An Open Letter to the Bitcoin Foundation and its Members

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This author’s opinions do not reflect the opinions of Coin Brief.

To the Bitcoin Foundation and its Members,

I must preface the main body of this letter by saying that my message comes from a place of deep passion and respect for Bitcoin. I in no way intend to be contrarian or narrow-minded, I only hope to preserve the experiment in applied liberty that Bitcoin was created to facilitate.

You see, while I understand that a Bitcoin fueled, libertarian utopia is, practically, little more than wishful thinking.  However, I believe that a free and unregulated Bitcoin economy could eventually turn our exercise in wishful thinking into a realistic possibility at some point in the future. And I fear that the recent actions of the Bitcoin Foundation have been aimed at bringing this piece of cryptographic artistry under the auspices of government, which would render it as impotent in the fight for liberty as the beloved US Constitution. For that document was meant to be sacred, the rights protected by it were meant to be inalienable, but it has become nothing but a scrap of old paper ever since we have allowed the federal government to become increasingly intrusive in our lives. We allowed for such intrusion because we believed it best for the preservation of our security against foreign and domestic threats to liberty. Now, to many people, dealing with those threats seems like paradise compared to the massive police and surveillance states we live under today.

So, in the past, when I have spoken out against the Bitcoin Foundation and its actions, I have done so out of genuine fear that compromising with governments will turn Bitcoin into nothing more than a new addition to the status-quo. Even the pursuit of benign legislation, laws that would affect no one except those that truly intended to do harm, would open the door for complete control over Bitcoin—no government would resist that type of opportunity to assume dictatorial power over any aspect of life. We cannot, for a single moment, expect governments to limit themselves in their arbitrary expansions of their own power.

This statement does not come from a place of conspiracy, or an “us vs them” mentality. It comes from the notion that most governments—at least those in the developed world—truly believe that they are acting in our best interest. The most caring and humanitarian government is the most dangerous one, the one that should be held under the utmost suspicion. For it will not cease its tyrannical endeavors into the lives of its citizens as long as it believes that its actions are in the name of the greater good. Therefore, it seems apparent to me that the Bitcoin Foundation is playing a dangerous game when they try to negotiate with governments about which Bitcoin regulation to pass, rather than demanding that they enact no regulations at all. Even if they are successful at getting governments to enact the lightest legislation possible, they have still set the stage for government control over crypto-currency. All a government needs is one law, it does not matter how strict or laissez-faire it is, and they have the legal precedence that they can use to give themselves authorization to completely control every aspect of Bitcoin. And they will take that opportunity; they will vastly overstep their bounds because they believe that they must do so in order to make their citizens as safe and happy as possible. This notion deeply terrifies me.

A Response to Recent Communications from the Bitcoin Foundation

Now you know why I have so adamantly opposed you (the Bitcoin Foundation) in the past. However, my articles and discussions with my colleague, Sean Wince, on the Coin Brief Podcast, have gone seemingly unnoticed by you and most of the Bitcoin community in general. That is, until my most recent article that spoke out against your actions. I wrote an OP-ED a few days ago in response to an open letter to the New York Department of Financial Services (NYDFS), written by Jim Harper, your global policy counsel, on your behalf. In my article, I accused you of tacitly accepting Bitcoin regulation and giving up the fight of defending the free market.

Then, finally, I began receiving responses from your officials. A few days after that article was published on Coin Brief, Jim Harper retweeted the link to my article. A small gesture of acknowledgement, but, as a lowly Bitcoin journalist, it was a huge surprise to me. An even bigger surprise came the next day when Jon Matonis, your Executive Director, engaged Sean and myself on Twitter. He sent us three different tweets; the first one telling us that the Foundation’s full response to BitLicense had not been completed, the second one linking us to an article he wrote that touted Bitcoin’s ability to prevent “monetary tyranny,” and the third one linking us to the Foundation’s official stance on Florida’s application of money services business (MSB) laws to individual Bitcoin users. Lastly, the most recent response we received from you was on the morning of August 14, 2014. This time, it was Jinyoung Englund, your Director of Marketing and Communications. Jinyoung respectfully told us that my opinions on Jim Harper’s letter were misinformed and wrong. Your communications director then told us that I had misunderstood your mission and the “legal and rule making process.” In this correspondence, Jinyoung provided us with a link to you initial response to the BitLicense proposal, which was published in January of 2014.

I would like to now take some time to respond to the three documents provided to us by your representatives. These responses will be brief, given that I cannot go into an in-depth analysis without risking an unnecessarily lengthy letter.

Jon Matonis, the Forbes article you wrote on Bitcoin is quite interesting. However, to be honest, it did not present any information to me, regarding Bitcoin’s ultimate potential, that I did not already know. In fact, I am sure that most—if not all—of the Bitcoin community is aware of this potential. The fact that you are also aware of it does not necessarily mean that your Foundation will fight to realize it. In reality, the Foundation’s actions have suggested that it favors Bitcoin regulation over a free market, even if the regulation it supports is “reasonable.” Additionally, that article was published on Forbes, not on any Foundation-owned media. Therefore, while you very well could be fully invested in the ideas you wrote about, it does not necessarily mean that the Foundation shares those views.

