Discussion about bitcoin regulation often resembles mixing oil and water. This becomes more apparent as governments and bureaucrats worldwide ponder how they can apply regulatory policy to bitcoin. As the cryptocurrency gains significant popularity, the question arises: ‘Can bitcoin be regulated?’
Lawmaker Nostalgia Towards Traditional Regulatory Policy
2016 was a remarkable year for bitcoin as it increased in value exponentially to become a store of value and financial safe haven. The year also saw lawmakers worldwide investigating possible ways to regulate bitcoin. The problem is government officials do not understand cryptocurrency, and it poses many challenges to the way things traditionally work.
Bitcoin has allowed people to exchange value without the need for government or central banks. The decentralized payment system operates beyond borders with no regulatory permission. Within the bitcoin community, there are those who believe bitcoin needs to be regulated. Additionally, there are many who believe regulatory policies cannot be applied to the digital currency. Over time the agencies and courts of nation-states have classified the cryptocurrency with rules and definitions that are poles apart.
This past weekend, bitcoin luminary Andreas Antonopoulos detailed his opinion of whether or not the decentralized currency can even be regulated.
The question is not whether #bitcoin should be regulated, but whether it *can* be regulated. The reality is "No". The rest is nostalgia.
— Andreas (@aantonop) December 31, 2016
Globally There is No Clear Consensus for Bitcoin Regulation
The bottom line is across the world there is no clear consensus on how to regulate the peer-to-peer cryptocurrency. The fact of the matter is it will be a continuous uphill battle for bureaucrats. It’s been eight years with people doing what they want with their wealth, and bitcoin technology has enabled this. However, that doesn’t mean governments will stop trying to enforce regulations. In fact, the nation-states will try harder as each, and every one of them will feel bitcoin’s economic disruption.
For instance, this past year in the U.S. there has been a lot of regulatory discussion about virtual currencies. A handful of states have created their own way to create policy surrounding bitcoin, but each state has a different way of handling regulation. Bills and laws vary from the newly created Bitlicense in New York to North Carolina’s recent virtual currency framework. There’s also been the recent Coinbase tax probe by the IRS and court cases in Florida and New York shedding light on definitions. Interestingly enough these court rulings can’t decide on whether bitcoin is a commodity or form of currency.
In Europe, the central bank has proposed virtual currency legislation to the European Council and Parliament. Authorities detail the main focus is to curb funding terrorism and tax evasion within the region. The European Central Bank (ECB) also is having a hard time figuring out regulation and the classification of bitcoin. The ECB and other regional banks were told by the European Banking Authority in 2014 not to get involved with virtual currencies until authorities figured out regulatory standards. In 2015 the European Court of Justice had declared that bitcoin transactions were exempt from consumption tax. Now EU bureaucrats are steadily moving toward some type of regulation, but like the U.S. they have no idea what to do.
Abundant Banning Rumors from Government Officials but They Cannot Stop an Idea…
Then there are the constant rumors of a country “banning bitcoin” spread by some news outlet or a staunch politician. Just recently it was Colombia, in the past Russia, China, Mexico, and many others have supposedly banned the cryptocurrency. However, nothing typically materializes from these prohibition scares and the threats from bureaucrats never come to fruition.
No one knows how to proceed with regulations towards bitcoin because it’s an extremely difficult task. As growing interest in bitcoin escalates regulators are sure to clamp down on trying to apply law to this decentralized protocol. Most likely the only people who will be affected by these policies are those who use traditional banking onramps and offramps with their digital currency use.
Another factor to consider is whether or not bitcoin is ownable which has significant implications towards future legal frameworks and regulation. For instance, the bitcoin protocol is basically numbers held on a digital ledger which puts forth questions concerning intellectual property (IP) and property rights in general. The Austrian economist and author Konrad S. Graf has written many articles on bitcoin monetary theory and one that specifically covers this subject. Graf’s book “Are Bitcoins Ownable?” delves into property rights, IP wrongs, and legal theory implications.
“Must property be measurable (matter, space, energy) if property rights are to remain an internally consistent and defensible concept?” asks Graf in his book. “Bitcoin provides a fascinating and nuanced test case.”
The fact of the matter is governments worldwide really can’t regulate bitcoin, but they can manipulate the existing financial system’s rules. At times this may hamper people’s abilities to participate, but global cryptocurrency proponents and developers are creating ways to circumvent the nation state’s restrictions. The fact of the matter is governments worldwide cannot stop an idea whose time has come, but they sure like to try.
Do you think governments can create a regulatory framework for virtual currencies worldwide? Let us know in the comments below.
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