A year ago, in march 2013, the US Department of the Treasury Financial Crimes Enforcement Network (FINCEN) published a paper FIN-2013-G001 on crypto currency defacto regulating bitcoin in the US that let me to write Bitcoin gets regulated in the US. (20 march 2013):

via FINCEN: Bitcoin Users Not Regulated, Exchanges Are | Bitcoin Magazine. (NB This Bitcoin Magazine article neatly describes/summarizes what virtual currency is considered to be. “Must read” for payments professionals!)

The problem is a difficult one; nearly all laws to date that attempted to regulate online payments of any form have all assumed a central issuer, and in the case of Bitcoin it could be just as easily argued that everyone is an issuer or that no one is. Today, however, we have gained a much clearer picture of what regulation for Bitcoin will look like, as FINCEN just released a paper clarifying their position on virtual currencies, touching on the concept of “decentralized digital currency” in detail with Bitcoin clearly in mind.

I elaborated on this report explaining what digital currency is and how it compares to other currencies:
from What is digital currency? (10 april 2013)

The US Department of the Treasury Financial Crimes Enforcement Network (FINCEN) released a paper (FIN-2013-G001) recently on the application of its Regulations to Persons Administering, Exchanging, or Using Virtual Currencies clarifying their position on virtual currencies. This paper gives a clear definition and hence demarcation of the various types of currency. It is also the first guideline on how virtual currencies are legally seen (in the US) and therefore a milestone in their development.

In a year a lot has happened in the world of bitcoin and with bitcoin in the world. Regulators have stepped in in various countries already, as I predicted they would. Bitcoin was hyped, grossly misunderstood and bashed at the same time. Exchange rates sky-rocketed and tail spinned. NB I have been covering backgrounds of bitcoin (see RPD Bitcoin Files landing page as a starting point for exploring RPD’s resources) during this year abstaining form commenting on daily events.

Today the daily email news-feed from Finextra runs an interesting item: Banking watchdoc to set up virtual currency taskforce

The European Banking Authority is to assemble a taskforce to determine whether virtual currencies should be regulated.

NB Download the European Banking Authority consumer trends Report 2014

Bitcoin and the bitcoin protocol are complex and easy answers are not available. I think the FinCEN has produced a very solid view. It regulates while allowing innovation by the market do its work. It nicely fits how the US is embracing innovation where others will lag. My view on the differences for payment innovation between the USA and EU are written down in a recent post: “Why was PayPal not invented in the EU?”.

Taking your time to set the right bearings and set the right policies for something as complex as bitcoin is a good thing. Bringing all the EU countries in one line is a tedious job as well. And sometimes taking your time has the advantage to see what happens, how it develops and to better understand the iteration with legacy methodologies and regulations.

Crypto currencies are a reality and are popping up all over the place, Pandora’s box has opened and can’t be closed, let’s regulate it wisely. If this takes time and yet an other taskforce so be it. (NB How I wished to be able to eavesdrop into the EBA bitcoin taskforce meetings!)

Lets hope the EBA (the authority not to be mistaken for the European Banking Association) does have a open view seeing the broad picture and not money payments only. (see Transfer of property rights: „Payment Myopia”)