Wikileaks was one of the first, and remains one of the best, examples of why we need Bitcoin. After the “collateral murder” video was released by the site, along with the other documents provided by Chelsea Manning, traditional funding services blocked Wikileaks. The legend goes that Wikileaks considered using Bitcoin as an alternative donation option, but Satoshi himself asked them not to because Bitcoin was in its infancy and was still at risk of a 51% attack if large organizations pointed their computing power at it.
A few years later, once Bitcoin’s blockchain was better secured, Wikileaks started accepting bitcoin as a donation method. By that time, traditional funding methods had resumed Wikileaks donations but the site itself was secure from being completely locked out again.
Then, last week, Wikileaks announced that Coinbase had suspended its account. In response, Wikileaks changed its Bitcoin processor and called for a worldwide boycott on Coinbase. They also started accepting other coins, including privacy minded ones like Dash and Monero.
But would boycotting Coinbase be beneficial to the cryptocurrency community? Judging by the reaction on Twitter, it seems like a lot of the community is on board with it.
Bitcoin is a vast ecosystem. And within that ecosystem there are a vast array of different people with different intentions and needs for the cryptocurrency. Not every company is designed to service every niche in Bitcoin. It is necessary that different companies function for the different shades of the ecosystem.
Coinbase is meant to serve the most mainstream of those customers. While their move against Wikileaks is wrong, disappointing and unnerving, it isn’t all that surprising and furthermore, it doesn’t change their role in the community.
Of all the exchanges, Coinbase is the most “bank like.” It follows KYC/AML regulations. It has a virtual “vault” for cryptocurrency savings and it has a professional trading platform. They have also done things similar to their Wikileaks ban in the past.
A few years back, Coinbase received some heat for suspending accounts that sent bitcoin to popular gambling sites. While gambling sites have slowly transitioned into a grey market from a black market in recent years, they still felt it necessary for them to block that kind of activity from their site.
That’s because while Coinbase’s interactions with its customers are probably important to it, it is its relations with regulators that is important to the community and the future of Bitcoin.
Consider Andreas Antonopoulos’ recent tweet about a potential Coinbase boycott.
While I’m disappointed with Coinbase shutting access to Wikileaks, I’m not hating them or proposing any boycott.
Coinbase is the most bitcoin-friendly bank there is. Once you accept that they are a bank, it becomes easier to understand. If you need to use a bank, they’re it.
— Andreas M. Antonopoulos (@aantonop) April 21, 2018
No company can say they are concerned with anything more than their interactions with customers. It would be PR suicide to admit something like that. But if Coinbase were concerned primarily with that, they wouldn’t consistently do things that anger the community.
But here is the kicker, we should want them to be more concerned with the regulators than they are with us. Coinbase is the most visible exchange in the United States. To regulators, Coinbase seems like a reasonable party they can talk to. They are very good at putting the financial squares’ mind at ease. No, Mr. Senator, Bitcoin is not just about buying drugs. Look at these investors!
And that is more important than one out of the dozens of exchanges acting the way we wish they’d act. If you want to send money to Wikileaks, and I certainly suggest you do, then move your coins off Coinbase and then send them to Wikileaks using a wallet on your computer or another web wallet.
When Coinbase went to Congress, they didn’t ask for more regulations. They didn’t promise to help them take over bitcoin. They asked for clarity. The only segment they argued for regulations was in ICOs, but only after stressing how important and useful they could be in the future.
“We currently do not trade ICO’s or any other security tokens. Despite that, we believe that security tokens are inevitable and full of tremendous potential. They can provide a much more efficient and effective method of capital formation. They can help spur innovation, launch new companies, create new jobs, and generate growth in the U.S. economy. Moreover, they can allow broader participation in capital markets by investors and companies. This means they can unlock the ability of entrepreneurs anywhere in the U.S. to raise money on a level playing field. Entrepreneurs won’t need to know funders in Silicon Valley or New York to access vibrant sources of capital. At the same time, there is a need for responsible regulation to ensure investor protection. We welcome that regulation […]
[I]t is important the SEC take enforcement actions when necessary to protect against bad actors, protect investors and help maintain public confidence in markets.
At the same time, we need to be sure that we are not killing good innovation brought about by new technology and good actors. Unfortunately, the current regulatory environment — in particular regulation by enforcement without enough clear guidance on what is permissible — is harming healthy innovation in the U.S.”
That’s the kind of language we need to go to Congress with. That is the kind of face we want to show them. We don’t want to go to them saying You can’t stop us. We are going to send money to anyone we want, including people you think of as enemies. Your laws will be ineffective, and our technology will destroy your financial system and replace it with our own.
Even if that is true, it doesn’t help anyone to tell Congress that. It would terrify them.
In addition, Coinbase’s recommendation is something I agree with. The ICO space is rife with scams. Known scammers get off without any consequences. Providing investors with some modicum of confidence through regulation would encourage more investment, not less. If two out of three ICOs weren’t ill-fated because they were either scams or incompetent, then more investors would get involved in them and the ones they got involved in wouldn’t be wasted money.
Do I wish Coinbase stood on the side of freedom of speech and continued donations to Wikileaks? Of course. Do I understand why Wikileaks is calling for its boycott? Yes. But with all the current heat on Wikileaks, even if most of it is unjustified, I can’t get that mad at Coinbase. Their job isn’t to protect the ideals of Bitcoin, that is our job. Which we can do by not keeping our coins on sites like Coinbase and instead storing them on local wallets and then doing what we want with them. But Coinbase serves as an on-ramp to the bitcoin ecosystem from traditional finance. That is both crucially important for Bitcoin’s growth and extremely susceptible to regulation from government.
If Congress soured on Coinbase and services like it, it would be disastrous for Bitcoin in the United States. It would undoubtedly set Bitcoin adoption in the United States back years. It would have ripple effects across the world. The price would tank, investment would slow and because of that, innovation would be hampered.
If Coinbase starts banning users who send bitcoin to out of Coinbase and then to Wikileaks, then I too will join in a boycott against Coinbase. But until then, I see them for exactly what they are: a very convenient on-ramp to the Bitcoin ecosystem that is simultaneously one of the most important services we have, and the most vulnerable to traditional powers.
And since they are both crucial and vulnerable, I am willing to cut them a break on this one. Even as I disagree with their decision.