Banking on Bitcoin Page #7

who really took an interest

was Benjamin lawsky.

Very important regulator

in the financial world.

And in January, 2014,

holds these public hearings

because he wants

to come up with a license

for bitcoin companies.

We believe that putting in place

appropriate regulatory safeguards

for virtual currencies

will ultimately be beneficial

to the long-term strength

of the industry itself.

Lawsky was essentially

given the opportunity

to write the rules for this whole

new industry from scratch.

The first question

is the obvious one

that's on everyone's mind.

Sort of unexpected yesterday,

but with the arrests

we saw obviously

that's put a bit of a cloud

hanging over

the industry right now,

and so how do each of you react

to what we saw yesterday,

what it means for bitcoin or

virtual currency and its future?

I think it further supports that

bad guys are gonna do

bad things,

and they're gonna use whatever

technology is available to them.

But I view it as, if the allegations

are true and they're convicted,

the system works.

Are people still doing bad

things with bitcoin?

Sure. Is the majority of

the bitcoin activity vice?

Not a chance.

So I think the issue you raise

is one that people

like to write about,

the media likes to write about

it, makes great headlines.

You get a lot of clicks.

You can sell a lot of ads,

but I think

it's in the rearview mirror.

There are some people

in the bitcoin community

from the libertarian

side of things

that want government

to just leave it alone.

Would you say regulation

is both inevitable

but more importantly,

actually ultimately

going to be crucial for the

survival of virtual currency?

Sounds like a terrible

idea to me.

Just understand what we're

trying to do with bitcoin.

We're trying to create a world

where transactions can move

globally for free, okay?

And making these companies hire

you know, some outsourced

compliance firm

is a bad idea.

It'd be great, in any industry,

if you could just

open the door and let folks

run out and give it a shot.

We may choose not

to invest in a company

if they can't

get licensed by you.

If the choice ultimately

is between

preventing money laundering

on the one hand,

and I probably shouldn't even

use the word "money laundering"

'cause it's too nice

a word, frankly.

Money laundering

is the facilitation

of all kinds of horrific crimes

that I think

everyone in this room

never wants to see happen.

Acts of terrorism,

funding rogue nations, etc.,

all take place through

massive money laundering.

Now the choice

for the regulator is,

permit money laundering

on the one hand,

or permit innovation

on the other.

We're always going to choose

squelching

the money laundering first.

I agree that I don't think

anybody wants money laundering.

When we got a...

First saw bitcoin

you know, about a year and

a half, almost two years ago.

I don't think anybody would deny

that it was a bit

of a wild, wild west,

because there was no regulation.

There was no framework

to evaluate

the asset, evaluate companies,

determine who was compliant

and who was not,

and a wild west

attracts cowboys.

And I don't think anybody here

would disagree with the fact

that a sheriff

would be a good thing.

A lot of, I think,

the entrepreneurs

feel like they have

to self-censor.

They don't want to come out vocally

critical of the regulations.

Part of that is maybe

'cause some of them

just like regulations,

but I think another part of it,

some of them just feel like

they will get

attention of the regulators

if they come out against them.

Yes, we want them to innovate,

but at the same time,

we just can't live in a world

where we're gonna permit

money laundering to go on.

I think regulators

should give bitcoin

some time to grow up.

Too much regulation now

will just stifle innovation.

I think before regulators

kind of come in and say,

"we're gonna solve

all your problems,"

and then fail

to solve all their problems,

I think they should give

the innovators time

to solve those problems.

One function of regulation

is to make things clearer,

so right now bitcoin,

because it's so new,

is in a state of flux

everywhere.

The lesson from the Internet

is anything that China bans,

invest in.

And that's a joke,

but the U.S.

Allows Google to operate here,

allows Twitter to operate here,

allows bitcoin to operate here,

allows Facebook to operate here.

Chinese government doesn't allow

any of those companies to operate

the way they operate in

this country, or at all.

This is about freedom,

ultimately.

You know, we're 50 yards

from the old

world trade center here

and I think all of us

never want to see

anything like that happen again, and

it would have been a lot harder

for 9/11 to ever have occurred

had we had

the protections in place

that would prevent the movement

of massive amounts of money

around the globe

by people who would want to

kill everybody in this room,

so I think the key is

to not create useless regulation

but I think the motives

behind a lot of those rules

are to ensure we don't

miss something again.

Since 2001,

there's this absurd

obsession with terrorism.

So any time a regulary

gets up and says,

"well, bitcoin can be used

for terrorism."

Well, of course it can.

So can anything.

So can cell phones and so can the

Internet and so can the car.

It doesn't mean that we should stifle

the growth of those industries

just because bad people

can use it.

This has arguably been

the worst week

in the cryptocurrency's

short life,

stunned by the collapse of

once-dominant exchange mt. Gox.

Now that failed firm's ceo

mark karpeles is in hiding.

Some 750,000 bitcoins

allegedly stolen or lost

which accounts for about 6%

of the total circulation.

By the time

mt. Gox went down,

it was holding what

its customers believed

were about

a half a billion dollars

worth of their bitcoins

and the company's bitcoins.

It was no longer the largest

exchange in the world.

But part of what's so amazing is

that people kept using it

even after there had been

numerous incidents

in which it was clear

that the company

was not up to the task

of safeguarding the money.

And the only reason he survived

as long as he did

was because in 2013,

the price started going up.

People kept

putting money into it.

He had more and more money

'cause the price was going up,

but as soon as

the price started going down,

this is what happened, right?

It peaks in late 2013.

It starts coming down in 2014.

Soon as that price

started coming down,

it all just tumbled for him.

Gox was going to collapse.

That it lasted as long as it did

was actually

kind of a stroke of fate.

But its failure was

it didn't have

the kind of more boring

mainstream

institutional controls

that we require to bring it

to the next level.

And there's a whole bunch

of money missing,

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