Sibos 2014: Cryptocurrency Regulation – Four Things to Know

Regulators aren’t necessarily opposed to virtual currencies:

Barry Silbert, founder of online marketplace SecondMarket and Bitcoin Investment Trust, has observed certain governments embracing the opportunity for new technology and innovation, such as cryptocurrencies. “There is still some anti-bank sentiment here in the US and around the world, and from that perspective, there will be pockets of real support, whether it’s regulatory, tax or otherwise,” he said.

Conversely, there will be countries, particularly those that are focused on capital controls, that will do everything they can to stop cryptocurrencies. “But given the nature of Bitcoin – it’s decentralised; there’s no company to shut down, so ultimately, they will lose,” Silbert added.

The US leads the way on virtual currency regulation:

Jeremy Allaire, founder and chief executive (CEO) of Circle Internet Financial, regards the US as among the more progressive countries in terms of regulating Bitcoin and other cryptocurrencies. “It’s one of the only countries that has actually issued rules and guidance around digital currency operators,” he said.

“Most other countries are still examining it and seeing what the outcome is in the United States. But what that’s done is, it’s essentially said, exchanges, custodians and exchange operators are money services businesses and have Bank Secrecy Act obligations to know their customers, monitor transactions, etc.”

Allaire added that there are some different interpretations of what that all means state-by-state; some US states are making excessive requests of digital currency companies, while others are applying existing money transmission law. Nevertheless, the US has been at the forefront of regulation on this issue.

“That’s going to be a real test bed for the rest of the world,” he said. “Will Europe amend the Payment Services Directive [PSD] for digital currencies? It’s most likely that they will over the next one to two years. So I think as that framework come into place, private equity, venture capital and commercial banking will participate in this ecosystem a lot more directly.”

Directly or indirectly, regulation is coming:

Jon Matonis, executive director and board member of the Bitcoin Foundation, said it is a “bit of a myth” that Bitcoin is free of regulation. Most countries around the world are formulating strategies around regulating cryptocurrencies in a roundabout way.

“What they’re actually doing is, they’re regulating their own national currencies at the point of intersection with Bitcoin,” he said. “So it’s called Bitcoin regulation, but it’s actually regulation of their own currencies, and how their own national currencies will be bought and sold with Bitcoin.”

What will not be regulated, Matonis added, are the individual bitcoin transactions. “The only way to regulate or affect any change over that would be to disable the entire internet,” he said.


Regulation will legitimise cryptocurrencies:

Chris Larsen, co-founder and chief executive (CEO) of Ripple Labs, told
gtnews
that regulation is absolutely necessary for legitimising virtual currencies. “We think you actually have to lead on regulatory compliance,” he said. “That’s the only way the banks are going to get comfortable with it. So we have to engage and we have to get regulators comfortable.”

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