In regards to the response to the recent Florida case, I commend the Foundation for defending the man who was wrongly accused of acting as an unauthorized MSB. I think if an inefficient and restrictive law already exists, and there is no realistic possibility of repealing it, then governments should at least be held accountable when they try to illegally apply the law to someone. However, your stance on Florida’s application of MSB laws does not equate to a desire to keep the Bitcoin economy completely unregulated. The brief presented to the court said nothing about preserving an unregulated Bitcoin ecosystem and, therefore, cannot be used as evidence that the Foundation does not “tacitly accept” Bitcoin regulation. In fact, on several different occasions, literature from the Foundation has assumed regulation as a given and has stressed the importance of reasonable legislation, rather than advocating for no legislation. An example of this kind of tacit acceptance of Bitcoin regulation will be shown below, in my response to the literature provided by the Foundation’s communications and marketing director.

Jinyoung Englund, I appreciate your link to the Foundation’s initial response to the NYDFS’s BitLicense proposal. I read it in full and I have to say that it only served to confirm my accusations that the Foundation has no desire to keep the Bitcoin economy free and unregulated—despite the fact that you provided the literature as proof that I had misunderstood the Foundation’s position on Bitcoin regulation. That particular document said nothing about preserving a free market, Bitcoin economy. In actuality, Marco Santori, the speaker in this document, assumed that a regulatory infrastructure must be erected around Bitcoin. He did not question whether or not Bitcoin regulation was necessary, but rather what kind of Bitcoin regulation would be the most conducive to consumer protection; Santori even stated that Bitcoin licensing may be warranted in certain circumstances. To reiterate, not once did Santori question whether or not Bitcoin regulation is necessary, he only questioned whether or not BitLicense could achieve the desired regulatory goals. Towards the end of his testimony, Santori stated that any future Bitcoin laws need to be enacted at the federal level. Additionally, Santori even suggested that there be a uniform, global law, a standardized regulatory infrastructure to be adopted by the entire world! And since Marco was speaking on behalf of the Foundation, I must assume that the Foundation actually supports much larger, fully encompassing, and global Bitcoin regulations.

Here is a direct quote from Marco Santori’s testimony:

Bitcoin businesses would probably prefer that any new regulatory framework be undertaken at the federal level or with interstate cooperation through a group like the Conference of State Bank Supervisors rather than on an ad-hoc, state-by-state basis.

We view these hearings as the continuation of a much needed conversation among the states and the federal government on how a streamlined, standardized, and fully protective regulatory system can be developed for the United States as a whole, and perhaps internationally.

(Emphasis added by Evan Faggart)

So, Jinyoung, if your intent in citing this document was to prove that my arguments were misinformed, then I would have to say that it is actually you who misunderstood my position on Bitcoin regulation—not the other way around. If you are trying to prove that the Foundation is against BitLicense, not because it is Bitcoin regulation in general, but because it is inadequate regulation, then you are only confirming my belief that the Foundation assumes and accepts future, restrictive Bitcoin laws.

It is true, though, that I am not aware of the legal difficulties involved in submitting a formal comment to the NYDFS. However, those legal difficulties only apply when using governmental channels to negotiate inevitable legislation, rather than outright denouncing the mere thought of Bitcoin regulation. Since the Foundation is based in the state of Washington, it is guaranteed the right to free speech by the First Amendment of the US Constitution. There are, then, no legal difficulties involved in rallying the Bitcoin community in opposition of government intervention into the Bitcoin economy. Therefore, hiding behind a complex legal system is not a valid excuse for the dismissal of my arguments; I am not asking the Foundation to submit a formal request, using the intricate legal process laid out by the NYDFS, for a certain type of legislation, I am asking for the Foundation to stand up in the name of liberty and demand that New York implements no Bitcoin regulation, at all.

To All Members of the Bitcoin Foundation

Now I must address the members of the Bitcoin Foundation, corporations and individuals alike—you are all of equal importance in this fight to preserve our experiment in total liberty. Do not forget that you are the backbone of the Foundation, your membership fees serve as the lifeblood for the Foundation’s existence. Therefore, their actions should fully reflect your opinions and beliefs. You do not fund the Foundation so that it can carelessly pursue whatever avenues of action it desires; you pay your membership fees every year so that the Foundation will fight to protect your livelihoods from government intervention and develop the core Bitcoin protocol so your businesses can become even more prosperous in the future.

