The Feds Are Terrified Of Cryptocurrencies... But They're Powerless To Stop Them

Authored by Josie Wales via,

The federal government is no match for innovation. This is something lawmakers have always known, and it is the reason state and federal regulations exist. But innovation, by its very nature, will always find a way around those regulations, resulting in the implementation of more regulations for creative minds to learn to evade — which they will. This results in the over-regulation we see in America today.

Nothing scares the government more than something it can’t control, and the Securities and Exchange Commission (SEC) revealed this week that it is terrified of cryptocurrencies — as well it should be. See, all those lawmakers and bureaucrats sitting around regulating everything depend on taxpayer money to pay their salaries so they can keep writing regulations. Since cryptocurrencies allow people to keep all of their money, this is a big problem for the lawmakers. Soon, people may even start to realize they can buy, sell, and trade freely without any government intervention. The horror.

So the SEC recently got together to write up even more regulations to try to scare people away from using cryptocurrencies and the blockchain by targeting Initial Coin Offerings, or ICOs. Initial Coin Offerings have become very popular recently as a way for crypto start-ups to raise funds for their ventures using digital tokens (cryptocurrency) like Bitcoin or Ethers. They operate on a blockchain, which is a decentralized digital ledger of publicly and chronologically-recorded cryptocurrency transactions. Investopedia gives a wonderfully detailed breakdown of how ICOs work. You can read it here or watch an explanation by technologist and author of The Internet of Money and Mastering Bitcoin Andreas Antonopoulos here.

Basically, with the birth of the ICO came the emergence of a whole new market — one with a great deal of money floating around that the federal government couldn’t take by force. Naturally, this had to be investigated, and on July 25, the SEC released a Report of Investigation under Section 21(a) of the Securities Exchange Act of 1934. The investigation zeroed in on the DAO, a distributed autonomous organization that set the record for the largest crowdfunding campaign in history, raising over $150 million in ether in 2016. According to the report published by the SEC:

The Commission applied existing U.S. federal securities laws to this new paradigm, determining that DAO Tokens were securities.  The Commission stressed that those who offer and sell securities in the U.S. are required to comply with federal securities laws, regardless of whether those securities are purchased with virtual currencies or distributed with blockchain technology.”

Or, as crowdfunding lawyer Amy Y. Wan explains, the press release amounts to the SEC saying: 

“For those of you out there doing ICOs, we’re here to warn you that U.S. securities laws might apply. When we say might, we mean just that — sometimes securities law will apply, sometimes it won’t. It depends on the specific facts of the ICO.”

Okay, so the government wants to regulate virtual tokens, aka cryptocurrency. Good luck. As blockchain engineer Elaine Ou pointed out on Twitter, ICO’s are “Untraceable, international, [have] no central authority, [and] funds can’t be frozen. The SEC ICO warning is the best ad for ICO’s.”

So while the government can — and will — continue to make the lives of innocent people miserable using weapons like civil asset forfeiture, crypto regulations, web-provider takedowns, and the war on drugs, these are all last ditch efforts by a desperate ruling class on its death bed.

The creativity and resilience human beings possess do not exist within the jurisdiction of the government – no matter how hard it tries to convince us otherwise.


Dsyno Arturo Sun, 07/30/2017 - 15:31 Permalink

"The Fed's Are Powerless To Stop Cryptocurrencies"Bullshit. Look how fragile Bitcoin is/was this month, on the verge of being split in two because of in-fighting between various groups. A group of people are deciding the future of Bitcoin right now. To Segwit or not to Segwit. Think about that: A group of people are deciding the future of Bitcoin.China controls so much of the Bitcoin mining, due to their cheap electricity and cheap servers, that China now has a huge say in decisions on Bitcoin changes. They could've devastated this entire Segwit plan.Since China already has so much control over Bitcoin, you can absolutely bet that there are, and will be, countless more ways to control it.My bet is, each government is going to create their own cryptocurrency, and make all independent crypto's illegal. If you think the governments are "powerless to stop crypto", you're delusional.

