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As part of the Digital Currency Council’s Continuing Education partnership with Inside Bitcoins, the DCC’s Vice President, Sarah Martin, had the opportunity to interview the thought leaders that will be speaking at the Inside Bitcoins Conference in New York City on April 27-29, 2015. Today, we share an interview with Marc Hochstein of American Banker.

Sarah: Tell us about how and why you got involved in Bitcoin and digital currencies.

Marc: I first learned about Bitcoin in late 2011, from reading an article in The New Yorker. It was fortuitous timing because around the same time I was editing American Banker‘s 175th anniversary issue and immersing myself in the early history of banking in this country. American Banker was founded during the first half of the nineteenth century, a time when there was no national currency and each bank issued its own currency. The original mission of our publication was to inform investors which currency-issuing banks were solid and which ones were duds. (The original name was Thompson’s Bank Note Reporter.) So my mind was already opened to different possibilities outside the system I’d always known when I found out about Bitcoin, and my curiosity was piqued.

Then I started going to Bitcoin meetups, playing around in my spare time with the software and various early Bitcoin services and talking to some of the early adopters, who I found very friendly and open. It was part hobby, part work-related research at that stage. When I told people at the office that this was something we should be paying attention to, they’d side-eye me or laugh.

Sarah: American Banker was one of the first to seriously cover Bitcoin. How has your coverage evolved in terms of quantity of articles or diversity of voices in the intervening years?

Marc: The quantity has risen. I wouldn’t say it’s a core focus – yet – but it’s no longer a lark. Most of our early coverage was on our blog, BankThink, which was largely because my job at the time was overseeing the blog. Most of the Bitcoin-related blog posts then were written by Jon Matonis, whom I recruited in early 2013 to write a weekly column for us. (This was before he became executive director of the Bitcoin Foundation.) The opinions he put forth during his roughly six-month stint were provocative, particularly for our audience, which is made up largely of bankers, regulators and other traditional players in the mainstream financial system. But these days you’re just as likely to see Bitcoin crop up in our news coverage, written by our staff reporters on the regulatory, business or tech beats. A lot of the stories are related to the global “de-risking” phenomenon and how it has restricted access to banking services for cryptocurrency startups. If it’s any consolation, Bitcoin businesses are in good company – a number of other industries, from legal marijuana shops in Colorado to remittance providers, even some churches (!) are finding themselves dropped by their banks because of the perceived regulatory and “reputational” risk. We recently reported that those pot and Bitcoin businesses fortunate enough to have bank accounts are paying through the nose for them. (Now you know where all that VC money is going!) But at the same time banks are now tentatively curious about the potential of the technology underlying Bitcoin, so that’s an emerging theme as well. The Federal Reserve is now gently nudging the U.S. banking industry to modernize the payment system, and financial institutions are now taking a serious look at cryptocurrency as a potential way to upgrade the plumbing. In short: my worlds are now colliding!

Sarah: InsideBitcoins NYC has brought together many of the best minds in the industry. What do you hope to hear from others at the conference?

Marc: I’d like to hear some frank discussion about the “voice vs. exit” question. Recent entrants to the Bitcoin industry actively seek a dialogue with regulators, and they cite pragmatic reasons for doing so: they want to influence regulation so it doesn’t squelch innovation. Early adopters, on the other hand, dread regulation, partly on principle. The success of AirBnB and Uber suggests that in certain ossified, uncompetitive industries, it is better for an innovative new service to beg forgiveness than ask permission. But is such an approach feasible in financial services, which is heavily regulated, with especially high barriers to entry? Discuss.

I’m also looking forward to an intelligent debate on the question of whether Bitcoin (capital “B”) can be bifurcated from bitcoin (small “b”). In other words, is it really possible to reap the rewards of the blockchain without some form of token, as many new entrants claim? How?

And on the more granular level, what’s the trajectory for transaction fees, particularly when the next halving occurs for mining rewards? That’s my fancy way of asking whether we can count on Bitcoin transactions to always be dirt-cheap.

