Bitcoin Regulation

-


By Othman Darwish

Since its invention, Bitcoin challenged regulators all over the world, different regulatory options and actions taken by jurisdictions, such as public awareness/warnings, research papers and case studies, regulations for specific digital currency stockholder (e.g. exchanges regulations ), others regulatory trying to adapt existing regulations and interpret it in way that fit digital currencies nature and properties , some regulatory  went extremely and  found  Bitcoin a real threat to their nation currency and capital control , thus prohibit or ban it . Bitcoin facing different regulatory concerns on different levels, capital and currency control is main concerns for some countries (e.g. Chain and Russia), other jurisdictions pay more attention on other aspects, such as consumer protection, taxes evasion, and AML/CTF activates (e.g. USA, UK, Australia).
Although existing regulations already in place to protect investors/consumers, prevent fraud and ensure illicit funds does not get laundered, Regulators should reach a consensus when regulating digital currency like Bitcoin, for example, U.S Treasury Department FinCEN issued regulations on March 2013 addressing digital currency like Bitcoin as convertible currency “either has an equivalent value in real currency, or acts as a substitute for real currency”. According to FinCEN, Bitcoin exchanges are considered as Money Service Business (MSB), FinCEN issued “guidelines” regarding Persons Administering, Exchanging, or Using Virtual Currencies: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” As a “financial institution”  MSBs are required to comply with Bank Secrecy Act laws and regulations, including AML (Anti-Money Laundering) requirements. They also need to comply with KYC (Know Your Customer) rules. From another hand, U.S Tax Authority IRS classified digital currency as tradable property to serve the purpose of federal taxation, In Nov 2016 IRS sought information from Coinbase on a group of “John Doe” bitcoin users that allegedly avoided or failed to pay taxes on cryptocurrency transactions. Clarity and unambiguity in legal terminology is essential, different and sometimes conflicting legal classifications for digital currency is a major barrier for this newly innovated technology and lead to legal and regulatory implications.
As newly innovations are continuing process, and the industries/businesses continually evolving, law maker and regulators are also needed to keep creating rules that reflect the specific situation of the digital currency, creating more “relaxed” regulations framework to understand this new technology is important ,for example in UK Financial Conduct Authority’s (FCA) created the concept of sandbox, where FinTech businesses, working collaboratively with regulators, have appropriate “space to breathe” in developing and testing innovative solutions without fear of enforcement action and regulatory fines . Globally collaborated dedicated team should be formed from different regulatory bodies and regimes across domestic and international jurisdictions. 
Regulatory concerns about removing conflict between market completion and efficiency, protecting consumers and investors, governments have the powerful imperative to fight money laundering, terrorist funding, fraud, and corruption. Digital currency innovators need to keep the needs of society and consumers in mind, and businesses need to ensure legal compliance to protect their community and ensure trust and safety.

  

Comments

Unknown said…
Good article to understand general regulatory aspects of BitCoin...
August 25, 2017 at 3:59 PM
Post a Comment

Popular posts from this blog

The New Internet Protocol: Blockchain

-
Image
By Othman Darwish The age of the online world began its journey with the invention of the Internet. The Internet has grown and evolved into its present form because people find immense value in using it. The emergence of Blockchain technology years ago and its current steady progress would revolutionize the Internet as we know it today. This article is arguing how the decentralized nature of Blockchain would radically changing the today's Internet . Internet starts with a prototype, done back in late of the 1960s by Advanced Research Projects Agency Network or ARPANET, which was funded by the U.S. Department of Defense. ARPANET allows multiple computers to communicates on a single network. The technology continues its growth and developments in the 1970s by Robert Kahn and Vinton Cerf, and they developed the Transmission Control Protocol and Internet Protocol-TCP/IP, a communications protocol that standardized the way the data exchanged between multiple networks. The i
Read more

Consensus Models in Public and Consortium Blockchain: Tradeoff Analysis

-
Image
Authors: Lamine SANO & Othman Darwish Abstract In distributed systems, with multiple computing nodes, consensus is a fundamental concept that aims to achieving system reliability, with the fact that some nodes may fail, malfunction or provide malicious information. This conflict in the provided information, requires a mechanism where all nodes agree on some state; this process is called consensus. The problem was first formulated by Leslie Lamport, Robert Shostak and Marshall Pease in their 1982 paper, "The Byzantine Generals Problem," [1]  and proved then to be unsolvable. Since then,  different algorithms were designed and developed to try and solve this problem under various assumptions. The advent of Bitcoin, and its underlying innovating blockchain technology provided a practical and radical mechanism to solve this problem and make it possible to transfer information in an entirely decentralized and trustless environment. This paper, will briefly explore th
Read more

Blockchain-Powered Internet-of-Things: Potentials and Challenges

-
Image
By Othman Darwish Device democracy was the idea of the experiment done back in 2015  by IBM, with the collaboration of  Samsung. The trial studied the integration of decentralization technology of blockchain with Internet-of-Things - IoT. The use case revealed by IBM concerning autonomous wash machine, that able to order detergent autonomously;  that machine provided by a sensor that able to detect detergent level, and when it goes low,  it communicated with a smart contract using Ethereum protocols and instantiated an order request to a retailer. Once the retailer received the request and upon approving it, a digital payment automatically released from wash machine and received by the retailer, then an acknowledged of the payment received by wash machine. The negotiations between wash machine and retailer ordering service and resulting transactions logged on the blockchain. The idea behind  that IBM experiment of making these devices autonomous in a decentralized internet of
Read more