Bitcoin regulation on the horizon

Financial regulators and tech investors gathered to discuss the viability of regulating the digital currency in New York

The group of investors, Silicon Valley bigwigs, and financial regulators who gathered at last week's hearing in New York City to discuss the viability of Bitcoin as an entity to be regulated came to the general conclusion that it is worth creating policy to govern the digital currency.  

Investors in Bitcoin, such as the Winklevoss twins, Cameron and Tyler, are in favor of setting up minimal regulatory actions to set policy for the integration of Bitcoin into the mainstream economy. (They filed a proposal with regulators at the U.S. Securities and Exchange Commission last July to operate an exchange trade for the digital currency, initially selling $20 million worth of shares.) As the two collectively own 1 percent of all Bitcoins, it is predictable that they would want some official way to trade them. And the New York Times reported that Barry E. Silbert, the founder of Bitcoin Investment Trust, stated that “it may be appropriate to regulate any transaction that involves an unregulated intermediary converting Bitcoin to dollars on behalf of a third party.” But others were more skeptical.

Fred Wilson of Union Square Ventures wants very little regulation at all, if any. And Richard B. Zabel, prosecutor from the U.S. attorney office in Manhattan, is worried that the currency is too likely to be used to make criminal activity easier and more lucrative. The task now at hand is figuring out how to apply regulation to a thus-far underground currency -- one that has been associated with illegal activity and the online black market called the Silk Road -- to bring it into the realm of the mainstream economy. For as many worries as there are about Bitcoin's tendency to be used for criminal activity, there are plenty who are using it for legal trade as well. 

Of course, the hearings were slightly overshadowed -- but not clouded -- by the arrest of Charlie Shrem the day prior. Shrem was the CEO of BitInstant -- an organization that sells Bitcoins to users. His association with dealing Bitcoins to a person who was also arrested and who dealt directly on the Silk Road highlighted the very anxieties of financial regulators looking for a way to put parameters on the digital currency. The road to regulating Bitcoin will be a long one, but New York could be the first state to do it.

 

Further reading:

Bitcoin gains legal, financial interest

Regulators set sights on Bitcoin

EBA issues warning against Bitcoin trade

Contributing Author

Juliana Kenny

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