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Is lack of clarity on regulation hindering the spread of Bitcoin and other cryptocurrencies?
It seems that regulating Bitcoin has become an ‘arduous’ task, that is true at least according to a report published by the private intelligence company Stratfor. Stratfor is a company who provide geopolitical intelligence to individuals as well as organisations across the world.
Stratfor’s publication is called ‘The Arduous Task of Regulating Bitcoin’ and is available for download here. They forecast that the regulatory uncertainty will continue to act as a deterrent in the wider adoption of cryptocurrencies.
In its analysis of the present situation, Stratfor thinks that while the technology behind cryptocurrencies will have a ‘greater’ impact, cryptocurrencies themselves will face some issues in being widely adopted.
“Regulatory uncertainty will continue to inhibit the widespread adoption of cryptocurrencies.Though the U.S. federal government has made progress in regulating cryptocurrencies, uncertainty and ambiguity at the state level will be more difficult to overcome. Blockchain, the technology underpinning cryptocurrencies, will have a greater impact than the cryptocurrencies derived from it.”
What exactly cryptocurrencies are seems to be the biggest issue when it comes to the future of Bitcoin and other forms of digital money out there. This is a question we have addressed in a recent article in Cointelegraph as well.
Stratfor has taken a similar line of thinking and says in the report:
“Individuals and businesses must inevitably wait for laws to be figured out and enacted before new technologies can be fully utilized. This has been particularly true of cryptocurrencies — most notably Bitcoin and financial technologies — which have been hindered by a lack of regulation and an abundance of confusion.”
Stratfor says in the report that the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has issued guidelines under which administrators and exchangers (not individuals) are to be considered as ‘money transmitters’. In the United States at least this means that transmitters are responsible for KYC and AML regulations and their adherence. They also have to register with FinCEN. Stratfor thinks this is an onerous burden on smaller companies as well as startups, and some benefits that are traditionally attributed to cryptocurrencies such as anonymity are essentially tossed out of the window.
Anyone who follows the news may have noticed in the past years how marriage equality in the United States moved from state to state until finally the Supreme Court ushered it in countrywide. Cryptocurrencies are currently on a similar curve. Only a few states according to Stratfor have issued any guidance on cryptocurrencies.
“Registering as a money transmitter is relatively simple at the federal level, but receiving a state license in one of the 48 states which requires one is much more difficult and time consuming. New York has made the most progress toward regulating Bitcoin, which is unsurprising considering its place at the center of the U.S. financial system. In June 2015, New York finalized BitLicense, which will likely become a model for other states to emulate.”
Until the time the United States receives a nationwide definition of what cryptocurrencies are, we may keep seeing a lot of conflicting laws and regulations and more confusion.
The fluid situation in Bitcoin regulations leads to some issues but there are many who think that more regulations could mean the end of ‘freedom’ and defeat the very purpose for which Bitcoin was developed.
We talked with Dmitry Lazarichev, Co-founder of Wirex Limited about the current state of regulations regarding Bitcoin.
“Obviously we can’t avoid a regulatory framework if we are aiming to reach further Bitcoin adoption, which is supposed to be beneficial for everyone. On the other hand, without standards and rules there are still might be options of how to avoid regulatory requirements. Thus, the Bitcoin community should be embracing the regulation in the first place. The regulators can apply existing AML and KYC rules and monitor legal entities such as exchanges dealing with fiat. However, there are no solid concepts yet in how to regulate pure crypto-to-crypto services and platforms.”
On the other hand there is also merit in the point that Bitcoin may be a new asset class in itself and it may prove very difficult to regulate it with the set of ‘usual’ approaches that the authorities are taking.
Simon Dixon, CEO BnkToTheFuture.com says:
“No two countries take the same approach and regulators all around the world are uncertain about how to tackle Bitcoin financial institutions. The first hurdle is defining it as an asset class. If they do this they may fit it into their traditional regulations, but this is very dangerous as Bitcoin is a new asset class. Bitcoin has properties of a currency as it has a global payment system attached to it, a commodity as it can be used as a store of value, a stock as its value is tracked by the utility and progress of Bitcoin and it’s also a protocol/ technology that allows companies to build financial products on top of it.”
Regulation needs to keep up with new technological approaches instead of trying to classify the unknown with known labels. This is a problem that we are currently facing when it comes to Bitcoin and other cryptocurrencies. When the regulators finally do catch up, things might start looking up for cryptocurrencies, no matter what Stratfor thinks.
As Dmitry Lazarichev says:
“Perhaps this standard regulation should be adjustable adapting new technological breakthroughs and learning from the past cases. If the entire community can take part in formulating such standards, it would be ideal.”
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