Google analyst Andy Yee is the latest to wade into the bitcoin regulation debate, concluding that any legal framework should be based on an “adaptive” approach.
Politicians and policy makers alike have expressed concerns about bitcoin’s lack of regulation.
Yee has proposed that rules should apply to services that actually handle money as opposed to those that create the digital currency software. He wrote:
“The logical and user layers are populated by private actors from the bitcoin community and real economy respectively. These actors are small and can easily escape from regulation and enforcement. At the information layer, intermediaries of various kinds have emerged to bridge the two networks. Their position in the Internet architecture enables them to capture information flows and identify wrongdoers. In addition, they are larger and more established actors, making them more amenable to state regulation.”
In his article for Internet Policy Review, Yee suggested using similar laws and rules to those already used to regulate financial companies:
“These laws and regulations of general applicability can in theory be applied to the emerging non-financial, information-based companies in the bitcoin economy. But a balance needs to be struck between eliminating instances of gatekeeper-aided wrongdoings and avoiding excessive burdens on gatekeepers.”
When addressing the issue of criminal useage, Yee wrote:
“Criminals need to go through intermediaries in this layer to exchange between the bitcoin and real economies. As a result, these exchange mediums collect and retain significant amounts of information, which can be utilised by law enforcement to detect money laundering and the underlying criminal activity.”
In other words, at some point the criminals will want to transfer their bitcoin currency into recognisable money and it is at this stage that they can be caught.
Various Google employees have voiced their opinion’s about bitcoin. Its Chief Economist Hal Varian has been quoted as saying: “I think something like this technology will take hold in the future but I am not particularly optimistic about bitcoin because it suffers from being the first in the area.”
Meanwhile, earlier this year, Google’s Director of Ideas, Jared Cohen, declared that bitcoin was “inevitable”.
Here in the UK the European Banking authority has advised that European banks should not deal in virtual currencies until a regulatory system had been developed.
We shall continue to monitor developments…