Bitcoin exists on the digital frontier. Nobody tells bitcoin what to do. And that’s the way its users like it.
Bitcoin’s lack of central authority isn’t a bug; it’s a feature. Of the many benefits cited by bitcoin adepts concerning the cryptocurrency, its complete lack of governmental oversight is usually very high on the list. Unlike “fiat,” bitcoin runs free, immune to any sort of regulation save that applied by the free market.
Another major benefit of bitcoin is its lack of transaction fees. Want to send a bitcoin across the world? It’s free. No jackbooted financial thug or fat-cat oligarch can say boo. For users of a libertarian stripe, it’s a dream currency come true.
The flipside of the bitcoin is that free transactions come at a price. It’s the price of being on the frontier. It's the price of exposure.
This is not to predict a crash of the entire bitcoin system, as pundits are wont to do any time there’s a problem. The system as a whole will not crash completely, at least for awhile more. But for users who had their funds in the now-deceased exchange Mt. Gox, it did.
Since no government really has the oversight to investigate bitcoin theft, anonymous hackers have taken the place of the police. Investigating the Mt. Gox fraud that caused $500 million in bitcoin to go missing, hackers went ahead and got into Mt. Gox CEO Mark Karpeles’ personal accounts.
In explaining the the ensuing “dump” of Karpeles’ personal information, along with Mt. Gox ledger information, the anonymous hackers wrote that "It’s time that Mt. Gox got the Bitcoin communities' wrath instead of Bitcoin Community getting Goxed.”
That is, they acted as the Bitcoin Police. They turned over the fruits of their investigation to the bitcoin community with the implied assumption the community at large would serve as judge, jury, and executioner.
Of course, it would be erroneous to treat one group of anonymous hackers as the de facto Bitcoin Police Department, or the Bitcoin Exchange Commission. But in this case, the hackers definitely served that function.
The parallels between the information dump and the mission of the US Securities and Exchange Commission are pretty apparent. The SEC explains their mission as a regulatory body thus:
“The laws and rules that govern the securities industry in the United States derive from a simple and straightforward concept: all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it. To achieve this, the SEC requires public companies to disclose meaningful financial and other information to the public.”
Bitcoin institutions, of course, are not beholden to US securities law, and do not have to disclose their bitcoin information to anyone. And nobody seems to care much, until things go south, as they did at Mt. Gox. In that case, the self-appointed regulators take it upon themselves to do the disclosing for them.
There will be another Mt. Gox. Maybe not on the scale or scope, but without disclosure laws, there is nothing to stop an exchange from committing fraud. That is, except the fear of retribution from vigilante hackers.
There is no official Bitcoin Police. Bitcoin is still, relatively speaking, in the Wild West. But don’t think there’s no sheriff in town.
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