In reply to by Arturo

GreatUncle logicalman Sun, 07/30/2017 - 20:11 Permalink

Only works if you have something to lose ... an ever growing number of people have nothing to lose that being whacked is the least of their worries so government loses control.Imagine a person with $100K of debt and no way to repay it even in a lifetime and you threaten them with being whacked ... lol ... 100K of debt burned and how much leverage?

In reply to by logicalman

OpenThePodBayDoorHAL Dsyno Sun, 07/30/2017 - 17:05 Permalink

This article is stupid, look at the history of QQ Coin, 800 million users, oops government crackdown, gone.The government already throws you in jail for having certain strings of numbers on your computer (child porn JPEGs for example).And the article says "crypto allows people to keep all their money". Hello, gains are taxable anytime, try not paying your taxes sometime (unless you're a billionaire of course).

In reply to by Dsyno

tmosley Dsyno Sun, 07/30/2017 - 17:45 Permalink

>A group of people are deciding the future of BitcoinWelcome to the world of free banking. If an issuer fucked up back then, the value of their privately issued currency could plummet. It is much the same today, except its better for the consumer. If the miners fuck up the protocal, it can just be forked and a non-fucked up version can be put before the market for consideration and potential adoption.Here's the thing. If governments create their own cryptocurrencies, then it WILL be impossible to stop private cryptos. Decentralized exchanges that handle both govt cryptos and "illegal" private ones will inevitably pop up, and there won't be any way to stop them. The fact that a banking interface is highly convenient for shunting purchasing power from fiat to crypto is the only thing that allows them to have any sort of control at all right now. But the system is too leaky--easy to get around barriers by trading goods bought on Amazon, or gift cards, or even local meetups for cash.

In reply to by Dsyno

Sam.Spade Dsyno Sun, 07/30/2017 - 21:21 Permalink

I suggest you read Antifragile by Tailb.  It applies directly to the cryptospace.He describes how all living things and structures made up of living things adapt and grow stronger under stress.  To paraphrase the work in one statement: "Blows that do not kill me make me stronger".The point applies to cryptocurrencies in spades.  Because the technology is out of the bag, because there is a demand for anonymous free remote payments that won't go away, every action by the Feds against them will only cull the herd and make the survivors stronger until they become unassailable.Take a look at the book. Rated 4.3 in 937 reviews at….

In reply to by Dsyno

eclectic syncretist Automatic Choke Sun, 07/30/2017 - 15:20 Permalink

The governments and banksters are letting the fish run with the line and fully swallow the bait before they set the hook. Hopefully I am wrong about this and posters here don't get hurt by what I see coming, but with postings like this one, wherein the author is so clearly just talking his book when he goes so far as to claim that the government can't step in and regulate crypto's, when China has already done so on multiple occasions, albeit in a minor fashion, is lying.

In reply to by Automatic Choke

Implied Violins eclectic syncretist Sun, 07/30/2017 - 16:10 Permalink

It is laughable to me how many people continue to staunchly stand by crypto's and how they are 'the wave of the future', when it has been demonstrated many times that governments can, AT WILL, track down anyone using them and PROSECUTE THEM. Anything digital, including the words in this post, can be hacked and traced at ANY TIME.

I am starting to believe that this crypto thing is SO important to the roll-out of the One World Government that they are paying massive numbers of trolls to write articles like this and then troll forums - like ZH - to affirm the 'virtues' of cryptos. I just hope that they make sure they are getting paid in gold, so they will eventually have something for their efforts.

In reply to by eclectic syncretist

Implied Violins GodSpeed_00 Sun, 07/30/2017 - 17:24 Permalink

Here's one right here, Silk Road:…

"...former FBI special agent Ilhwan Yum described how he traced 3,760 bitcoin transactions over 12 months ending in late August 2013 from servers seized in the Silk Road investigation to Ross Ulbricht's Samsung 700z laptop, which the FBI seized at the time of his arrest in October of that year. In all, he followed more than 700,000 bitcoins along the public ledger of bitcoin transactions, known as the blockchain, from the marketplace to what seemed to be Ulbricht's personal wallets."

