I was recently tasked by CCN with attending the BitFin conference in Dublin, Ireland. Some of the discussions were interesting, some less so, some were like swimming through cold porridge. One of the most interesting was, in my opinion, given by Gareth Murphy, of the Central Bank of Ireland, he is the director with responsibility for markets supervision, this includes the regulation of Irish securities markets as well as supervising the funds, stockbroking and investment management industries. He is described on the Central Bank site as a member of the senior team and would be seen by all as a heavy hitter.
At the BitFin conference, Mr. Murphy gave a presentation on the Thursday, titled: Regulating Virtual Currencies. He voiced his concerns that Bitcoin, and indeed all cryptocurrencies provide potential channels for tax evasion as well as for money-laundering. He advised the virtual currency industry to actively move to address the concerns of the established financial authorities “rather than playing cat-and-mouse and eventually, and inevitably, being drawn into the regulatory net.”
He went on to discuss the real concerns that financial authorities have about the adoption of cryptocurrencies, that there is a potentially significant cost to any state from the very real losses of tax-leakage, from the State, to those in the virtual economy. He said: “There is a substantial threat to the country’s finances if more and more transactions for goods and services in the national economy disappear from the tax net.”
He went on to state that virtual currencies can offer a channel through which the proceeds of crime can potentially be used to purchase goods and services. This is an area that commands a lot of regulation world-wide as governments move to put in place ever more stringent money laundering legislation. He went on to raise concerns about the issues of consumer protection and issues within payment and settlement systems. He stated that legislation and systems were necessary to ensure confidence in the completion of financial transactions. He said that the loss of sovereignty as a result of the adoption of a decentralised currency would create implications for financial authorities.
BitFin conference attendees were then treated to his proposal for what would be the necessary elements of regulation necessary in any acceptable regime. There would need to be legally managed reporting of all transactions in virtual currencies. “Choices would have to be made in relation to who should be legally obliged to report to financial authorities” he went on to say “That would potentially bring a whole new set of parties into the regulated net.”
He went on to advise that while some existing rules could be used that other legislation based on new legal concepts, capable of standing the test of time, will be necessary to cope with the evolution of cryptocurrency. Once that rule book is drawn up and put in place it will be necessary to for the industry to be supervised and enforced, and this will require manpower and resources. He finished by saying: “Effective resolution relies on all of these aforementioned steps as well as potentially significant powers of intervention and the appetite to use them.”
The BitFin conference was an important first step in bridging the gap between the virtual currency industry and the world of conventional financial services. For me, as an attendee, the gap was apparent and huge. I formed the opinion that both sides would have some significant distance to move to reach consensus. I believe there may be a certain hunger present in both sides to find, at least, common ground. The BitFin conference in Dublin may have provided, at least, a first step.