Hearings conducted in New York City this week attempted to hash out the viability of regulating Bitcoin, and to discuss the digital currency’s realistic place in the U.S.’s existing banking infrastructure. Reports have indicated that the hearings ended with the general sense that, yes, regulating Bitcoin is possible, and that, yes, it should happen. But many obstacles lie along the long path to regulation and compliance for a currency that is still a source of perplexity for government officials.
The hearings were called by Benjamin Lawsky, Superindendent of The New York Department of Financial Services. Among those in attendance were Bitcoin investors and Silicon Valley bigwigs the Winklevoss twins, prosecutor from the U.S. attorney office in Manhattan Richard B. Zabel, Fred Wilson of Union Square Ventures, and Bitcoin enthusiast James Barcia of Bitcoin Center NYC, among others. The attendees discussed the advisability of creating and applying regulatory standards to the currency that is now being exchanged for real-life commodities.
Those such as Fred Wilson claimed that regulation should be kept to a bare minimum, if any is applied. And skeptics, like Zabel, are extremely wary of the currency’s likelihood of being used to make criminal activity easier and more lucrative. The Winklevoss twins lie somewhere in the middle; as proponents of the currency’s legitimacy in the mainstream economy, they recognize the need for some regulation, but also desire to keep Bitcoin’s decentralized nature a key component of its appeal to future users.
Of course, the elephant in the room was the arrest of Charlie Shrem on Monday, the CEO of BitInstant — a company that sells Bitcoins to customers. Shrem’s involvement in money laundering and link to the online black market website Silk Road cast a dark cloud over the potential of the decentralized currency that so many are in favor of making mainstream. But Forbes reported that Lawsky’s approach to the hearings occurring so shortly after Shrem’s arrest was wisely non-judgemental; he made a point of noting that the NYDFS “approaches the issue of virtual currencies without any prejudgements,” and that “no industry should be defined entirely by its bad actors.”
As the hearings closed, Lawsky told media that 2014 should see the proposed “regulatory framework” for virtual currencies in New York. If such policy does make it through this year, New York will be the first state to put regulations for virtual currencies into practice.