For Steve Stockman, US Representative for the 36th Congressional District of Texas, bitcoin presents an opportunity to provide much-needed fuel to a struggling US economy while creating a new class of jobs that redefines the Internet.
But, if regulations like those proposed by the New York Department of Financial Services (NYDFS) proliferate, Stockman fears the bitcoin business space - and its community - will face pressures that may ultimately prove insurmountable.
In a new interview with CoinDesk, Stockman said the NYDFS proposals are too onerous considering the relative infancy of bitcoin. Further, he argued that state-based regulators like those in New York are being too aggressive in their efforts to impose rules on digital currency.
Stockman told CoinDesk:
“I think New York is putting the cart before the horse.”
He added that the regulations, far from laying the foundation for future growth for bitcoin companies, are actually more beneficial to the industries to which bitcoin poses a threat.
Traditional banks, financial services providers and payments companies, he says, won’t face the same level of scrutiny that bitcoin companies will in New York should the proposals be approved.
Overregulation will ‘crush the industry’
Throughout the interview, Stockman cast the proposed NYDFS regulations as a banker-friendly, growth-harming framework that fails to recognize bitcoin’s unique characteristics and ability to jumpstart a new era of digital commerce and value exchange.
Echoing statements made by former US Mint director Ed Moy, Stockman said that the bitcoin sector itself should be the source of regulation rather than agencies that don’t fully understand digital currency. Using the US healthcare system as an example, he stated that government intervention and rule-making not only stifles innovation but keeps investment activity out entirely.
“Many [doctors] are dropping out of the profession because it’s overregulated. Now, what may happen to the bitcoin community is that, if there’s so much regulation, there’ll be a lot of people who say, 'You know what, I’m done with this. I’m not gonna do it,' and it’s going to crush the industry.”
Proposal a win for bankers
According to Stockman, the clear winners should the NYDFS proposal pass in its current state would be banks who face competition from bitcoin's underlying technology.
Stockman told CoinDesk that not only would the regulations make it tough for bitcoin businesses to get off the ground in the first place, but actually competing as an alternative to traditional banking and payment systems would become a difficult task:
“I think the regulation, from the standpoint of the banks, is a banker’s dream come true. It’s basically putting a hedge around the banks, protecting the banks.”
The problem, Stockman continued, is that banks and companies that handle money in general do not and will not receive the level of regulatory focus that is being proposed for bitcoin companies. Using cash as an example, he said that hypothetically, a business would have to collect information on where each customer had received their cash.
As a result, any competition that banks might face from bitcoin companies will be stymied, he argues.
Apathy to regulation a deeper problem
At the heart of the matter, Stockman explained, is the failure of the bitcoin community to recognize the problems inherent in the NYDFS regulation.
Citing his recent appearance at The North American Bitcoin Conference (TNABC), Stockman said that far too many people were ambivalent about the proposed regulations. Saying he was “alarmed” by the feedback, Stockman added that many operated under the belief that, in the future, regulations for bitcoin will be lax given its unique qualities.
But, citing historical precedent and a front-row perspective on regulation, Stockman said this rosy outlook is far from certain. The failure to recognize this problem threatens efforts to lobby both Congress and the greater public on digital currency and its various uses.
Making matters worse, opinions on both if and how the bitcoin ecosystem should be regulated risk fracturing the community further and dampening adoption and outreach efforts. Stockman joked that if you ask 25 people in the bitcoin community a question, you get 50 different answers.
Kidding aside, the congressman reiterated that a lack of agreement among decision-makers and grassroots-level activists on the topic of regulation will be costly if the situation continues.
“We’re having problems solidifying the position, which then weakens our position. That’s a real serious problem for the bitcoin community to have.”
Stockman concluded by saying that the bitcoin community needs to adopt a greater sense of urgency as regulations are being drafted. Otherwise, they risk ceding control of the conversation and leaving the rule-making process to those who might not fully understand bitcoin.
Congress not ready for action
When asked whether or not Congress was ready to pass a digital currency bill like the one he has authored, Stockman said that US lawmakers aren't yet educated enough to take action on the measure.
He cited events on Capitol Hill involving members of Congress as positive developments, as they give attendees more opportunities to use digital currency and better understand the technology. Through efforts like these, he hopes, more lawmakers will see a compelling reason to protect what Stockman feels can revolutionize commerce.
The lack of institutional knowledge on the part of Congress, Stockman said, makes advocacy efforts more of an uphill battle. Yet, by introducing a digital currency bill that he says is a simple, pro-growth legal framework, the educational process will continue and, in time, result in legislative action that both protects and advances the bitcoin cause.
Image credit: Gage Skidmore / Wikipedia