Remember that movie where Sandra Bullock crosses the entire country blindfolded because peaking outside means you’re basically facing a certain death?
That must be how it feels to build anything in Bitcoin right now.
Everyone is just moving blind. The United States government is taking everyone along for the ride and no one knows where we’re headed. There are no instructions you can read, and no rules to follow. You move an inch in the wrong direction, you make one unfortunate shitpost, or maybe you tweet at Elizabeth Warren on her bad day. You get your head chopped off.
Imagine you’re one of the Samourai Wallet developers. One day, you decide enough is enough and take the blindfold off. You make a concerted effort to engage with the regulators and bring two dozen of your peers on board. You pay top dollar and hire the best lawyers in the industry to help everyone see through the regulatory fog.
Four months later, chopped.
Beyond the human tragedy unfolding here, this should be a cathartic moment for the industry.
We’ve spent the last decade trying to get into the good graces of regulators. We’ve asked permission, laid out red carpets and practically begged for consideration. Millions of dollars were donated to lobbyists and many more were put to work by any company seeking to do business with United States citizens.
If last week is any indication, it was all for naught.
Did you think only shitcoins get you rugged?
Sure, the Samourai guys seem like easy pickings. Inflammatory personalities and bombastic statements are enough to convince the casual observer that they are guilty, if only of wrong-think. Openly challenging the government and inciting individuals to take control of their financial privacy appears to be a criminal offense these days.
Even in Bitcoin circles, “moderates” argued that well… they were brash meanies so they probably deserved it. As far as they’re concerned, there is no need to overreact.
“Nothing to see here.”
Back in the real world, your head starts spinning once you begin reading the indictment. The language is flimsy. The technical concepts are bastardized. Even the most sensationalized charges are incredibly tenuous. One loose Twitter DM, a rather vague presentation slide, and a casual shitpost. Given the defendant’s history, I’m actually astounded they couldn’t conjure up something more incriminating. Maybe they have a couple of aces up their sleeves but at first glance, none of it adds up.
That is until you zoom out and look at the whole picture. What if the reality distortion field is intentional? What if Keonne Rodriguez and William Hill are the fall guys for something far bigger than them?
We don’t have to guess. There is no conspiracy required here. The day following the Samourai team’s arrest, the United States Attorney for the Southern District of New York laid it all out in the open. In their case against Tornado Cash developer Roman Storm, US attorneys submitted their response to the defense’s appeal to dismiss, and boy is it a doozy. Not only were we operating blindly, but it is argued everyone has been breaking the law the whole time. A decade of FinCEN guidance? Irrelevant.
Under the terms set in this document, every Bitcoin transaction probably ought to be KYC’d. Peer-to-peer software is unlawful and self-custody should be prohibited.
Criminal intent
Don’t fall for the cheap tricks of high-profile cases and punk-rock developers. The United States government is not trying to prosecute criminals, it is seeking to reset the rules of the game and redefine the law so that everyone who doesn’t have a license to operate is deemed a criminal.
It is not just Samourai Wallet or Tornado Cash that is on trial. It is your financial freedom as well.
Of course, those amongst us who make a living out of kissing politicians’ feet and have enough of a regulatory moat will try to convince you otherwise. You aren’t lobbying hard enough, they will say. They probably genuinely believe that, if worst comes to worst, we’ll also vote ourselves out of that one.
Some are already heeding the warning shots. On Friday, ACINQ, creators of the Phoenix Lightning wallet, announced that they were pulling their product from the US app stores.
Recent announcements from US authorities cast a doubt on whether self-custodial wallet providers, Lightning service providers, or even Lightning nodes could be considered Money Services Businesses and be regulated as such.
— ACINQ (@acinq_co) April 26, 2024
Others are calling the government’s bluff and taking a stand. Refusing to serve US customers might work in the short term to reduce one’s liabilities but it also feels like kicking the can down the road. The precedent that could be set in this case presents the genuine risk of being used by other countries as a basis for similar policies. Give them an inch here and they’ll take a mile.
The fight has been brought to us and must be responded to in kind. The rule of law is being challenged. Courts are being weaponized. For Americans, this is a battle for constitutional rights. For the rest of the world, this is a cautionary tale.
For Bitcoiners, this is an opportunity to let go of the divisive rhetoric and align against the actual enemy at hand, the State.
