satoshi criminal
Most people wouldn’t view Satoshi Nakamoto as a criminal.

Superintendent of Financial Services for the State of New York, Ben Lawsky, posted a new proposal for regulating Bitcoin companies on Reddit yesterday, and the Bitcoin community as a whole has reacted in a rather negative manner.

The new BitLicense regulations would add a large amount of new legal overhead to the Bitcoin related companies operating in the state of New York, but the real issue with these new laws and regulations is that it could create a situation where writing open source code to be shared with everyone else around the world is illegal.

Although it would only be a specific type of computer code, the reality is that most people view software code as free speech. The saddest part of these new regulations is that they could actually turn Satoshi Nakamoto into a criminal after a period of 45 days if he does not decide to register his creation of the Bitcoin protocol with Ben Lawsky and the New York Department of Financial Services.


Coin Issuers Must Apply for BitLicense

The part of the BitLicense draft that has the Bitcoin community up in arms can be found in section 200.2n5. That section of the document states, “Virtual Currency Business Activity means the conduct of…controlling, administering, or issuing a Virtual Currency.” The real question is whether or not creating a decentralized cryptocurrency can really be called “issuing” a virtual currency. After all, the reality of the situation is that there is no one issuer of bitcoins on the Bitcoin network. If you had to narrow down the entity that was actually issuing new bitcoins, you could really only point at the Bitcoin source code. Having said that, Satoshi did, in fact, release the source code to the general public back in 2009. The Merriam-Webster definition of issue is “the act of officially making something available or giving something to people to be used.” Under this definition, it would seem that Satoshi would be breaking the law if he did not apply for a BitLicense within the next 45 days. I’ve reached out to Ben Lawsky and the NYDFS to clarify this point, and I am awaiting their response. I am hoping for the sake of the NYDFS’s sanity that they don’t actually think creators of open source software should have to apply for a license.

Legal Precedents from the Past

If the NYDFS is going to try to say that open source software needs to be licensed, then this is something that could eventually be challenged in court. We just have to go back to the 90s to get a legal precedent for this possible challenge. In early 1993, the creator of PGP, Phil Zimmerman, was actually at the center of a criminal investigation due to his release of PGP encryption to the general public. The argument was that the US Government’s enemies could now use this form of encryption to better keep their secrets from the CIA. Zimmerman made the point that encryption software was free speech when he released the open source code in a book that was sold for $60. Following the Zimmerman case and a few other cases throughout the 90s, two federal appeals courts eventually established that cryptographic software source code is free speech and protected by the 1st Amendment.

This is Why Satoshi Nakamoto Remained Anonymous

Anyone who has been wondering why the creator of Bitcoin decided to remain anonymous after releasing his new technology to the world should now have their answer. He, she, or they did not want to deal with any of the backlash that could come their way for releasing a new, controversial piece of open source software to the world. Satoshi could show up in New York within the next 45 days to file the regulatory paperwork related to the Bitcoin currency, but then again, I suppose peace could be found in the Middle East too.

Photo via MattysFlicks.