Ever since Bitcoin and other cryptocurrencies started gaining worldwide popularity and acceptance, there has been a debate going on about regulation. When bad news hits the fan, the cry for a legal framework is even bigger. Yesterday, we were happy to report that the state of New York is taking applications from enterprises that want to acquire their ‘Bitlicense’. Today, it seems the world’s leading economy is considering regulating it. Commodity Futures Trading Commission (CFTC) Acting Chairman Mark Wetjen has told journalists that the regulator is looking into how it can increase oversight of Bitcoin and other virtual currencies.
Bitcoin is known for its characteristics of providing anonymous, instant money transfers at very low costs through a decentralized network. Those same characteristics are the reason Bitcoin received considerable notoriety. The coin has been used by money launderers and people looking to buy drugs and other illegal goods. In January this year, Bitinstant’s CEO was formally charged with money laundering and enabling illegal drug transactions through Bitcoin.
Bitcoin and every other cryptocurrency lives in an environment where there is a complete lack of regulation. Everything is possible, and there is little that can be done to prevent bad things from happening. Because of this, China has barred financial institutions from dealing in Bitcoin. India has warned its investors against dealing in Bitcoin. It’s remarkably easy for countries to wash their hands clean of all things that have to do with Bitcoin, but that doesn’t take away the fact that the lack of regulation brings serious risks. Bitcoin tries to make its way into the homes of common people and because of that, there needs to be some form of legislation to ensure the protection of these folks.
The CFTC knows they need to act, and it seems they are well on their way to at least consider regulation the virtual currency. “We are looking into that,” Mark Wetjen, acting chairman of the CFTC, said Tuesday. “It’s been initiated, there’s been an internal discussion at the staff level.”
The CFTC regulates the commodity futures and options markets. Wetjen said the agency is analyzing whether digital currency falls under its purview as a watchdog over commodity manipulation.
“I think people believe there’s a pretty good argument that it would fit that definition,”Wetjen said. “Then there’s a separate question about whether or not there is some derivative contract based on, or denominated in a virtual currency and whether that’s listed on an exchange. … There’s some looking into that question too, but it’s impossible to offer a timeframe for any final decisions,” he added.
It’s not remarkable that the CFTC decided to publically claim it is talking about regulation. Japan recently said Bitcoin is “unworthy as a currency, but some transactions could and should be taxed.” Obviously, calling the coin unworthy and yet taxing it is a bit contradictory but Japan is considering regulation anyway.
Every country is taking different stances towards Bitcoin and cryptocurrencies in general. Total banning of the concept is usually followed by negative feedback from the public, so the United States are taking a slightly different approach. They’re not making any promises but, on the other hand, they’re not saying no to Bitcoin either. The recent developments, like Mt. Gox’s collapse, prove that there is a need for regulation. It all depends on what governments want with the coin. If they are able to preserve Bitcoin’s advantages in some sort of legal framework, people will gladly accept, and cryptocurrencies will flourish. Only time will tell.