What is a Bitcoin: Is Bitcoin illegal? Part II
Bitcoin is of interest to law enforcement agencies, tax authorities, economists and legal regulators, all of which are trying to understand how the cryptocurrency fits into existing frameworks. The legality of your bitcoin activities will depend on who you are, where you live, and what you are doing with it.
Bitcoin has proven to be a contentious issue for regulators and law enforcers, both of which have targeted the digital currency in an attempt to control its use. We are still early on in the game, and many legal authorities are still struggling to understand the cryptocurrency, let alone make laws around it. Amid all this uncertainty, one question stands out: is bitcoin legal?
The answer is, YES, depending on what you’re doing with it.
What are the concerns about bitcoin?
Government agencies are increasingly worried about the implications of bitcoin, as it has the ability to be used anonymously, and is therefore a potential instrument for money laundering. In particular, law enforcers seem to be concerned about the de-centralized nature of the currency. Nevertheless, the level of control is also dependent on the level of development of a country.
As early as April 2012, the FBI published a document highlighting its fears around bitcoin specifically, drawing a distinction between it and centralized digital currencies such as eGold and WebMoney. It voiced concerns that while US-based exchanges are regulated, offshore services may not be, and could be a haven for criminals to use bitcoin for illicit activities without being traced. (coindesk :2014)
So Who regulates Bitcoin?
In the US, the Financial Crimes Enforcement Network (FinCEN), which is an agency within the US Treasury Department, took the initiative to control bitcoin transactions.
Regulators however, will vary on a per-country basis, but you can expect to see national financial regulators interested in bitcoin and other virtual currencies, potentially along with regional regulators at a sub-country level.
What this means to you
The legality of bitcoin depends on who you are, and what you’re doing with it.
There are three main categories of bitcoin stakeholder. Someone may fall under more than one of these categories, and each category has its own legal considerations.
Users
These are individuals that obtain bitcoins, and either hoard them or spend them. Under the FinCEN guidance, users who simply exchange bitcoins for goods and services are using it legally.....so you are on track.
FinCEN: “A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter.”
Miners
According to the FinCEN guidance, people creating bitcoins and exchanging them for fiat currency are not safe.
FinCEN: “By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.
Exchanges
Exchanges are defined as MTBs.
FinCEN: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.”
Historical development of bitcoin depict the position of governments in some Countries. Few government have announced any explicit intention to prevent bitcoin use completely. However, around the end of 2013 and start of 2014 there were a series of warnings and directives from central banks and regulators to varying degrees of severity. They ranged from the simple “be careful, bitcoin is neither regulated nor officially a currency”, to blocks on financial institutions and even raids on bitcoin businesses.
Many claim to be worried about the effect that large-scale bitcoin adoption might have on the stability of the financial system, especially if prices are volatile. Bitcoin adoption has however defiled all obstacles as it used has proven to be effective than the conventional means of fund transfer.
Blockchain, BitX and Coinbase, which represent major player in the bitcoin community are currently witnessing exponential growth of users occasioned by the increased adoption of bitcoin and therefore the need for a bitcoin wallet. t the same time, the game players have also formed committees to offer legal guidance, steer policy, and liaise with regulators.
Bitcoin as a form of cryptocurrency, is also generating employment in the technology ecosystem with growing interest for start ups to include bitcoin plugging on their interface- suffice to say that a lot of physical stores now accept bitcoin.
Will bitcoin survive? well its the battle between the old school and the new school, between the industrial age and the information age...the new school usually have technology as a weapon...I see bitcoin as a game changer.
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