Bitcoin Gains Traction
HandelontheLaw.com Staff Writer
The digital pseudo(?) currency known as “Bitcoin” continues to gain acceptance and regulation more than 4 years after its creation.
In early July 2014, Timothy Draper, who cofounded and manages the Draper Fisher Jurvetson investment firm, won 30,000 Bitcoin in a U. S. Government auction. Seized from the illegal Silk Road, the Bitcoin had an estimated worth of $19 million, though Draper did not disclose the amount that defeated 44 other bidders. Draper predicts that Bitcoin will help transform banking, investment banking and venture capital within a few years because it allows rapid, less expensive, more reliable exchanges. Draper concludes that Bitcoin will be “as transformative to finance as the internet was to information and communication.”
Meanwhile, the virtual currency is increasingly used for purchase of more expensive, traditional property. For example, a Lake Tahoe land parcel was recently purchased for 2,739 Bitcoin, worth $1.6 million. Situated in Martis Camp, California, the property represents merely one of several real estate purchases with Bitcoin. In addition, Dell allowed Bitcoin use on its website and very quickly accepted an order for 84 Bitcoin worth $50,000, saving $1,000 in processing fees. Evidently, sellers of these pricier items are becoming more comfortable with accepting Bitcoin as a matter of course.
On the restrictive side, more proposed regulations are being introduced. In addition to the IRS’ March 2014 decision to treat Bitcoin as property rather than currency, New York State is taking a crack at regulating the revolutionary virtual money. The state’s Department of Financial Services issued proposed regulations requiring a “BitLicense” and compliance with rules for consumer protection, cybersecurity and hindrance of money laundering by any company that operates in New York State to secure, store, possess or control Bitcoin for customers. Reactions from pro-Bitcoin forces range from cordial to hostile. The Bitcoin Foundation is attempting to work with New York by requesting more response time, multiple drafts of the proposals and a hearing. However, anti-regulation critics assert “regulation invites flight” and Bitcoin users will merely steer clear of New York State.
Whether one is cooperative or hostile toward regulations, increasing acceptance and recent regulation attempts show that Bitcoin is gaining ground in several key players: sellers, buyers, investors, and regulators.
By Kathy Catanzarite
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