Bitcoins’ anarchistic character will be pounded into line by real world regulations

Finextra: Bitcoin exchange MT. Gox introduces account verification:

In a statement on its Web site about the new verification system, MT. Gox says: “The Bitcoin market continues to evolve, as do regulations and conditions of compliance for Mt. Gox to continue bringing secure services to our customers.

“It is our responsibility to provide a trusted and legal exchange, and that includes making sure that we are operating within strict anti-money laundering rules and preventing other malicious activity.”

The firm says that it has doubled its verification support staff and can process requests within 48 hours. However, it will be the loss of anonymity, rather than administrative hassle, which concerns many users of the currency

Schermafbeelding 2013-03-01 om 21.24.19
Some eager students from Twente University came forward for further discussion after my guest lecture on “Collaborability and the future of payments” last week. In this lecture I gave my views, amongst many other things, on how the “real world” will inevitability bring the interconnected world in line with societies established interests – as written down in rules and regulations – especially in the realm of money and payments.

Together we discussed the future of Bitcoin, AirBNB and taxi services like Side Car as examples of how real-world administrations are trying to bring the broader social perspective and interests forward. However different, all three are examples of the interconnected world creating services disrupting the current paradigms.

The efforts of public administrations and competing companies to enforce rules and regulations upon the disruptive newcomers are easily seen as a rear-guard battle to defend the incumbent parties – populistically seen as inefficient, corrupt etc. – against the inevitable change brought by the disruptive nature of these and many other services.

[pullquote align=”right” textalign=”center” width=”40%”]Read also: Technology, government and incongruous prophesies revisited and Is technology governing us or are we governing technology?[/pullquote]

I am of a different opinion. Step by step we will adapt our rules and regulations to include the interconnected world to be in line with societies broader interests. Of course these new services on their part will push the change of rules and regulations as to open up new possibilities for our societies and economies. However challenging this is a natural process of social adaption.

Hotel business is based on permits. Permits are no holy grail for dealing with individual parties by our administrations but these permits allow safeguarding the interest of the renters and others like the neighbours. One of the students asked my opinion if, in case of AirBNB, user reviews could be used instead of the local administrations’ permit system. From the perspective from the renter the permit could serve as an insurance of a minimal and safe service. For the person wanting to rent a room or apartment via AirBNB the experiences of others can be worthwhile to improve on his decision-making.

The interconnected world is creating new ways to give you the ability to reduce your uncertainty about a certain decision, in AirBNB’s case with crowd-sourced reviews. But how are the AirBNB visitors – as an example – going to give an assessment on the construction or fire safety of the facility? Or how are they going to safeguard the neighbour’s interest?

Will the interconnected world be able to create new methods to replace the hotel permit as a way to save guard third party interests without being part of our political system and administration? I doubt it.

While hoteling can just be considered as commercial service money and payments cannot be. The social importance of money and payments is paramount and even while it has shifted too much into the commercial realm in my opinion it is under direct supervision of our national political systems.

Money and payments cannot be left alone by national governments. Like with telecom a payments provider operating in given country you are not allowed to operate unless you get the permit to do so. I have reported on this earlier for Bitcoin being regulated in the USA.

The core interest of society in keeping track on money flows – for taxation and for other purposes like anti money laundering – is at stake. If governments cannot get a grip on bitcoin – and equivalents – they will in the end just choose to make it illegal to use up front. Just as with child porn, having it on your device(s) would then be sufficient to be punishable. This sounds pretty harsh – especially for people rejoicing the anarchistic element of Bitcoin and AirBNB for that matter – but we do not live in a world where governments will just sit back.

Next to that, for the average person staying anonymous in the interconnected world is an illusion. Many parties have an interest pinning down you and your digital dealings. Companies want to pin you down for commercial reasons; governments have the tendency to increase their hold even more.

So bitcoins anarchism is “fighting” with two major national interests: Governments defending societies interests (lets call this a positive reason) and the same governments wanting to increase their ability of surveillance of its citizens (lets call this a negative reason).

[Update 4 june ’13 NB: The combination of the two is very poisonous indeed. [via Daring Fireball]”The Banality of ‘Don’t Be Evil’” by Julian Assange via NYtimes]

It is in the interest of all to regulate bitcoin – in its use and the underlying technologies – in such a way that the baby is not thrown away with the bathing water.

NB Bitcoin has been a regularly recurring item here at Red planet Dust: there is a landing page created in case you’d like to explore.