The financial services superintendent for New York, Benjamin Lawsky, has detailed plans to regulate the use of the digital crypto-currency Bitcoin by the end of this year.
Speaking at a currency conference in Washington D.C. yesterday, he said
Our objective is to provide appropriate guardrails to protect consumers and root out money laundering - without stifling beneficial innovation.
He proposes to issue 'BitLicenses' to all companies who deal with Bitcoins that would allow them to operate in the way that they currently do but also added that Bitcoin exchanges should be made to warn their customers of the volatility of Bitcoin value and of the irreversibility of Bitcoin transactions, saying
We've found in other areas of the financial world that strong, clear, concise disclosures are critical to earning the long-term trust and confidence of consumers... Virtual currency is no exception.
Bitcoin exchanges, such as MtGox, may also be forced to adopt 'know-your-customer' strategies which ensure that financial institutions keep an eye on customer behaviour and report suspicious activity to appropriate law enforcement departments. Exchanges may also be governed by rulings similar to those currently imposed on banks, although it is unclear exactly how that would work. Lawsky is even reported to be considering drawing up regulatory rules for individuals who use personal computers to 'mine' Bitcoins for themselves.
However, whether all of these steps could actually be implemented is another thing as Bitcoin was designed specifically to be unregulated and is decentralized by default, unlike 'conventional' economic systems. Lawsky also admits that the nature of how Bitcoin transactions operate will make it very hard for governments to regulate the currency. He still believes that proper regulation for Bitcoin could be possible though and could even add credibility to the currently unstable currency:
If we get those rules right, perhaps we can make New York and the United States a magnet for legitimate, well-regarded [Bitcoin] exchanges.
With many of the United States-based exchanges already shut down by the law, however, it is uncertain how much effect many of Lawsky's new regulations would have on the currency as many of the largest Bitcoin exchanges left operating, such as the Japanese MtGox mentioned above, are based in territories not under US control.
Lawsky's statements definitely prove one thing though: Bitcoin is beginning to become formally accepted by economists as a real currency, even if it is not necessarily regarded as a legitimate one, and is no longer the 'reserved' currency for basement geeks and people involved in the trade of illegal substances on sites such as the infamous Silk Road.
Source: CNN News
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