How 5 Influential Countries Are Regulating Bitcoin
“As the world becomes more digital, paying physically with bills, gold or credit cards will seem archaic. Everyone will have bitcoins.” – BTC China CEO Bobby Lee.
Last week, viewers from 117 countries, commonwealths and territories watched as the New York State Department of Financial Services held hearings on the future of Bitcoin.
This viewership was indicative of a global excitement about the potential of Bitcoin, and a keen interest in how US regulators are thinking about the digital currency.
Jeremy Allaire, Founder, Chairman & CEO of Circle, a financial services company developing products that make it easy for consumers and businesses to exchange, store, send and receive digital currencies, said that digital currency is one of the first major Internet-driven technology issues that will require collaboration on a world wide basis in order to take hold.
The decision of lawmakers on how to regulate digital currency is the main obstacle between Bitcoin and its preordained future as a global transaction network, offering advantages of lower transaction fees, faster international transfers, as well as a number of security advantages.
To help paint the landscape today, we took a look at how 5 influential countries are regulating Bitcoin. The United States, of course, and the BRICs (Brazil, Russia, India, China) which represent the top 4 emerging national economies.
Back in November 2013, a Senate committee heard testimony from Bitcoin executives and law enforcement officials. There was a resounding message that Bitcoin, in and of itself is not illegal, and the Senate committee expressed positive sentiment.
Last week, The New York State Department of Financial Services conducted two days of hearings on virtual currencies.
Coinbase, a Bitcoin wallet and platform where merchants and consumers can transact with the new digital currency bitcoin, said that a scaling of requirements of state legislation is important in digital currency adoption.
Circle’s Allaire said that states are using outdated rules on transactions that do not account for the Internet. There was a call from the panelists for a common licensing model and examination to be established throughout the states. Allaire encouraged legislatures to have a “forward leaning posture.”
With inflation at 6% as well as the highest tax rate of any of the emerging economies, Bitcoin is an appealing alternative for Brazilians who are mainly interested in it as an investment vehicle. Batista, a former program developer for Morgan Stanley (MS) in Brazil, believes that the volume on Mercado Bitcoin, Brazil’s largest platform for buying and selling Bitcoin, will grow to 160 million reais a month in 2014.
Presently, Brazil’s central bank isn’t regulating Bitcoin because, for now, the crypto currency isn’t significant enough to be of “systemic importance.”
“The Bank of Russia has warned that Russian legal entities providing services for the exchange of “virtual currency” in rubles and foreign currency, as well as for goods (works, services) will be considered as a potential involvement in the implementation of suspicious transactions in accordance with the legislation on counteraction to legalization (laundering) proceeds of crime and financing of terrorism.” - Statement issued on January 27th by the Central Bank of the Russian Federation
The Bank of Russia has warned citizens of Bitcoin’s possible ties to gangs into money laundering and the financing of terrorist organizations, and has strongly discouraged its use.
Meanwhile, German Gref, head of Sberbank, Russia’s largest bank, has been a vocal Bitcoin advocate, calling Bitcoin, “a very interesting global experiment that breaks the paradigm of currency issuance.”
While issuing strong statements against Bitcoin, Russia has yet to issue any sort of ban on digital currencies.
Due to fear of arrests and raids by tax officials, many Indian Bitcoin businesses have (at least temporarily) shutdown. After the Reserve Bank of India issued a warning on the risks of digital currencies, the Bitcoin community of India is seeking legal help in order to clarify the legal landscape of doing business in the country. In the third week of February, The Bitcoin Alliance of India will be meeting with the Reserve Bank of India to discuss the future of digital currencies in India. There has been increased lobbying in India for a “clear regulatory framework on digital currencies.”
“Today we received notice from our 3rd party payment processor and they essentially have cut us off from allowing customer deposits into BTC China’s Bitcoin exchange,” said Bobby Lee, CEO of BTC China, the world’s largest Bitcoin exchange in December 2013.
In mid-December, The People’s Bank of China ruled that merchants were not allowed to accept Bitcoin and banks and payment processors were forbidden from coverting Bitcoin in yuan. Deposits into Chinese Bitcoin exchanges were banned, and the price of Bitcoin tumbled nearly 50% overnight.
However, there is still hope as Bitcoin wasn’t all out banned, just harder to purchase.
BTC China has since found a loophole to continue business whereby “customers can now buy bitcoins from the exchange by depositing their funds directly into the company’s account.”
In conclusion, regulators are still contemplating how to support the innovation that comes from digital currency while also preventing the side effects of Silk Road and Sheep Marketplace. The United States and the BRICs are all paying close attention to Bitcoin and everyone is watching the next moves carefully.