Regulators Take a Greater Interest in Bitcoin

As the digital currency gains momentum, regulators are taking notice.

May 07, 2014
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Steve Kirsch

Bitcoin investor Steve Kirsch compared the state of digital currency—and bitcoin specifically—to the dawn of the Internet during a CUNA Payments Roundtable presentation Tuesday in Las Vegas.

Kirsch is principal of Cointrust, a facilitator of digital currency. He said the Bitcoin technology could have other uses besides currency, including “anything that is tradable, such as cell phone minutes.”

He added that Bitcoin is adding as many as 500 merchants a day despite concerns from regulators.

“It is gaining momentum, but as the regulators gain clarity we could shift to a more regulated version of bitcoin,” Kirsch said.

The concept of digital currency won’t go away, he added. “It’s just going to change in terms of how we think of it in being compliant with laws instead of being out there in the Wild, Wild West.”

In contrast to conventional currency networks, the Bitcoin network is decentralized. The network processes bitcoin transactions on a peer-to-peer basis rather than through a centralized processing system. The Bitcoin network has its own unit of value, called the bitcoin.

Kirsch explained that Bitcoin with a capital B means the software and the system; bitcoin with a lowercase b means the currency.

The market for bitcoins is volatile, in part because the crypto-currency is not backed by any assets and is unregulated.

Recently, some state regulators have warned credit unions not to deal in the bitcoin currency.

Kirsch acknowledged there are concerns with bitcoin currency and the Bitcoin network, primarily concerning safety, security, and compliance. But he said reputable companies are working to address these concerns to work with regulators and financial institutions and advance the technology.

Kirsch compared the Bitcoin network’s current status to the early days of the Internet.

“When the Internet was created it didn’t take off until somebody came up with the idea of the World Wide Web,” he said. “Right now the Bitcoin is this enabling technology, and there are going to be some interesting applications. There are lot economists and experts who say it is going to fail, but they fail to account for the innovation that is going to happen.”

RON JOOSS is an editor for CUNA's News Now.

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