Comptroller of the Currency Thomas J. Curry is right to argue that the letter of the law may have to change in the face of technological advancement in order to carry out the spirit of the law.
Many of the laws and regulations that affect open payments systems like Bitcoin were written at a time when only closed proprietary systems existed. As a result, some of the rules facing cryptocurrencies today are difficult if not impossible to comply with. For example, some anti-money laundering (AML) regulations require that financial institutions know the identity of the recipient of payments they facilitate–something that is essentially impossible to do by simply looking at a Bitcoin address.
In some cases, there may be ways to adapt how one uses the technology to meet the letter of the law, but in others there is simply a square peg and a round hole. In these cases, either the use of the technology will be deemed prohibited, or the law will have to change to accommodate the advancements in technology. Outright prohibitions, though, tend to serve no one since they don't tend to stop bad actors, only law abiding users. When there is an impasse, a forward-thinking policymaker will choose to rewrite the letter of the law in order to preserve its spirit.
Given the growing sophistication of terrorists and criminals, we have to make sure that the BSA is equal to the task. To this end, the OCC continues to discuss with our regulatory colleagues ways in which we can improve the system, including removing or amending regulations and requirements that may no longer be necessary or effective. We are also working with our colleagues to find better ways to use technology in advancing our BSA/AML goals. Without question, technology is rapidly changing the way we do business. New payment systems are creating greater efficiencies and convenience, and virtual currencies offer the prospect of instantaneous transactions directly between individuals and entities on a global basis. These innovations are potentially revolutionary in their impact, and are advancing at a breakneck pace. The current regulatory regime, which is rooted in 20th century concepts and approaches, will need to change and adapt in order to remain relevant into the 21st century. While the task seems daunting, it is also foreseeable that, if properly employed, technology can be used by banks and the government to better meet the goals of the BSA, by providing more accurate and timely information to law enforcement and regulators, while simultaneously reducing cost and burden.
That's the right approach, as daunting as it may seem, and we stand ready to help OCC and others find the right way to make the letter of the law match the spirit.
Hat tip to Reuben Grinberg for the pointer.