In an interview yesterday, a reporter asked me about the many warnings that regulators and others have issued about Bitcoin: “Are the warnings overstated?”
In general, I don’t think they are. But regulators’ warnings risk being over-interpreted. What appears to be an anti-Bitcoin tide is just a lot of people doing their jobs. Multiple warnings about the same issues can be wearying, but they do not signify trouble in Bitcoin-land.
Let’s take a look at the dynamics around regulators’ warnings, and reporting about those warnings, to get things in perspective. We’ll use the U.S. state of Massachusetts as an example.
“On Monday, the second bitcoin ATM in Massachusetts — and apparently just the fourth in the [United States] — opened at the Clover Food Lab restaurant in Harvard Square,” reports the Boston Globe. “The company that installed and operates the machine, Liberty Teller of Boston, placed its first kiosk at South Station in Boston in February.”
That’s good news! But the title of the article is “Mass. regulators warn about bitcoin.”
Bitcoin is exciting and interesting, and the folks at Liberty Teller want people to know about their cool new tellers. Maybe they called the Globe, or maybe reporter Kyle Alspach saw it on his way through Harvard Square munching a bagel. Or perhaps he checks government Web sites for warnings every day, poor guy. Whatever the case, it was time for a news article.
What does a good reporter do when he’s writing an article about something interesting and new? Call around to get people’s comments.
Alspach knows Bitcoin pretty well, having written articles about it before. But he did all the right things for this story, too. He called a Boston lawyer who has written about digital currency issues, he called the Massachusetts Bankers Association, and he called the undersecretary of consumer affairs and business regulation in Massachusetts, Barbara Anthony.
I don’t know, of course, whether Anthony and her colleagues had already issued their caution about Bitcoin when Alspach called. When Bitcoin ATMs started going in, they probably knew that someone would call to ask soon. Either way, the department put out a consumer alert Tuesday that cautions people in a straightforward way about Bitcoin. Among other points the warning makes are: Bitcoin’s price against government currencies is volatile. It doesn’t have the consumer protections of other payment systems. It is not insured. There are security risks. These are all true statements that should warn uninformed consumers away from buying large amounts of Bitcoin.
One might wish for a more encouraging tone. Maybe the last line of a regulator’s warning could say, “But you know what? Bitcoin is going to lower the cost of financial services and increase competition, so that everyone is better off! It’ll bring billions of unbanked people around the world into a financial services system that allows them to accumulate wealth, feed their children, and send their kids to school!” Alas, that’s just not the business regulators are in.
Back to the Boston Globe. The old adage is true: “If it bleeds, it leads.” So Alspach wrote the story to highlight potential conflict between Bitcoin ATMs and regulators. The headline writer—usually a different person—did the same. There is room in the world for feature stories, including about cool new tech with world-changing potential, but this is news, and news needs conflict. So the Globe story, like so many others, highlights the negative.
The repetition of these stories—each time a regulator, central banker, or other organization says something cautionary—may create the appearance of a rising tide. But it’s just repetition of the same warnings about the same issues, and the news stories are all produced in the same controversy-heightening atmosphere.
The warnings themselves deal with real issues that people are working on, and these issues will diminish in significance over time. The Bitcoin protocol is solid. Social and economic habits, practices, and institutions will take some time adjusting to it and learning how to maximize Bitcoin’s benefits.
That’s the idea: maximizing Bitcoin’s benefits while minimizing the risks. So if you’re worried or frustrated by regulators’ warnings or the reporting about them, another adage applies: Keep calm and #Bitcoin on.