On a state level, New York has taken one of the most proactive approaches to Bitcoin and virtual currency regulation to this point. The New York Department of Financial Services recently released a list of proposed rules and regulations that essentially states that all businesses that receive, transmit, store or convert virtual currency for customers; buy and sell virtual currency as a customer business; control, administer, or issue a virtual currency; or perform conversions between bitcoin and fiat or any value exchange will need to be licensed to operate in New York. While merchants merely accepting bitcoin are not included by the regulations, it appears that it will impact a very broad segment of the Bitcoin ecosystem.
The proposed regulations have been met with a swift and critical response from members of the Bitcoin community around the world. The concerns center around the prospect of regulations creating such expensive and cumbersome entry-level costs for bitcoin companies, that innovation will be stifled. By holding start ups to similar regulatory standards as traditional financial institutions like banks, New York will be driving small and thinly financed innovators out of the market and effectively eliminating competition for the entrenched systems. While most in the bitcoin industry welcome the idea of regulation, the general sentiment is that the industry is still too young to necessitate extensive rules that New York is promulgating.
As the comment process is still ongoing, we will have to wait and see how regulations develop amongst the states and whether differing regulations will create more bitcoin friendly hubs throughout the US.
Around the world countries have reacted to the growth of bitcoin with varying levels of enthusiasm and regulation.
As a new technology, it is still unclear exactly how the existing regulatory framework in the United States will embrace Bitcoin and its maturing ecosystem. Article I of the Constitution gives Congress broad powers regulating both money and interstate commerce, so Bitcoin’s potential as both a cryptocurrency and payment platform land it squarely within the dominion of congressional regulation.
Up till this point, the federal government remains primarily in the exploratory stage concerning bitcoin regulation. However, while Congress has yet to act regarding bitcoin, the SEC has argued that existing securities regulations should apply to investments purchased with bitcoin as well as investing in bitcoin itself.
While bitcoin regulations are still taking shape in countries all over the world, we have selected a few examples representing interesting and differing stances governments have taken towards regulation as of now. This is not meant to be an exhaustive treatment, but rather a sampling of how the regulatory landscape is developing internationally.
Argentina has seen one of the largest spikes in bitcoin popularity and use around the world over the past year due in large part to the government debt default and subsequent rise in inflation. While usage has grown rapidly, the government has been slower to respond with official regulations, so many in the industry are waiting to see what will happen.
In China, speculation over how the government will regulate bitcoin has caused a significant amount of volatility in the market over the past year. While there were fears at one point of the government banning bitcoin, it appears the government has no aim to take such a drastic measure. While regulations have made it more difficult for bitcoin exchanges to interact with Chinese banks, industry leaders in China are optimistic about its future.
Some of the strictest bitcoin regulations to date have been seen in Iceland. Out of a fear of capital flight, the country has banned the purchase of bitcoin. While residents can sell bitcoin (thus bringing money into the country) and possess it, exchanging for the local krona is outlawed.
In Russia on the other hand, the future of regulation seems much more volatile. The Russian government has taken a strong stance in opposition of “monetary surrogates” out of a fear to ties to illegal markets. For now, the rhetoric coming from the government has suggested that cryptocurrency use may be criminalized in the future, but it is still unclear what will happen.