Despite the United States seeing much of the innovation and development of Bitcoin through 2012, it has not kept up in terms of trading volume.
The multiple Bitcoin trading exchanges in the US that once existed have dwindled down to a single functioning exchange, Camp BX in Atlanta, whose low trading volume saw it removed from the CoinDesk BPI.
An op-ed in the Guardian by Jerry Brito asserts that US regulations have caused this stagnation.
Jon Matonis at Coindesk argues this is not a conscious decision but rather a mess of conflicting regulations at the state and federal levels. Startups in the US simply require too much licensing to become compliant.
A pair of Senate subcommittee hearings in Washington will not help matters, as the federal government tends to look at disruptive currencies as a law enforcement issue. This will trickle down to banks as a chilling effect, meaning banks and credit unions will be less likely to want to even deal with Bitcoin businesses.
Again, compliance is just too messy, and that coupled with Bitcoin’s volatility scares banks away. Matonis argues this is the biggest obstacle innovators in the payment sphere face in the US.
So, those innovations are springing up elsewhere.
Where? Well, China for one. That’s where more than one-third of all Bitcoin trades take place.
And China is home to the world’s largest exchange, BTC China, which did almost $300 million in trading volume between October 15 and November 14. The next three largest exchanges are in Japan, Slovenia and Bulgaria, respectively.
That said, the US probably has a quarter or so of all Bitcoin users. Those Bitcoins just aren’t moving around as much as elsewhere. Likely, the high-volume exchanges will be much more influential as time goes along and become entrenched.
This means the US has two choices: Create a more Bitcoin-friendly environment, or get left behind.
Make no mistake: The left-behind option is already very much in play. Coinfloor, a London-based exchange, has barred American customers. The first Bitcoin ATMs are being installed in neighboring Canada. Even the Bitcoin Foundation is considering a move abroad.
Brito drives home one big downside if the US forfeits its position as a major player in the Bitcoin arena. With most activity taking place overseas, all that worry about law enforcement and catching cyber criminals using virtual currencies in Washington will be moot.
The US will have then shot itself in the foot.