The recent hacks at ShapeShift, a sort of vending machine for altcoins, has been one of the biggest stories in Bitcoin for the past few weeks. Although the hacks were a serious hit to the exchange, CEO Erik Voorhees claims things could have been much worse if the startup had decided to comply with BitLicense regulations in New York.
Traditional Regulations Won’t Work
Voorhees was recently on a panel related to disruptive Bitcoin companies at Consensus 2016. OB1 CEO Brian Hoffman, Blockstack Labs co-founder Ryan Shea, and Lightning CEO Elizabeth Stark were also featured on the panel. The panel was moderated by Chamber of Digital Commerce President Perianne Boring.
The topic of regulation came up on multiple occasions during the panel discussion, and Voorhees, a vocal critic of various forms of Bitcoin-related regulations, did not hold back in sharing his contempt for the various legal restrictions that have been placed on Bitcoin (especially the New York BitLicense).
Voorhees made the point that traditional regulations ‒ when applied to Bitcoin or other blockchains ‒ are like fitting a “square peg into a round hole.” Voorhees said that placing restrictions on the development of this new financial technology would be akin to requiring bloggers to get some sort of publishing license in the early days of the Internet.
Why BitLicense Would Have Made the ShapeShift Hack Worse
Voorhees also used the multiple hacks and thefts he’s recently had to deal with to make a point about how traditional regulations should not be applied to Bitcoin. In regard to the hacks, Voorhees stated:
“You can bet that if we had, for example, followed the New York Bitlicense and were taking personal, private information of every single customer that was on our website, all of that personal and private information would now be in the hands of the hacker [and] all over the dark web.”
Voorhees has been extremely transparent with everything that has happened in relation to the hacks. He wrote a full report of events, talked about it on the Bitcoin.com podcast, and answered further questions for Epicenter Bitcoin.
The Blockchain Offers True Consumer Protection
One of the reasons Voorhees has a disdain for the BitLicense is that, in his view, it makes consumers less safe. For example, ShapeShift does not have to collect practically any information related to their customers because crypto tokens work like digital cash.
The fact that ShapeShift does not have to collect information or funds from their customers removes a liability from the exchange’s side and increases security for users.
“To me, that is true consumer protection through design, and that’s one of the magic things that blockchains allow,” Voorhees added.
New York is the only jurisdiction in the entire world blocked by ShapeShift. In this particular case, it appears that ShapeShift made the correct decision from a consumer protection perspective.