Below is the video of the concluding part of my speech from Inside Bitcoins Singapore.

My case against regulations was based on failures of all institutions involved in drafting and executing previous regulations in achieving goals they were aimed at, particularly:

  • Central banks with their low interest rate policies have created a massive business cycle with bubbles, crises or periods of stagflation. As a result, real capital was wasted in malinvestments instead of increasing productivity and standard of living.
    This luckily is not possible in Bitcoin because there is no central bank regulating monetary base and money supply
  • Capital and reserve ratio requirements have created arbitrary rules, which institutions focus on instead of weighing real risk because they are implicitly or explicitly guaranteed to receive liquidity or capital injection as long as they meet those rules.
    Impossible with Bitcoin since it is not possible to issue new units of currency to provide such funds
  • Too-big-to-fail as another form of regulation introduced moral hazard to the financial markets. It allowed banks and other institutions to increase risk exposure safely assuming they will receive bailout.
    Without the printing press, bailouts would have to be financed directly from taxes, which would be very unpopular and almost impossible
  • Deposit insurance has lead to lack of due diligence on part of consumers who don’t need to look at bank’s health as long as their deposits are below the insurance threshold
    In Bitcoin financial system, no institution would have sufficient resources to cover such insurance. On the other hand, we have seen examples of how unhampered free market reacted to failures after MTGox collapse. Other exchanges came forward with transparent proofs of reserves and explained their security processes in as much details as possible. That is in huge contrast to lack of transparency in regulated financial markets where the focus is on regulatory compliance.
  • To understand what credibility regulators have in consumer protection when it comes to Bitcoin exchanges, one must know only that Bernie Madoff was regulated.
    Consumer protection is the area where regulations would be possible, but they would result in same lack of due diligence as was the case with Madoff. Also they would lead to exchanges having to shift focus on compliance from security and would increase costs for new startups
  • AML and KYC requirements might lead to much more cases of private information leaks such as JPMorgan, Target and others who lost data of hundreds of millions of their customers due to attacks. On top of that, these rules haven’t stopped HSBC and other banks subject to them to launder hundreds of billions of dollars for drug cartels.
    Such requirements would be possible to impose, but would increase costs for startups and increase privacy risk for their customers. If JPMorgan with all their money can’t protect their data, how is a startup supposed to achieve that?

The conclusion based on these points is in the video.