One freedom that many people do not often consider is that of the freedom to choose their own currency. Jon Matonis, a Board member for the Bitcoin Foundation, wrote in an Op-Ed published in Forbes that, “freedom of choice in currencies is probably the most important free speech issue of our time.”
Well, the government seems to have recognized this freedom as they continue their recent crusade against our liberties. On May 30, the Department of Financial Institutions of California sent a cease and desist letter to the BitCoin Foundation in Seattle, Washington. The letter claimed that the Bitcoin Foundation was in violation of the Financial Code for acting as a “money transmission business” without the proper licensing. The Bitcoin Foundation was given 20 days to answer the Department with the “steps they have taken to comply with this order.”
Here is the full letter:
This letter may be part of a widespread attempt by California to try to stomp out Bitcoins, but so far the Bitcoin Foundation is the only group to release news of receiving a cease and desist letter. The strangest part of this letter, though, is the claim made against the non-profit Foundation.
According to the US Code, a money transmission business is a business that “provides check cashing, currency exchange, or money transmitting or remittance services, or issues or redeems money orders, travelers’ checks, and other similar instruments or any other person who engages as a business in the transmission of funds, including any person who engages as a business in the transmission of funds, including any person who engages as a business in an informal money transfer system or any network of people who engage as a business in facilitating the transfer of money domestically or international outside of the conventional financial institutions system.” It is certainly a very long and confusing definition.
What is more confusing, though, is the fact that the Bitcoin Foundation does not engage in any of those activities. It is a non-profit organization with the goal of helping Bitcoin to reach its potential “from the opportunities it creates for entrepreneurs to the purchasing power it provides for citizens of countries large and small.” The focus of the Bitcoin Foundation is to standardize Bitcoins as a “respected, trusted and useful” tool, protect the integrity of Bitcoin protocol and to promote the reputation of Bitcoin.
Yes, Bitcoins are traded and exchanged for goods, services and legal tender all the time. Yes, some organizations involved with the use of Bitcoins are money transmission businesses. But, no, the Bitcoin Foundation is not one of these. The California Department of Financial Institutions has targeted the wrong organization — little surprise there.
Returning to the discussion of our freedom of currency, though, the important question is whether the government should be attempting to regulate — aka kill– the use of Bitcoins in America. Since the government supports their oppressive tactics by claiming to be protecting people, let us look at who is hurt by the use of Bitcoins.
I find two possible victims; the first are those who use Bitcoins. Just like any other currency, Bitcoins can be stolen. Bitcoins were also designed to be deflationary and expensive due to their scarcity (there will only ever be 21 million Bitcoins created). Clearly there are more positives involved in the transactions of Bitcoins, though, or people would not make the decision to join the Bitcoin virtual market.
The second “victim” is the federal government. Since Bitcoins are hard to track, it is difficult for the IRS to hold users accountable for any taxes they may owe on their Bitcoin transactions (see my past article “GAO: IRS Should Tax Bitcoins” for more on this). So basically, the government is not making revenue from Bitcoin usage, the way they would through people’s transactions using legal tender. Once again, it is the loss of the government, and not for the protection of Americans, that is leading the government to try to abolish a free-market activity. In this case, Bitcoin usage is a way for Americans to engage in their freedom of speech by choosing the currency they wish to use in the market they wish to be involved in.