Should Bitcoin be regulated?
There are many arguments for and against the regulation of Bitcoin. For it to succeed in the medium to long term, there must be some sort of fair regulatory framework in place for certain Bitcoin businesses and start-ups to adhere to. The currency, as it stands, is a legal grey area that nobody is 100% certain on how to navigate.
Banks still see it as an inconvenience to deal with and as such are not eager to support businesses and individuals that are Bitcoin related in nature. Because of this, they’re often shutting down bank accounts due to regulations that are in place that relate to money laundering and other criminal activities. If a bank suspects there to be suspicious activity with one of their customer’s accounts, it’s often easier to shut the account down than to get in trouble with regulators.
Bitcoin is still seen as a currency for terrorists and people of a questionable nature. Is it any surprise that banks want little to do with Bitcoin activities going through their customers banks accounts? It’s a bank’s responsibility to report on suspicious activities and to close accounts that are suspected to be used for criminal activities.
If this is not done and a bank is found to have let its customer use an account for criminal purposes, it’ll be fined considerable charges by regulatory bodies. The closure of a customer’s account is simply business. It’s easier for a bank to shut an account down than to face potentially colossal fines from regulatory agencies.
To overcome this, there needs to be definitive legislation handed down from the government to banks for them to be able to engage with digital currency related customers. The government is currently addressing this issue, and with time, there’ll no doubt be clear guidelines on how to treat Bitcoin companies.
Currently, there are many Bitcoin businesses that have to bank elsewhere to operate. These include Bitcoin exchanges that are operating in other EU countries. This has led to higher charges and more inconvenience for customers who are having to accept higher transfer fees for the purchase and sale of Bitcoin. It needs banking services for legitimacy, integration and lastly widespread adoption. It’s questionable as to how Bitcoin can flourish if the public are unable to purchase Bitcoin in an easy and frictionless fashion.
Circle is a great example of being able to purchase Bitcoin in an easy fashion. By simply entering your credit card details, you’re able to purchase Bitcoin in an instant manner with your credit card. Ease of use is key if we’re to reach widespread adoption with digital currencies.
The government seems to be open to talks about digital currencies, and it recognises the fact that increasing banking competition is in the interest of all customers. It’s also taken small steps forward by looking to apply anti-money laundering laws on exchanges and will discuss the proposal early in the next parliament.
How regulation should be applied to digital currencies is to be seen, but those of us in the Bitcoin community must engage and communicate with the government to make sure a fair proposal is placed forward. The government is to decide on the identity of the regulatory body to carry this process out and also on the scope of the regulatory oversight that shall be placed on the shoulders of the digital currencies industry. By communicating with the government, we can make sure this process is as fair as possible.
If we look at the Bitlicense at New York, we can see the pros and cons of regulatory oversight. Bitcoin in its current state is a small entity, but with more oversight comes more clarity for the end consumer. There were and still are many bad actors in the Bitcoin industry, and this fact can be pointed to the lack of general checks that more traditional financial industries have to go through.
The cost of such a licence can be prohibitive and could potentially hold back or prevent the creation of new startups in this space. Many companies in the Bitcoin space have already broadcasted their distaste for such a licence, with Local Bitcoins and Satoshi Citadel Industries pulling out of the market altogether.
Overall, I feel that regulation will, in the medium to long term, be a positive process for Bitcoin and will allow us to move to the next stage of adoption. With regulation, Bitcoin services can be seen to have the same standard of professionalism as other financial institutions, which will lead to a better public perception of the currency. With a better image, we may see the public migrate with open arms into the Bitcoin ecosystem and in turn see Bitcoin finally move into its mainstream stage.
Phillip George is an avid follower of Bitcoin and digital currencies. He is currently co-organiser of Bitcoin Wales and is pushing for the adoption, education and understanding of Bitcoin and digital currencies.