Satoshi meets the state: bad policy in Uncle Sam’s initial encounters with Bitcoin and distributed ledger technology

Abstract

How can the US response to the initial advent of Bitcoin in 2009 be understood? This chapter argues that the first encounters between the US and Satoshi Nakamoto-inspired financial technologies were characterized by persistent bad policy. The federal government’s approach sought to reconcile the need to contain potential national security harms associated with Bitcoin, while encouraging wider applications of its underlying blockchain technology on the other hand. These dual policy objectives succeeded in containing some of the worst potential excesses of Bitcoin-related experimentation. Yet they failed to address the rapid growth of actual consumer harms as scams and frauds proliferated along with environmental harms as a large part of the energy intensive Bitcoin and cryptocurrency production industry located in the US. Efforts at reversing the initial policy have been constrained as the growth of this sector in the US had formed a powerful new lobbying force.