Recently, researchers from the Bank of Canada insisted “private digital currencies like Bitcoin” need regulation to succeed. The market, however, seems to disagree.
To begin with, researchers at the Bank of Canada made a fundamental error in studying and evaluating Bitcoin if they considered Bitcoin as a “private digital currency.” The Bitcoin network is an open peer-to-peer protocol where there is no central authority or governing entity. Looking at Bitcoin as a centralized and private network is a severely flawed technical perspective.
Unlike actual “private digital currencies” like Blockchain tokens being developed by leading banks and financial institutions, the Bitcoin network is maintained by miners across the globe who contribute computing power to verify transactions and developers within an open source development ecosystem wherein anyone can contribute to the development of Bitcoin.
Bitcoin doesn’t need regulation
Bitcoin doesn’t need regulation to survive or prosper. Central authorities including the Chinese government chose to regulate Bitcoin because they prefer to oversee the Bitcoin market rather than having it operate in underground markets that are significantly more difficult to regulate.
Companies operating within the Bitcoin industry such as Bitcoin exchanges, service providers and development firms are struggling to deal with inefficient and impractical regulations specifically in regions such as New York that require startups to obtain an expensive license to operate.
Know your customer and Anti-money laundering policies are also impractical for Bitcoin exchanges to comply with, as exchanges are pressured to transform their infrastructures into a centralized architecture in order to meet the demands of central authorities.
In China, when the People’s Bank of China halted withdrawals of OKCoin and Huobi users, two of the largest Bitcoin exchanges in the country, the majority of traders moved on to LocalBitcoins, a peer-to-peer trading platform wherein people directly trade Bitcoin without the presence of a third party service provider or mediator.
Researchers at the Bank of Canada are likely describing Bitcoin as a “private digital currency” as they are developing on an altcoin of their own called Project Jasper.
Developers of Jasper want to offer an impression to the general public that centralized Blockchain networks like Project Jasper demonstrate virtually no differences to decentralized networks like Bitcoin. However, the global Bitcoin market has already evolved to a point where most users and people have developed an awareness of Bitcoin as a decentralized currency and open network.
A part of the white paper released by the Bank of Canada read:
“Government issued digital currency will not drive out existing private digital currencies, and government intervention will be required for privately issued and government-issued digital currencies to be a uniform currency.”
Already, Blockchain consortia including R3 have given up on developing centralized Blockchain platforms and networks due to serious security issues and potential compromisations. Instead of attempting to mislead the general population regarding the concept of Bitcoin, the Bank of Canada should attempt to describe benefits of private digital currencies.