Michael Jackson, former COO of Skypeand current venture capital investor at Mangrove Capital Partners, explores how bitcoin companies can learn from the early struggles Skype had with regulators across the globe.
For all the differences between Skype and bitcoin, there are many similarities.
Both products use fundamental changes in technology to enable new opportunities, and they both remove the existing organizational hierarchy of their respective industry. As such, parallels can be made and valuable lessons can be learned from the early days of Skype.
The bitcoin industry seems to be adamant that bitcoin is a currency and bitcoin companies are financial institutions. This was very much in evidence at Bitcoin2014, where all major actors were describing their progress to ‘regulatory compliance’.
From the inception of Skype, we could have said that the firm is a telco (telecommunications company). We could have decided to apply for telecoms licences all around the world and customize the product to both match and support the vagaries of different rules and directives.
It would have been the logical thing to do and it is similar to the route many bitcoin actors are taking today. However, if Skype had done so, it would have been the worst strategic mistake it ever made.
At that time, the world had changed from large, government-owned telcos to a new paradigm. Had we tried to establish Skype as a telco, rules and perversity would have appeared, driven by a dangerous combination of lack of knowledge, good intentions and political pressure.
We would have entered the same world that many bitcoin operators appear to have chosen, a world in which our ideals would have been suppressed by forces outside our control.
Let’s try and learn from previous successes. Let’s see if we can navigate the complexities of the legal and regulatory situation, using some of the experiences and techniques that were adopted by Skype – techniques that could help reduce any regulatory influence or restrictions on bitcoin.
Regulation is not a given
As a congressman in the US told me one day, something that looks like a duck and quacks like a duck must be treated like a duck. If Skype looked like a phone company and sounded like a phone company, then it must be a phone company. But Skype was never a phone company, and never will be.
There are many technical arguments as to why this was so, but the most relevant here is that Skype was simply a piece of software. It was a piece of software that was developed by a company and released directly to the users.
The users created the network and the existence of Skype as a network was independent of Skype as a company. Skype simply provided a part of the network.
To argue otherwise would be to argue that anyone who makes cables, or handsets, or even the bricks and mortar and relays and batteries for telephone exchanges is also a phone company. This would be truly absurd. If Skype, the company, closed down, the software would still be in the wild and the whole world would still be able to talk for free.
We, the bitcoin community, need to make these arguments better. The default position of the products and services derived from bitcoin must be that they are not to be regulated. They need not be, and the existing rules need not apply. They may apply in intent, but often the wording is poor, unsuitable and can be argued to be irrelevant.
To put it bluntly – every bitcoin actor should be reading the law very carefully and finding the loopholes. You should all invest a great deal of time in this – it is hugely important. For example, are you really moving ‘currency’ or are you simply exchanging some sort of token?
Life is going to be a lot easier if we take the latter position, as there are no rules that prevent the exchanging of keys. Likewise there are no rules that say keeping a string of data in a cold storage vault makes a business a bank.
So far, many of the proponents of bitcoin have been taking entirely the wrong approach – making claims that attract a raft of unwanted rules and regulations.