Cryptocurrency Regulative View

Views on cryptocurrency from a regulation perspective

Given the importance of understanding the role of cryptocurrencies in the monetary system

highlighted above, we now turn to another core element that must be considered, should

such currencies be utilized increasingly in the real economy — the role of regulation.

A detailed account of several aspects of regulation response to cryptocurrencies can be

found in Peters et al. [2014].

Even before the advent of cryptocurrencies, there have been concerns about how

centralized virtual currencies may limit a country’s ability to control inflationary pressures.

The Chinese Q-coin was adopted widely as a form of payment by online entrepreneurs,

i.e., outside the online messaging environment which it was created for. The Chinese

central bank, citing concerns about an increased money supply outside of its control, as

well as a difficulty in imposing taxation, enacted limits in the issuance of these currencies

(Lehdonvirta & Castronova [2014]).

A number of regulators around the world have been devoting an increasing amount of

attention to virtual and cryptocurrencies in recent years. Mitchell [2014] outlines the

responses of several regulators, from which one can observe that there are both varied

interpretations of cryptocurrency (e.g., as e-money, private money,20 as a commodity or

private property, or as a private unit of account), which informs their treatment from a

taxation perspective also. In most regulatory responses to virtual currencies in Europe,

Bitcoin has not been found to fulfill the criteria or definitions of a currency. Sweden,

however, has required virtual currency exchanges to register with the financial supervisor,

while Germany and France have declared that certain Bitcoin-related activities are subject

to authorization. There is no unified approach to regulation of such virtual currencies as

payment services within the EU, and ECB has not expressed any intention to amend the

current legal framework to incorporate such considerations. We will discuss in a little more

detail the recent responses of the ECB and the U.K. HM Treasury, who have both conducted

surveys about the use, benefits and risks of virtual currencies, as well as the New York

Federal Reserve’s recently released detailed regulatory framework.