As the Wall Street Journal eloquently explained in regards to the intricacies of the case: ”The legal trouble Mr. Shrem faces underscores the challenges faced by Bitcoin and its supporters as they try to expand the currency’s influence from a small coterie of technology nerds to the world of payments and widely accepted currencies.”
As the world is watching and awaiting the outcome of the case, it does not bode well for the newfound virtual currency:
“It certainly doesn’t help the industry landscape as a whole,” said Fred Ehrsam, co-founder of San Francisco-based Coinbase, a digital wallet that helps users buy and accept Bitcoins, as he told the WSJ in a recent article.
Throughout most of Bitcoin’s trials and tribulations, the currency has often bounced back.
As noted by Bloomberg.com, Bitcoin has pretty much endured “every possible setback a payment project could encounter. It was implicated in a huge drug bust when the Federal Bureau of Investigation took down the Silk Road electronic exchange.”
In addition, the currency has been experiencing regulatory pressure ranging from threats of a ban in Russia to restrictions in China. And just this week, angry Bitcoin fans smashed their iPhones in protest over the Apple company’s decision to drop all Bitcoin related software from its app store.
While the Apple move seems directly connected to the ongoing legal case involving Shrem, who has been charged with money laundering, the other noted instances of difficulty for the company all seem to have a common thread weaving through each tale of woe – fear. There is a fear of the unknown. There is an innate fear of that which we do not understand. And, financially speaking, there is no bigger fear imaginable than that of the decentralization of money.
Which is essentially what Bitcoin does. This seems to be at the root of the U.S. Government’s case against Shrem. In our article on Page 4, we refer to Bitcoin as “ a brave new world of unregulated trading, buying and selling that legislation has yet to catch up with, much like how the legal landscape can’t catch up to the ever-evolving face of the Internet, which continues to evolve and outgrow legislation that did not predict the next incarnation of technology.”
It is noteworthy that the Financial Crimes Enforcement Network (FinCEN), whose regulations are seemingly one of the core issues at the root of the Bitcoin case, did not issue any guidance or regulations to Bitcoin exchangers until March 18th, 2013.
The Jewish Voice takes issue with this as the government is alleging that Shrem’s “crime” of money laundering occurred throughout 2012, which is prior to FinCEN issuing any such guidance or code of conduct for traders.
As blogger Rick Falkvinge sees it, and the Jewish Voice is inclined to agree, Charlie Shrem “cannot be held responsible for any violations of vague or none existent rules before March 18th 2013. This is protected by the US Constitution. Article 1, Section 9, Clause 3.”
Furthermore, as Falkvinge has noted, “no definition of Bitcoin as a currency or financial instrument existed under US legal code. Only vague guidance valid March 18th 2013.”
And the laws have not yet been updated on either a Congressional or Senate level.
And Shrem has made clear through his public statements, BitCoin and BitInstant was working with regulators to become compliant with any upcoming legislation. And as his attorney Marc Agnillo told the Jewish Voice:
“Charlie Shrem is trying to bring Bitcoin out of its infancy and make it attractive to legitimate business in the modern age. He welcomes regulation because it will help in his efforts to make this currency useful and accepted by the business community at large.”
Another issue worth noting here is that in the past, a recent case against banking giant HSBC took a different turn. HSBC was implicated in a banking scandal that was related to conceal hundreds of billions of dollars. Charges were not filed in this instance, but rather, HSBC was fined and continues operating inside the United States.
We refer to this because, again, we interpret the government’s reaction to Bitcoin as an inherent fear of the deregulation of money. HSBC was allowed to continue to function as cash is king. Bitcoin is the scary grey area of the unknown abyss that regulators can’t rightly wrap their head around.