However, instead of working towards improving Bitcoin’s code, the Foundation has decided to play the political game. They have used your money to lobby governments around the world. In the United States, they used your money to hire a top lobbying agency in Washington DC. Instead of making Bitcoin a better currency for the general public, they are pandering to the politicians, lining their pockets with your money in hopes that they will have mercy on our community. They have even begun to take on some characteristics of the governments they have been hanging out with; they have failed to make their actions transparent and they appointed Brock Pierce, an extremely unpopular character in the digital business world—who is currently not even putting his full effort into Bitcoin—while ignoring the cries of outrage from the community. In the meantime, Russia and Ecuador have banned Bitcoin, Argentina’s only Bitcoin exchange had its bank accounts shut down, and New York is pursuing draconian Bitcoin regulations that could destroy the crypto-economy in the entire state. Clearly, the Foundation is failing at their mission to “standardize, protect and promote the use of Bitcoin cryptographic money for the benefit of users worldwide.”

I urge you to not stand by idly while the Bitcoin Foundation pumps your money into a broken political machine that will likely not listen to the community’s pleas and protests. Countless individuals and lobbying groups have tried to win the hearts and minds of government officials through campaign donations and free dinners. This kind of activity, though, leads to nothing but more corruption, more money in politics, and worse laws. Remind the Foundation of who is paying their bills and funding their political escapades; contact them and demand that they take a more principled, free market stance on Bitcoin regulation.

The Foundation has played the politicians’ game for far too long now—the clock is winding down on the BitLicense public commenting period and the Foundation has yet to submit a formal comment because they have been spending too much time twiddling their thumbs and hoping the NYDFS will change their mind. Only a few days ago did they finally demand that the Department release additional information on their proposed Bitcoin regulation. Now they will have to rush to read through the additional data that the Department has agreed to hand over and submit a formal comment before the 45 day window closes. Even if they can submit an official response on time, it is extremely unlikely that the Foundation will actually stand up in defense of the free market. The documents that I responded to above confirm that they do not actually believe in a free market, and in fact support a heavily regulated Bitcoin economy.

The Bitcoin Foundation still has a small amount of time in which they can respond to the NYDFS, though. Therefore, you should urge them to stand up for freedom and liberty. The Foundation is the most influential platform the Bitcoin community currently has, so we must use it to stand up against New York and all other governments—even in the midst of the Foundation’s waning popularity in the Bitocin community. If you want to keep Bitcoin, the engine of the future monetary structure, free, unregulated, and away from the people who have destroyed the current monetary system, then you must demand that the Foundation use its influence to defend our economic liberty.

Of course, we cannot be so idealistic as to believe that we can successfully preserve a free Bitcoin market by sending angry letters filled with loud demands to governments. We must attempt to reason with governments and get the lightest legislation possible, since, it seems, regulation is inevitable at this point. However, we should not waste too much time and energy pleading with these regulatory agencies because they will probably end up ignoring us anyway. The Foundation has been doing exactly that, though; they have sunk far too much of the community’s time and your money into a political process that has not yielded any positive results thus far. Instead of continuing to reach for the branches of this fruitless tree, they should make negotiating with governments an ancillary task while primarily focusing on the development and improvement of the Bitcoin infrastructure. If we can build decentralized systems on top of the Bitcoin protocol—such as Dark Wallet and OpenBazaar—then these restrictive Bitcoin regulations will become harmless.

If the Foundation is truly concerned with protecting the essence of Bitcoin and ensuring its longevity, then it should give up the political game and start funding projects that will provide actual value to the ecosystem.

You, as members of the Bitcoin Foundation, have the ability to use your financial influence to set the Foundation back on the right path. If you do not demand that they change their ways, the Foundation will continue to toss your money willy-nilly into the horribly inefficient political machines, which are hotbeds of greed and corruption. Do not fall victim to the argument that regulation would bring more legitimacy to your business; the fact that you have established successful Bitcoin businesses is more than enough proof that Bitcoin is already legitimate, even without regulation. Make your demands now. And if the Foundation continues on with more of the same, make your dissatisfaction loud and clear.

I hope that both the Bitcoin Foundation and its members take this message into serious consideration when formulating their stance on the BitLicense regulation.

Regards,

Evan Faggart

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2 Comments

  1. I have to agree with Evan on the main points made in the article. The Foundation should be doing everything in its power to refuse regulation and make it a point to show how this decentralized technology can free the world.

  2. I was actually worried along similar lines in the past, but then I changed my mind.

    The first point is that Bitcoin Foundation does not have ideology as a goal, and I don’t think it should. Assuming that the foundation employees did not want any regulation at all (and some of them are, as far as I know, anarchists), we need to think whether taking such a stance publicly would have a better effect on the regulators than if they proposed mild regulation. If it wasn’t, then being hypocritical is a better approach. We need to separate the question of whether there should be regulation from the question how the regulation can be influenced.

    The second point (brought to my attention by Greg Maxwell) is that the Foundation should not have much power over the Bitcoin ecosystem in the first place. If it did, then Bitcoin would already fail to be decentralised. The Foundation may purport to represent the Bitcoin users, but unless it actually has any power over them, it does not matter if it proclaims to support this or that.

    The third point is that the future of Bitcoin should not depend on the benevolence of the state. It should work irrespective or regulation. If it stops working when regulation (mild or draconian) is enacted, it is useless. Let the Foundation’s focus be on the regulators while others can work on decentralisation.

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