“We see this as the biggest fundamental change in consumer protection since banks were invented,” said Colangelo by phone from Miami. “We think it’s going to have as big an impact [on money] as the Internet has for information.”
Another impetus for the Bretton Woods gathering and the white paper was to have a “time capsule [showing] this is what the Bitcoin world saw as Bitcoin’s potential and blockchain’s promise and the obstacles in our way [in 2015],” said Colangelo. “So it’s really an investment in a future Bitcoin museum piece.”
“We wanted to make sure there wasn’t a regulatory mismatch between what people thought they were regulating and what they were regulating, and we didn’t want [corporations] to think that they were absolved from complying with regulations or the law just because they were using new technology,” he said.
“Our current structure was built in 1920, basically,” said Colangelo, but it is already fairly efficient, costing the consumer about 2-3% in fees, whereas Bitcoin technology might cost 0.1%. “I’m not sure it’s enough to make Bitcoin a popular form of exchange here in America, because it takes a lot to get people to stop what they’re doing,” said Colangelo. “Where it does have a potential is for the consumers who don’t have access to banking services, whether they are in the United States or in developing countries.”
“We brought together libertarians, regulators, law enforcement, industry. There was a lot of back-and-forth over some differing principles, but everyone agreed regulation poses a significant threat to Bitcoin replacing U.S. dollars or serving as a medium of exchange,” said Colangelo, adding that regulation is “the biggest bogeyman for a lot of people in the Bitcoin community.”
For instance, “As soon as there is a real threat to their business model, [established financial institutions] will be able to purchase their competitor or implement a proprietary system,” said Colangelo. “All the big players can get together and say, This is the blockchain we agree on, it’s a private blockchain, it’s controlled by us, and people need to pay a fee to use it, and the fee goes to us, not some miner [a company who runs computers that keep the Bitcoin network running].”
Colangelo said volatility could be less relevant in other countries: “There are parts of the world where people already know that their currencies are going to decline next year. A Venezuelan would prefer something whose value goes up and down compared to their local currency, which they know will only go down.”
Though not discussed in the paper, governance issues could “cascade into a real brain drain as different developers become entrenched with different viewpoints and no longer continue to consider views based on their merit but based on who is proposing it,” said Colangelo, who still expressed optimism that the community will make it through this “existential threat.”
“We live in this world where nobody sells, electronically, really small-value items,” said Colangelo. “When we can transact and sell those items efficiently, all the property around us can be turned into something that can be leased. Right now, it’s just big items, through Airbnb. We’re beginning to monetize couches, extra storage in homes and seats in our cars. It’s not until we have the ability to send a one-cent transaction that we will be able to monetize this whole host of other things like Wi-Fi and content on the web.”
Due to increased regulation, such as Dodd Frank, Colangelo said, “It’s now not necessarily in the bank’s best financial interest to offer a free checking account to someone who is going to have a couple hundred dollars in there.”
“The future is on its way, and we don’t want to let overly burdensome regulations or noncompliance to stop it from getting here,” said Colangelo. And his advice for Bitcoin companies specifically? “There are a lot of times when it’s better to beg for forgiveness then ask for permission, but when you’re dealing with financial regulation, it’s much better to ask for permission, because ignorance is not an excuse.”
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