Sarah: As blockchain technology advances, what are you looking forward to seeing develop this year, or in the next 5-10 years?

Marc: I’m personally very interested in privacy-enhancing projects like DarkWallet and Zerocash. The pseudonymity of Bitcoin was one of the things that got me interested early on. Just to be clear: I am a law-abiding citizen and I lead a dull suburban life. But (speaking for myself and not my employer) I think the cryptocurrency community is doing important R&D for a cashless future. I take it as a given that physical cash is going to fade away, possibly in my lifetime, and I think that this is mostly a good thing. Think of all the transactions that don’t happen because someone didn’t have exact change, or the costs of armored trucks, or the germs that are transmitted on coins and banknotes. But I’ve argued for a couple years now that there needs to be a place for anonymous transactions, at least on the very low end, in a digital future. If all our everyday transactions become traceable, the implications for further surveillance are chilling. I recognize that terrible people may use cloaking technology to do terrible things, but I do not accept the claim that only criminals would find a use for it. That’s frankly offensive.

At the very least, we should be having a candid and open debate right now about financial privacy, and it should be informed by the public conversation about the Snowden revelations and the Fourth Amendment. It is questionable whether Bitcoin as it stands is compatible with existing regulations, but I think it’s also fair to ask whether it’s the regulations that need to change, rather than Bitcoin.

I’m also interested in potential uses of the blockchain to build identity and reputation systems – with the caveat that these should never be allowed to create back doors for government spying. Multisignature transactions are also fascinating, and they speak to the broader goal of minimizing the need for trusted parties in commerce. And I’m also curious about the possibilities of using the blockchain to record real-world assets, such as property titles, and self-enforcing smart contracts.

Sarah: What do you see as the greatest immediate challenge facing the industry?

Marc: Broadly, Bitcoin very much goes against the grain of the financial establishment. On the Internet, neutrality is a great virtue. But in the financial system, neutrality is an unspeakable sin, and discrimination is mandatory. Software does what you tell it to do. It doesn’t care whether you’re Jamie Dimon or the pizza delivery guy. Financial intermediaries, on the other hand, are increasingly expected by regulators to not only know their customers, but also their customers’ customers, and even their customers’ customers’ customers. They are expected to block transactions to certain countries. They are told by their field examiners to manage the “reputational risk” of doing business with certain (perfectly legal) industries, which in practice has meant de-risking, i.e. just dropping the clients.

How is a system like that going to mesh with an open, value-neutral, borderless, global network like Bitcoin? It will be very interesting to watch. Pass the popcorn.

On a more prosaic level, the volatility of the exchange rate between Bitcoin and fiat currencies discourages widespread consumer adoption. And while transactions are frictionless within the Bitcoin network, getting money in and out of Bitcoin is not. I like to joke that Bitcoin is like the Autobahn, but with really crummy on-ramps and off-ramps. Until the access roads are smoother, it’s going to be hard to convince the average person to try the Autobahn.

Sarah: What’s your advice for growing the industry? How do we engage more people in digital currencies?

Marc: I’m hesitant to answer this one. I usually find it pompous when journalists dispense unsolicited advice toward entrepreneurs and technologists. And my colleagues in the media condescend Bitcoiners enough already. What the hell do any of us know? We’re just a bunch of scribblers.

The one thing I would say is, recognize that it may take a long time for this technology to catch on, and prepare for many disappointments on the way. It’s not a get-rich-quick scheme, or at least it shouldn’t be. Those never end well.

Bitcoin has come a long way in five years, but it’s far from realizing the dreams of the early adopters. And that may never happen, or it may not happen exactly as we all envision. That’s OK. It’s a worthy project, to attempt to decentralize trust, to restore a modicum of online privacy, to lubricate the wheels of global trade on a peer-to-peer level.

Just know that success is not inevitable, certainly not instant success. There’s a great quote on this from Karl Popper, the philosopher: “There is no law of progress, and everything will depend on ourselves.”

Sarah: Thanks very much for your thoughts, Marc. Looking forward to a great conference.

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