Importance Of Bitcoin

As we have seen, the popularity of Bitcoin is continually growing and it is by far the most widely adopted virtual, decentralised currency in the world. This ever increasing growth will lead to increased regulatory concerns about Bitcoins possible impact on real currencies, tax implications, potential for fraud and criminal use. Governments, law enforcement, taxing authorities and financial market regulatory agencies will all want to contribute to defining the rules for digital currencies. Bitcoin is still in its infancy, and many of these regulators are only just starting to realise and understand the full scope of digital currencies. The good news for digital currency advocates is that any type of regulation will be an implicit nod of legitimacy.

It is the organisation in rich countries which creates incentives and opportunities, as we saw with the patent system in the US. With Bitcoin, governments face the familiar issue of needing to provide a suitable environment for innovation to flourish, while at the same time, ensuring that companys working in the same industry, performing similar functions are regulated in the same way. This must be done in such a way that consumers and the wider financial system itself is protected. Heavy handed and restrictive regulation risks stifling innovation and will deter potential virtual currency based companys. After all, Bitcoin is a truly global currency that exists over the internet, so the physical location of a virtual currency based company doesn’t matter. On the other hand, too little regulation would leave digital currencies extremely vulnerable to criminality. This could have a detrimental effect on consumers and the economy. As we know, the digital currency industry has been dogged by problems in relation to theft from currency exchanges, facilitating the sale and purchase of illicit goods, malware and attacks on third parties and the potential to aid money

Governments approach towards Bitcoin needs to change, in order to allow innovation and development. At the moment, there is no clear guidance on what type of information, if any, needs to be collected and maintained by marketplaces and businesses. We recommend that regulation be introduced that would require Bitcoin businesses and exchanges to keep detailed, confidential records of all data related to their transactions, including information that identifies users. Companys would also need to ensure they put systems in place to identify threats and high risk customers. This would provide law enforcement agencies with everything they need to enfore compliance with existing financial regulations. In reality, it is more than likely that the majority of exchanges are already recording identifying information. Nonetheless, at present there are no clear legal requirements, so if an exchange was ordered to hand over Currency Transaction Reports to regulators, it might not be able to supply legitimate or adequate information. Introducing regulation would hold exchanges accountable and increase consumer