Every year has a handful of days that you’ll never forget. Sometimes for great reasons, sometimes for awful ones, and sometimes because a level of noise and action coalesces into an awareness that something big has shifted.
Wednesday was one of those days, with the staccato of compromised Twitter accounts (including ours) escalating to reach prominent public figures including current and former heads of state. The scale of the hack was spectacular.
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The mainstream press called this a “bitcoin scam,” and to some extent it was – the hacker set up the typical ploy of promising to send back double whatever amount of bitcoin anyone sent to a certain wallet. It’s amazing that people fall for this.
But some people do – a total of $123,000 worth of BTC was sent in approximately 400 transactions in total (some may have been the hacker recycling coins to inflate the activity). 17 transactions sent more than $1,000. Glossing over the fact that this is an astonishingly small amount for the scale of the hack, some skeptics took the opportunity to remind everyone how bitcoin was a scammer’s paradise.
Close the door
Some commentators went as far as to call for the banning of bitcoin. “If bitcoin were illegal,” goes the reasoning, “this wouldn’t happen.” Of course, this brought out the defenders by the droves, who pointed out – among other compelling arguments – that making something illegal doesn’t stop it from happening; it often just makes it harder to monitor. And banning bitcoin would not stop its use nor eliminate its value.
But it did highlight a pervasive concern among many mainstream investors: a lack of regulatory clarity. Could the U.S. decide to outlaw bitcoin transactions within its jurisdiction? The very possibility is understandably enough to keep cautious investors away.
Technically, the U.S. could not ban bitcoin on a global scale – bitcoin lives on a distributed network that would continue to exist even if U.S.-based nodes shut off and U.S.-based users dropped out. One of the strengths of bitcoin is that it is out of the range of state actors.
But, realistically, making the holding or transacting of bitcoin illegal for U.S.-based entities and individuals would be a big shock to the price as its store of value narrative would take a significant hit.
What’s more, the U.S. has considerable influence over the FATF, which sets anti-money laundering and anti-terrorist financing systems for the world’s banks and payments companies. The organization could be pressured to penalize governments that allow cryptocurrency services within their jurisdiction. Yet all of these concerns seem unfounded. Last week, the FATF announced its intention to step up crypto asset supervision with a view to building a global framework, which implies an interest in monitoring rather than stopping.
And in the wake of the Twitter hack, the talk coming out of Washington is not about bitcoin. The concern is the centralization of platforms. Twitter is under scrutiny much more than bitcoin.
If regulators were going to jump on the ban-bitcoin bandwagon, given the media frenzy, now would be the time. That they have not done so is a strong sign of acceptance. True, there may yet be hiccups ahead in the road to systemic support – but so far, the concern is more about the vulnerabilities in centralized services.