The Government’s Attempt to Control Bitcoin – Bitcoin Magazine
This is a transcribed excerpt of the “Bitcoin Magazine Podcast”, hosted by P and Q. In this episode, they are joined by Matthew Pins to talk about the regulatory landscape and how the government might try to legislate Bitcoin.
Watch this episode on YouTube or Rumble
Listen to the episode here:
Matthew Pines: You can assume any scenario you want. I can imagine a scenario where solar flares wipe out the web and that’s not good for Bitcoin, but is that relevant to anyone’s decision making? I don’t think there is a plausible scenario where Elizabeth Warren herself takes executive power and bans Bitcoin.
I can construct an infinite number of these kinds of negative scenarios. The question is how much faith do you put in them? I think it’s like symmetry. For every negative downside scenario, is there an equally likely upside scenario? What would be the political conditions? We are really making a political assessment here. We make no financial assessment. We make no assessment of when the next block will arrive, it is like a completely political judgement.
I don’t put much stock in anyone’s ability to predict any kind of political development. So then it’s a question of what’s the reasonable worst case scenario, what’s the reasonable best case and where we’re more likely to end up somewhere in the middle.
I think you’re likely to see, especially in the Biden administration, an increasing willingness to push the boundaries of the national security case against Bitcoin, and the climate case against Bitcoin. It is not a united front. There are people in many parts of government who are neutral, negative, positive, and it’s a complicated, messy kind of bureaucratic machine.
Any particular power instrument is very much disconnected from all other instruments. So you can get somewhat disconnected, if not downright disjointed policy making on different things. I think what we should more likely expect is a downside scenario, like Tornado Cash-like OFAC stuff just getting a lot more aggressive on Bitcoin.
This is to try to gradually boil the frog on Bitcoin miners. They will try to get them to come into more of a walled garden, so to speak. It’s not necessarily hitting the application layer, they’re trying to hit the enterprise layer.
There are layers to Bitcoin beyond just the social consensus layer, the Bitcoin layer. It is the political, economic, social layer of companies, such as state and local regulatory regimes and national enforcement. I think it’s an interesting test case to see how far they think they can push things like the OFAC power, which is a really unique power, right? The Tornado Cash justification came from the National Emergency Act and through a separate international economic law, the International Emergency Economic Powers Act, which basically allows them to sanction foreign property and entities linked to foreign property.
I think there’s going to be litigation over exactly to what extent smart contracts can be considered a person or a property or an entity. That would be where I would see, would be the technocratic “exercising the sanctioning power”, and then really instilling compliance into companies – not necessarily requiring it, but basically leaving the ambiguity open. So, as we saw with the Ethereum stuff, self-censorship is going on, right? So it is not forced. It scares a bunch of people who are VCs or executives who don’t want to get into trouble and who just want to act on a precautionary basis and just take action themselves, even though they might not be required to. For me, that is the most negative scenario.
They do this, and then a bunch of senior Bitcoin miners and other people on the corporate team, like they’re backing down. I think it’s more the kind of game you’re likely to see play out, as opposed to the big hammer of the state going to fall and a bunch of thugs with jackboots going to steal your hardware wallet. That will not happen.
Eventually, such things end up in the courts. It’s very boring, isn’t it? It’s like things like that end up in lawsuits and two years later, after many lawsuits, you find out that like maybe it’s new case law, maybe it’s not. I think people are overestimating how much of it is going to be some major crackdown or even equal legalization, as opposed to just this random half-drunk wander through a new regulatory landscape.
