Calls for the regulation of digital currencies, including Bitcoin, increased in September worldwide. Many governments seem keen on the idea of closely overseeing the use of digital currencies for money transmission. However, there is also concern that controlling the field too closely will hamper the development of a potentially helpful innovation.
U.S. Commodities Futures Trading Commission
The U.S. Commodities Futures Trading Commission (CFTC) has ruled that digital currencies, such as Bitcoin, can in fact fall under the designation of commodities. The ruling means that such currencies would be covered under the Commodity Exchange Act. In a statement, CFTC’s director of enforcement said,
"While there is a lot of excitement surrounding bitcoin and other virtual currencies, innovation does not excuse those acting in this space from following the same rules applicable to all participants in the commodity derivatives markets."
U.S. Conference of State Bank Supervisors
The U.S. Conference of State Bank Supervisors has released a final version of its regulatory model for digital currency regulation. While the document does not serve as a required directive on how states will handle digital currency, it does provide suggestions for how to craft future law and regulation around such currencies.
For instance, the document advises that third-parties fall under the purview of state regulators: “It is CSBS policy that entities performing activities involving third-party control of virtual currency should be subject to state licensure and supervision like an entity performing such activities with fiat currencies. Accordingly, activities involving fiat currencies that are otherwise subject to state laws should be covered if undertaken using virtual currency.
A bill that would have increased oversight of digital currency in the state has been made inactive at the behest of a senator. The bill, AB-1326, was heavily contested by digital currency supporters who said that the additional oversight would dampen startups and innovation in the space.
A bill in New Hampshire that would have allowed residents to pay taxes in bitcoins is nearing defeat in the state legislature, according to reports from CoinDesk. Representative Bill Ohm told the publication,
“I object to barter transactions involving the State that have no intrinsic value. Commodities such as gold bars, corn, wheat, chickens or cows have some intrinsic value in [New Hampshire] and can be auctioned off to an identified market when all else fails. Should the market for bitcoin collapse, like the market for our former toll road tokens, the State is likely stuck with worthless inventory."
Bitcoin wallet operator Circle, has become the first digital currency operation to receive a BitLicense from the New York Department of Financial Services. Applications for BitLicense closed in August and the requirement has spurred some digital currency operators to leave the state in order to avoid the hassles of compliance. In a blog post, Circle wrote, “We’ve been fairly vocal about our concerns with the BitLicense, especially in its initial incarnation. Many of those issues were resolved, and though still not perfect, the BitLicense and its requirements became clear and irrefutable prerequisites for serving and supporting everyone in New York. We are the first company to be granted a BitLicense, and we also hold a Money Transfer License for US dollar transactions in the state of New York. We want to help people everywhere around the globe, and that includes New Yorkers.”
Around the Globe
European Banking Federation
The European Banking Federation, a major trade group, is calling for the regulation of Bitcoin and other digital currencies in a new document that outlines changes the group would like to see within the banking sector. While the group does in fact suggest greater oversight of digital currency transactions, they also request that any regulation not be so onerous as to stifle innovation. “Using such technology offers clear opportunities to reduce costs of moving and handling money, to secure consumer spending and to introduce greater liquidity to the market. It also improves offers of products and services and increases banks' velocity in all their activities,” they write.
Mexico's Secretariat of Finance and Public Credit has placed restrictions on the use of virtual currency within the country. This means that currencies, such as Bitcoin, will now be subject to similar restrictions previously placed on the use of cash or precious metals for transactions involving things like property or large goods, like vehicles.
According to the Russian News Organization Interfax, the Russian Ministry of Finance has refined a proposed law that would both outlaw and impose criminal penalties for the use and transmission of digital currencies. According to the report, crimes related to the usage of digital currency could result in fines of up 300,000 rubles and more than 300 hours of correctional labor.
An economist from the Bank of England proposed setting up a national digital currency in the same vein as Bitcoin. In his speech, Chief Economist Andrew Haldane offered,
“What I think is now reasonably clear is that the distributed payment technology embodied in bitcoin has real potential. On the face of it, it solves a deep problem in monetary economics: how to establish trust – the essence of money – in a distributed network. Bitcoin’s 'blockchain' technology appears to offer an imaginative solution to that distributed trust problem.”