Table of Contents
Research Question: Considering technical, ethical and legal factors, which global
regulatory approach to Bitcoin is optimal for the future?
Bitcoin Use in Society
Factors Influencing Legal Regulations for Bitcoins
Legal Regulations of Bitcoin: A Comparison
Optimal Solution for Regulating Bitcoin
This essay analyses the considerations relating to Bitcoin as a modern way of conducting transactions. It addresses three different areas: technical, ethical and legal. These were chosen because they all impact what the regulation needs to cover. Without looking at each of these, an optimal solution would not be possible. It compares multiple countries’ approach to regulating or not regulating Bitcoin. Each country has its own reasons for deciding their preferences about Bitcoin. Some say that it should be regulated while others have banned Bitcoin. Some countries have been more neutral and allow its use but do not consider it as legal tender. The research question is Considering technical, ethical and legal factors, which global regulatory approach to Bitcoin is optimal for the future?
After analysing the considerations and comparing the different approaches, it was found that the best method would be to regulate Bitcoin as a legal currency including regulating it using the measures outlined in this essay.
No more bills? New technologies are being developed every day and Bitcoin is an example of a very unique proposition for the future. It is a global phenomenon and is gaining more and more traction with time. Bitcoin is a system which can be used as a replacement for money: it is an electronic method of paying. Of course, there are many ways of paying for things including traditional currencies, money transfers, mobile payments, or simply putting money onto prepaid cards. Bitcoin resembles much of this, but has its own unique characteristics.
Bitcoin is a topic of global significance, because it has the potential to be the way things are bought and sold in the future. As the world becomes more aware of this form of “money” it is being used and accepted in more places. Some countries do not consider Bitcoin to be a currency but do allow it to be used to buy and sell things1 (loc.gov). This requires more analysis into Bitcoin so that we can understand the world issues relating to it.
There have been problems reported with Bitcoin such as an unstable “network”, processing time, and security issues2 (bbc.com). However, there seems to be a new flare in the growth of Bitcoin and we must analyse Bitcoin as a method of transaction for the future. This involves an interdisciplinary approach because there are many angles that need to be evaluated in order for a proper conclusion to be drawn on the best way of regulating Bitcoin. These include technical issues, legal issues, ethical considerations and how these impact society. Looking at all these areas will help to determine an optimal solution presented towards the end of this essay. Without evaluating multiple perspectives, a sound conclusion cannot be provided.
We see that Bitcoin is accepted in some local restaurants and there are Bitcoin ATM’s. This means that it is getting more and more popular yet many people are unaware of how it works. One concern for people is whether Bitcoin is safe, reliable and question whether the value can be lost.
This essay discusses the issue of optimal regulation of Bitcoin through the lens various considerations which will evaluate this world issue from an interdisciplinary perspective and answer which regulatory mechanism is most appropriate to solve the problems Bitcoin creates. It starts by describing Bitcoins history, benefits and risks, delving into technical aspects, legal concerns and ethical considerations. Finally, this essay provides the reader with an optimal solution based on the above factors before concluding.
Bitcoin has been defined as “cryptocurrency - a system of digitally created and traded tokens to which value is assigned”3 (bbc.com). It started in 2009 and is in the form of a “decentralized peerto-peer” method of payment”4 (bitcoin.org). It does not have a particular authority5 (bitcoin.org). Satoshi Nakamoto is known as the inventor of the Bitcoin, although not a confirmed person, and ever since then many people have been involved in Bitcoin6 (bitcoin.org). The total “circulation” of Bitcoin as of August 2013, was more than “US$ 1.5 billion” and millions are traded every day7 (bitcoin.org). Bitcoin is accepted in certain countries and in particular places. It is mostly up to the buyers and sellers to trade in this currency. This currency also has a trade value, which in November 2016, holds a value of about $7508 (coindesk.com). The value has changed over the years and is similar to foreign currency value changes.
According to one news report, Bitcoin is most popular in the countries of Estonia, the US, Denmark, Sweden, South Korea, The Netherlands, Finland, Canada, UK and Australia9 (news.bitcoin.com). However, it is also illegal in some countries like Bangladesh, Argentina, and Russia because they say that it can be used for “moneylaundering”10 (bitcoin.org) Other countries where it is popular recognize the innovation and practical use of this currency.
As with many technologies, Bitcoin does not have a perfect history. It has faced several problems leasing to a major exchange crash in 201411 (wallstreetdaily.com), and recent security problems in 201612 (zerohedge.com).
Therefore, regulations are important to ensure that the currency is used in a legal manner and consumers are protected13 (coindesk.com).
“ Considering technical, ethical and legal factors, which global regulatory approach to Bitcoin is optimal for the future? ”
I am fascinated by new technologies that impact the world. What technology might be more important than one that deals with money?
I was exposed to this topic through research about new technologies and foreign currency which has always interested me. My family also has a collection of world currencies that interests me. Seeing that a currency can be traded online and used to buy and sell things seems like the way of the future.
I have various identities that allows me to see this from different perspectives.
Born in one country, raised in another and having visited many others, I can relate how different currencies are valued and exchanged as well as how Bitcoin can be a large scale concept significantly changing the way things are done in the world.
Also, this is a local issue as much as it is a global one. Living in the Los Angeles area, I have seen how technology works first hand. Many local people are unaware of how Bitcoin works including the benefits and risks involved. Being one of the most densely populated places in the world, this technology can make life more efficient here. However, there are issues that need to be addressed such as regulation as I will discuss throughout this essay.
