[Cryptography] On the 'regulation proof' aspect of Bitcoin

[Peter Todd]

On Tue, Mar 29, 2016 at 12:17:02PM -0400, Phillip Hallam-Baker wrote:
> I am getting rather fed up of all these BitCoiners telling me how
> their scheme can't be taken down like the Feds took out Gold Age. And

While I'm know many of the less technical and/or less thoughtful people in the
Bitcoin community are apt to make such gradiose statements, this isn't to say
that taking down Bitcoin is extirely trivial either. Rather, I think the
situation is more akin to whether or not Tor can be taken down, and the
defenses both Bitcoin and Tor have are both technical and political.

> 1) Federal Reserve issues notice stating that all BitCoin transactions
> regardless of size require a Currency Transaction Report (CTR) to be
> filed.

Equally, the US government can issue a notice stating that providing anonymity
services like Tor is now banned.

> 2) Partner with EU regulators.
> 
> BitCoin is not exactly popular in Europe either. But it is tolerated
> largely because nobody considers it significant enough to make a fuss.
> The development that is likely to start people making a fuss is the
> use of BitCoin to collect ransomware payments.

Any attempt to ban Tor would also likely involve a EU regulator partnership.
Tor is also part of the ransomware payment collection process.

> 3) Start making examples of BitCoiners in the US.

...or start making examples of Tor node operators, or even developers, in the
US.

> There have already been some arrests of people who were marketing
> BitCoin as a vehicle for evading currency controls. The main
> difficulty in bringing charges being the ambiguous status of BitCoin
> transactions. But once the Fed has ruled that a CTR must be filed,
> merely using BTC becomes cause for criminal complaint.

There has been at least one arrest of a Tor node operator(1) and much more
common, simple harassement via things like the DMCA. Harrassing and even
arresting Tor developers is not implausible.

1) https://www.techdirt.com/articles/20140701/18013327753/tor-nodes-declared-illegal-austria.shtml

> OK so at this point it is really difficult to transfer money into or
> out of BTC from the US and attempting to do so risks a jail term. do
> you think BTC is going to return to $1000 under those conditions or
> sink like a stone?

Do you think Tor could survive with node operators and devs being arrested?
 
> Sure you could bring a lawsuit. But on what grounds? Control of the
> currency has been considered a core government function for thousands
> of years. Article 1 Section 8 of the constitution clearly and
> unambiguously gives the Federal government the exclusive right to
> regulate minting of coin.
> 
> Even if a lawsuit was brought, it would be three years before any
> final decision and in the meantime, the value of BTC would drop like a
> stone.
> 
> So why doesn't the Fed do this?
> 
> My guess is that until ransomware, BTC just wasn't a big enough
> irritation and there is always the knowledge that as fast as one
> scheme is shut down, another pops up to take its place.

While the exact facts are different, again for both Bitcoin and Tor without
some amount of political support life would get much more difficult. Yet at the
same time, in both cases the way the technology is designed in a way that
provides a lot of protection: as fast as one scheme is shut down, another can
pop up to take its place. This may even be *more* true for Bitcoin than it is
Tor, as unlike Tor, Bitcoin doesn't rely on trust to anywhere near the same
degree; the way to prevent another Tor from popping up is to ensure that the
next time it does it's actually run by the Feds. A Bitcoin secretly being run
by the feds would still be succesful at moving funds from point A to point B.

-- 
https://petertodd.org 'peter'[:-1]@petertodd.org
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