As a two-day forum on the cyber-currencies wrapped up in New York on Wednesday, the regulatory future of Bitcoin and other virtual currencies is becoming clearer, though still undecided.
Yesterday’s post looked at the hearings from the perspective of regulators and government officials, but also represented at the hearings were businesses, entrepreneurs, and investors who had no shortage of opinions about what direction regulation should take.
Five Bitcoin panelists were allowed to speak at the forum, with all agreeing that a streamlined set of guidelines would help fuel new business opportunities. While law enforcement and financial regulators also pressed for defined rules, advocates of virtual currencies noted that a lack of clarity on Bitcoin may be driving business outside of the U.S. and preventing smaller start-ups from operating.
Jeremy Allaire, founder and CEO of digital currency company Circle Internet Financial, pushed to get serious and mature exchanges established locally. Rather than forcing users and markets overseas, he said, it is imperative to have a “well-financed and capable platform that is bother closer to the oversight of New York and federal bodies.”
“I think we need for those exchanges to clearly understand what their obligations are,” Allaire said. He also expressed confidence that such clarity would attract “very high quality private equity and venture capitalists and other investors that would invest in and build businesses.”
Many panelists agreed that businesses and investors welcome regulation, but fear burdensome regulations could compel innovative companies to seek opportunities elsewhere, noting that most major Bitcoin exchanges are located abroad.
Cameron and Tyler Winklevoss, co-founders of Winklevoss Capital and heavy investors in Bitcoin, were among the panelists who testified on Tuesday. Cameron Winklevoss also feels that onerous regulations placed on Bitcoin and other virtual currencies could hinder growth and innovation, but that action is needed.
“Solutions don’t really come from the current industry,” Winklevoss argued. “Bitcoin is appropriate for both federal and state regulation,” he said, adding that he believes “the current regulatory environment is sufficient and can be applied to Bitcoin.”
Regulators have yet to come up with specific guidelines for crypto-currencies like Bitcoin, or even decide who bears the responsibility. Benjamin Lawsky, New York State’s financial regulator who called for the hearings, hopes these issues can be overcome in the near future. “We need to think internally about how we can be a more modern, digital regulator,” he said. Among his suggestions is the creation of a “BitLicense” for virtual currencies.
Barry Silbert, founder and CEO of online marketplace SecondMarket, and founder of the Bitcoin Investment Trust believes that the New York Department of Financial Services (NYFDS) can provide the necessary clarity, but is wary of the new license. “It’s hard to know how to react to the idea of a BitLicense without knowing more about it,” he said. “I’m conceptually open to it but it would be easier to use the existing frameworks to combat fraud.”
However cautious lawmakers are, they acknowledge a growing acceptance for virtual currencies among legitimate businesses and law-abiding users.
Judith Rinearson, a partner at a Manhattan Law firm, who represents several Bitcoin companies, confirmed that the industry is not opposed to regulation. “Consumers want to know they are not dealing with crooks,” she said in an interview with IDG News. “Investors want these companies to be legitimate.”
Ultimately, lawful business people want a balanced approach to regulation that will help legitimize virtual currency without burdening new and growing companies with bureaucracy, reported Marc Ferranti.
With viewers from more than 100 countries streaming the hearings, and intense interest of speculators worldwide, the regulations that come out of New York could very well make or break Bitcoin.