Posted by: Greg Miller
October 12, 2014
New York is leading the world in Bitcoin regulation with their proposed, and soon to be implemented, Bitlicense. The Bitlicense is a oppressive piece of legislation that is definitely going to hinder Bitcoin businesses in New York, but these New York regulations crush financial privacy stronger than anything.
New York will require all businesses working in the digital currency business (exchanges, merchant processors, hardware, currency makers, etc) to report personal information, which includes name, and address of those involved. On top of that, a detailed report of the nature of the transaction must also be submitted. Any transactions above 10,000 dollars in one day must be reported. The report goes on to explicitly say that businesses offering services that mask the identity, source or destination of a digital currency transaction are banned from doing business in New York. These regulations are obviously very, very bad news for anyone who cares about Bitcoin anonymity.
The Bitcoin community has reacted on the whole, very negatively. Bitcoin business owners have said that rather doing business with people in New York State, they simply will block New York State IP . Cutting a state of 19,651,127 people off from Bitcoin.
These regulations will have a big impact on the Bitcoin community as the whole, but I think it will effect the Deep Web community in the biggest way.
Tor To The Rescue!
Bitcoin is not new to geographical restrictions. Many popular Bitcoin gambling sites block US IP because they are afraid of prosecution from the US, which has a tight hand on gambling in the US. This did not stop American Bitcoin gamblers, though. With the help of an another subversive and boarderless technology, Tor, they were able to continue gambling. Disguising their US IP as a different IP, getting around these restrictions. Many Bitcoin users in New York will use the same tactic and to undermine these harsh regulations. Pushing a whole group of normal and good citizens into the black market.
If Bitcoins are bought through businesses compiling with the Bitlicense regulations, they be tainted because of how well documented they are. These Bitcoins will be hard to anonymize after going through these gate keepers and will likely be rejected by the Bitcoin community outside of New York.
Deep Web Bitcoin Services
Well, Tor may allow people to get around these regulations for a while, but exchanges all around the US are increasing with regulations and requiring more and more personal info. Bank accounts, phone numbers, name are just a few of the things required by most exchanges and all these that can reveal the location of you, leaving New Yorkers behind.
I expect there to be a new trend of deep web industry to pop up, to meet the needs of those left behind by government Bitcoin regulation. Like the drug trade in US, or gold in India, government restrictions will only increase the demand. These exchanges will allow people to sell and buy Bitcoin. In France there is already a case of this happening. A French Bitcoin exchange was operating without any licenses and not compiling with French regulations. It ended up getting shut down and the owners arrested but while it was up, it was very popular and made more than a quarter of a million euros in its short stint as a exchange.
Regulation Will Push Clearnet Bitcoin Users Into The Deep Web
These regulations put businesses over the edge and as a result, are unable to do business in New York. This leaves a huge vacuum in New York for Bitcoin services. In the wake of this, black market services will pop up to meet the needs of these costumers and make a profit. People’s regular interaction (and perhaps first) with Bitcoin will be through black market channels and not white market channels. Making the average users in areas affected by government regurgitations closer and more familiar with the deep web.
People will be trying to get Bitcoin so they can send money to family in other countries, protect their value from the inflation of the dollar and find new economic opportunities. Good paying jobs are harder and harder to find, while the cost of living is rising. This leaves the average American in a very bad position. Bitcoin’s global nature could allow them to work for people all over the world and find better paying jobs.
They could also look to the deep web itself for opportunities. Never before in history, could you be a drug king pin from the comfort of your home and not be involved in any kind of violence. The drug trade on deep web is the safe and convenient solution for people interested in getting into the business. For business minded people, there can also be a lot of money to be made. As I already mentioned, as economic conditions worsen people will look else where in order to survive. The deep web will start being not where just someone can their fix, but the what puts food on the table for the family.
Though, there was be a lot of push back, the New York state regulators are not backing down. It looks like, for the time being, these regulations will be in acted as is but just like anything government does, it will back fire and reach the opposite goal of the regulations.