It's a small percentage at present, but that article is proof that governments can, at will, trace bitcoin transactions via the blockchain.

All that's needed is for the government to decide such transactions are illegal, then they can investigate and prosecute EVERYONE who has ever performed a transaction via bitcoin - because the entire history of where that bitcoin went is traceable right back to its origin.

In reply to by GodSpeed_00

tmosley Implied Violins Sun, 07/30/2017 - 17:54 Permalink

Everyone with any knowledge on the subject knows this is possible, and that it is stupid to try to use pseudonymous cryptocurrencies to commit crimes. Use Monero, Dash, or some other anonymous crypto if you want to do that shit.If governments step in to try to crack down on this sort of activity, it will just drive the market to those more privacy-focused coins.

In reply to by Implied Violins

GodSpeed_00 Implied Violins Sun, 07/30/2017 - 18:14 Permalink

Yeah just like they said they would lock up everyone who downloads illegal movies, yet I streamed some movies last night along with millions of others world wide. They can prosectue those people because they were buying drugs etc. Now try prosecuting everyone who owns crypto just because they own it, you must have a really large jail and lots of judges, lots of police to do raids. Then you have to prove it was me using the crypto and not just someone connected to my Wifi. Maybe I go to a mall jump on their wifi and buy crypto. You guys really think the government is a god huh?

In reply to by Implied Violins

Sam.Spade Implied Violins Sun, 07/30/2017 - 21:27 Permalink

You give the reason why Monero has exploded in value and will probably eventually take over the mantle from Bitcoin.  And, if it's brought down by some weakness, such as the inability to scale, one of the future thousands of replacement wannabes will rise to take it's place, resistant to that particular problem.Cryptocurrencies are like bacteria.  There are billions of strains of the latter, but only a few that are really dangerous to man.  But the latter exist because the former provided a development pool to make the latter effective.Sorry, cryptohaters and tyrant wannabes, but pandora has opened the box and the contents can't be put back again no matter how hard you try.

In reply to by Implied Violins

Golden Phoenix Implied Violins Sun, 07/30/2017 - 22:18 Permalink

All your crap is based upon people being criminals doing things which are illegal in any currency. The average consumer just wants to go online and order a widget cheap from China and have it shipped to the US. Do you think the government really cares about someone buying micro USB cables from Alibaba? Or buying an Amazon gift certificate so they can have some baby formula and diapers shipped to their doorstep? Do you think it'd have the capacity to stop it if it did?    

In reply to by Implied Violins

CaperAsh bionicknees Sun, 07/30/2017 - 16:41 Permalink

Maybe you won't give it to them and maybe they won't know you have it.But will you be able to use for anything in the event of some sort of cash dysfunction, that's the question.Probably not.I suspect junk silver coins might be the most liquid hard money solution because in that scenario you could conceivably use them to buy stuff with, like basic groceries. What could you get with a one ounce gold coin? It's worth too much. What do you trade it in for? Worthless (or illegal) cash?Bitcoin is a threat because as long as there is internet (admittedly a big if since it can surely be shut down any time they want, and/or they can surely shut down most crypto exchanges/isp's etc.) it can be liquid. But again: can you buy groceries with it if you need to? Probably not.Farm, that's the way to go! Buy a goddam farm in goddam Ecuador, wear a straw hat, chew on long stems of grass, main entertainment will be mooing back at the cows to see if they react at all, and not have to worry about money at all. Let's face it: the hippies had it all figured out decades ago! Chill!  

In reply to by bionicknees

GodSpeed_00 CaperAsh Sun, 07/30/2017 - 18:31 Permalink

Can you buy groceries with silver and gold? There is a youtube video with Mark Dice where he goes on the street with a Silver bar and a Hershey Bar and ask people which one they want. ALL of them took the Hershey bar, you think people will trade food in crisis for your shiny metal? You think in a collapse you will be blissfully walking into a supermarket and giving people shiny metals for food and water among the mass rioting? lol okay. If this nightmare scenario happens the only thing that will have value is food, water and ammo.

In reply to by CaperAsh