Bitcoin regulation the subject of FINANCIAL hearings in New York. This is my surprised face.
I have been fascinated at the way Bitcoin seems to be going mainstream. My practical side recognizes the risk that governments will not let Bitcoin be Bitcoin. Governments are not in the business of allowing uncontrolled currencies to roam free. See, for example, here and here.
Now comes news that financial regulators in New York and California are exploring ways to regulate the elecctronic currency.
In hearings by New York’s top financial regulator, law enforcement officials practically declared Bitcoin to be a financial dirty bomb.
“Mr. Zabel went through a list of six ways in which virtual currencies are more prone to crime than current forms of money transfer, including the ease with which money can be laundered over borders at the click of a mouse.”
There was the predictable noise about not discouraging growth while limiting illegal activity.
“Mr. Lawsky has indicated that Bitcoin is becoming popular enough that regulators need to create regulations that can encourage its growth but limit illegal activity. . . but there has also been a growing list of serious crimes committed in the Bitcoin network, which government officials have struggled to clamp down on.”
Well, one high profile crime ring, anyway.
The law enforcement officials disputed the contention of Bitcoin defenders that Bitcoin is no worse than other currencies for illegal activities. This despite the fact that those testifying were the ones able to nab Bitcoin-denominated criminals.
“Mr. Zabel was involved in the team that tracked down Ross Ulbricht, whom the authorities contend is the owner of the Silk Road online market, where drugs and child pornography were available. Mr. Ulbricht used a so-called Tor network to obscure himself, the authorities said, and Mr. Zabel said it was only after overcoming “substantial hurdles” that his office found Mr. Ulbricht.”
Well, there are hurdles in any investigation and prosecution, as Law and Order has taught us, such as the anonymous use of cash.
However, the unclear status of Bitcoin’s legality continues to be a pressing issue. For those already creating businesses in that space, expect rent-seeking and proposals for regulations that protect more established players.
““Regulation could be a good thing,” said Fred Ehrsam, the co-founder of Coinbase, the largest middleman for Bitcoin transactions.”