The methodology that this essay uses is to compare monetary regulations among different countries and looking at the issues presented from the technical, ethical and legal perspectives. This essay covers various IB disciplines such as business and management, and information technology. I have made use of various libraries and online sources to complete this essay. This required use of important secondary data including legal, governmental, media and technical sources.
This research question allows me to analyse and compare several countries which have different standards on Bitcoin. Some have stronger legal regulation than others which may have more lenient or even no regulation relating to Bitcoin. The goal is to determine the optimal level and kind of Bitcoin regulation based on the analysis of legal situation in these countries.
I believe that Bitcoin should be considered legal tender and should have the outlined regulations in place so that the safety and security of Bitcoin users can be protected. Also, any concerns relating to ‘money laundering’ and tax can be addressed. This way the benefits of Bitcoin can be enjoyed and problems resolved.
Bitcoin’s Use in Society
Society has not changed their monetary system for many years. People have used paper money to buy things and the monetary system has replaced the bartering system. Money is needed every day in order to conduct affairs and fulfil needs and wants for members of society. Bitcoin has potential to replace or alter the established monetary system through this form of “cryptocurrency”.
Bitcoin can be used for all the same purposes that paper money can and, with the right level of use, can make transactions more efficient. This is because people do not need to carry paper money or coins around and transactions can be conducted quickly. Society seeks more efficient and easier ways of doing things and Bitcoin can change people’s lives for the better.
I think that Bitcoin can be a common currency in society that helps to avoid the need for foreign exchange. This can be helpful for tourists and Bitcoin can be used instead of having to pay local cash or exchange money. However, there are issues that need to be considered from a regulation perspective which will be discussed. Also, transactions are traced. This can help to avoid money laundering if Bitcoin is regulated properly. Some governments are hesitant to accept the currency because they fear they would not be able to have control over transactions and there may be illegal activities. If proper legal regulations are in place, this can be avoided. However, Bitcoin can have negative effects on society. For example, many users may lose their money if there are security breaches. Consumers need to be protected from loss and currently there are no protection mechanisms in place. Also, people may engage in illegal activities affecting society through crime. This can be done through illegal use of money14 (theguardian.com), underage gambling15 (problemgamblinggudie.com) or avoiding taxes16 (forbes.com). These concerns need to be overcome.
1 "Regulation of Bitcoin in Selected Jurisdictions." Bitcoin Survey. Library of Congress, Jan. 2014. Web. 28 Nov. 2016. <http://www.loc.gov/law/help/bitcoinsurvey/>.
2 Baraniuk, Chris. "Bitcoin: Is the Cryptocurrency Doomed?" BBC News. BBC, 19 Jan. 2016. Web. 06 Aug. 2016. <http://www.bbc.com/news/technology-35343561>.
3 Baraniuk, Chris. "Bitcoin: Is the Cryptocurrency Doomed?" BBC News. BBC, 19 Jan. 2016. Web. 06 Aug. 2016. <http://www.bbc.com/news/technology-35343561>.
4 "Frequently Asked Questions." FAQ - Bitcoin. N.p., n.d. Web. 04 Aug. 2016. <https://Bitcoin.org/en/faq#whatis-Bitcoin>.
8 Coindesk. "Bitcoin Price Index - Realtime Bitcoin Price Charts." CoinDesk. N.p., n.d. Web. 28 Nov. 2016. <http://www.coindesk.com/price/>.
9 @allenscottoshi. "These Are the World's Top 10 Bitcoin-Friendly Countries - Bitcoin News." Bitcoin
News. N.p., 29 Mar. 2016. Web. 28 Nov. 2016. <https://news.Bitcoin.com/worldstop-10-Bitcoinfriendlycountries/>.
10 "Frequently Asked Questions." FAQ - Bitcoin. N.p., n.d. Web. 04 Aug. 2016. <https://Bitcoin.org/en/faq#whatis-Bitcoin>.
11 @wallstdaily. "Mt. Gox Bitcoin Crash." Wall Street Daily. N.p., 12 Jan. 2016. Web. 26 Aug. 2016. <http://www.wallstreetdaily.com/2014/02/27/Bitcoin-2/>.
12 "Bitcoin Price Crashes After Exchange Admits Security Breach, Over $60 Million Stolen." Zero Hedge. N.p., n.d. Web. 28 Nov. 2016. <http://www.zerohedge.com/news/2016-08-02/Bitcoincrashes-afterexchangeadmits-securitybreach>.
13 Coindesk. "Is Bitcoin Legal?" CoinDesk. N.p., 23 Oct. 2015. Web. 24 Sept. 2016. <http://www.coindesk.com/information/is-Bitcoinlegal/>.
14 "Ten Arrested in Netherlands over Bitcoin Moneylaundering Allegations." The Guardian. Guardian News and Media, 20 Jan. 2016. Web. 24 Aug. 2016.
15 Carl. "How BitCoin Gambling Possesses an Underage Gambling Threat." Problem Gambling Guide. N.p., n.d. Web. 24 Aug. 2016. <http://www.problemgamblingguide.com/bitcoin/>.
16 Forbes. Forbes Magazine, n.d. Web. 30 Sept. 2016. <http://www.forbes.com/forbes/welcome/?toURL=http%3A%2F%2Fwww.forbes.com%2Fsites%2Flaurash in%2F2015%2F12%2F16%2Fbitcoinat-taxtime-whatyou-needto-knowabout-tradingtipping-miningand- more%2F&refURL=https%3A%2F%2F Error! Hyperlink reference not valid. m%2F>.