We don’t need no Bitcoin regulation
“We don’t need No Regulation
We don’t need no thought control
No dark sarcasm in the Blockchain
Government: Leave our Bitcoin alone…
[Another Block in the Blockchain]”
Bitcoin – Background
Created anonymously in late 2008, bitcoin is a crypto-currency that can be used to buy and sell a broad range of goods and services electronically and in person or simply as a form of investment, by some even just a novelty use of technology.
Bitcoin is the world’s first open source digitised value transfer system gifted to us by Satoshi Nakamoto. This monetary freedom technology is now forever with us and digital crypto-currency is here to stay. Bitcoin or some future iteration of crypto-currency will prevail.
Bitcoin is no different from any other digital product or service. No specific regulation applies to other digital goods such as iTunes, digital images, email or indeed the web/internet.
What is used by people as ‘money’ is just an agreed social convention. Actual physical money (notes and coins) or digital money (bank account balances and bitcoins held personally) has no real inherent value except that given by its use and social custom. No specific regulation exists for UK private money such as the Bristol and Brixton pound, so the same should apply to Bitcoin?
Most developed countries already have the legal framework for Bitcoin regulation in place to allow the successful use and development of the bitcoin protocol. South Africa for example have since 2001 been subject to FICA –
“To establish and maintain an effective policy and compliance framework and operational capacity to oversee compliance and to provide high quality, timeous financial intelligence for use in the fight against crime, money laundering and terror financing in order for South Africa to protect the integrity and stability of its financial system, develop economically and be a responsible global citizen.”
By simply abiding by the FICA rules and regulations, South African companies like iceCUBED and BITX can operate legally and freely allowing innovation and rapid development. Compliance regulations for most scenarios where bitcoin interacts with FIAT already exist.
In Kenya companies like Kipochi and M-Pesa by Safaricom are blazing the trail in Africa for the rapid adoption of mobile payment technologies by simply complying with current legislation.
Benefits of No Bitcoin Regulation
The emergence of Bitcoin as a non-political non-regulated monetary unit allow many new possibilities that would not have been contemplated before, such as
- peer-to-peer mobile payment applications that don’t require permission from (heavily regulated) legacy transaction carriers;
- global remittances that don’t require high-fee currency conversion;
- merchant categories that are no longer disallowed due to fraud and chargeback risk;
- merchant reach into countries or organisations that are not even on the map for Visa, MasterCard or PayPal because of fears of fraud or unwelcome State interference (eg. Somalia, Wikileaks);
Bitcoin’s distributed network structure makes it hard for any single country or group of countries to regulate its activities. This is one of the currency’s main appeals to libertarians and new adopters.
Regulation – What can or should be done?
The issues that Bitcoin raises need to be addressed in a thoughtful and proactive manner by existing State authorities. The dis-intermediation power of bitcoin will continue to have a disruptive impact on legacy fiat money systems and those that regulate and rely on them; the effect will be a continuing erosion of the monetary power of state governments and their central banks.
US based FinCEN, as the US Treasury agency is known, released guidance in March 2013 saying that digital-currency administrators and exchangers are considered money-services businesses subject to regulations and anti-money-laundering controls. It is however only guidance.
Instead of regulation per say, one strategy may be to simply legalize virtual currencies within the current monetary system. The German Finance Ministry recently made Bitcoin officially usable in the country by classifying it as a unique financial instrument that’s not quite national or foreign currency but rather “private money” that can be legally used to transmit value between parties.
“We should have competition in the production of money,” said German Finance Committee parliament member Frank Schaeffler. He discourages hasty decisions on the fate of virtual currency (Bitcoin) and goes on to say: “Sooner or later, depending on the success of ‘private currencies’, authorities will feel the urge to ban or regulate private currency. A free country should resist and not intervene in a citizen’s private choice of money.”
Banks and other financial service companies can be regulated as they exist as counter parties in both physical and corporate form. Bitcoin is decentralised and has no central point of control, existing only on the internet and would be difficult or impossible to regulate.
Only companies within the Bitcoin ecosystem such as exchanges would be capable of any regulation. This may indeed be helpful to allow the exchange to operate fiat bank accounts with the blessing of the banks, and in compliance with the banks’ own regulatory KYC/AML needs. Otherwise, the KYC/AML risk is left entirely with the banks, leaving them exposed to large fines for any breaches.
But, apart from Bitcoin exchanges and Bitcoin payment intermediaries,