw this announcement as a victory against the New York state government, I saw it as evidence that the government would ultimately do whatever they wanted.
This grant of an extra 45 days was half of the minimum three-month extension that Harper requested, and the Department totally disregarded the suggestion of taking a new approach to its drafting process. In my opinion, this extension was not a concession on the part of the Department, but merely a political move to pacify the Bitcoin community. They gave just enough to get people stirred up, to get them to rejoice over defeating the government in a political battle, but not enough to actually make any difference. So, the extension can hardly be considered a victory for the Foundation in any sense, no matter how much optimistic spin is placed upon it.
There is no Justification for any Bitcoin Regulation
Ultimately, the back and forth between the Bitcoin Foundation and the New York Department of Financial Services points to the fact that not only are private individuals incapable of successfully negotiating with governments (the government will only “negotiate” win it ultimately wins), but that there can also be no practical justification for any kind of Bitcoin regulation whatsoever. Yes, this statement is an entirely idealistic one, and it is foolish to presume that we can sneak through this period in Bitcoin’s evolution without feeling the heavy hand of bureaucracy. However, it is important to understand that trying to find justification for “reasonable” or “healthy” Bitcoin regulation, and then lobbying governments for those regulations, is a waste of time. I have written about this truism extensively in recent weeks, and the message has been the same throughout: this period of bringing Bitcoin into agreement with standing financial and regulatory institutions is but a temporary stage in a long-term evolution, so dumping vast amounts of resources into this stage is a waste. The more capital that is sunk into the political machine, the less is allocated towards Bitcoin development, which means that Bitcoin’s evolution will only be prolonged.
The Bitcoin Foundation and its counterparts will likely continue chugging along, though. This is partly due to the fact that they genuinely believe that they can make productive gains by wrestling the vast political machines of the world. The largest reason for their efforts, however, is that they actually desire expansive Bitcoin regulation that extends across the entire globe. So, to conclude, the Foundation will probably never return to its original mission—improving the Bitcoin protocol and encouraging adoption—and it will continually be slapped in the face by governments pretending to care about the public while doing whatever they want behind closed doors.