Virtual Currency Participants Launch Self-Regulatory Organization

Thursday, 01 Aug 2013 03:37 PM

By Michael Kling

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The Bitcoin virtual currency may be in danger of becoming the Govcoin, warns a virtual currency expert.

Industry players are working on self-regulation of the Bitcoin and other virtual currencies.
If they're not careful, the Bitcoin could be taken over by the government, warns Jon Matonis, executive director of the Bitcoin Foundation, in an article for American Banker.

Editor's Note: Weird Trick Adds $1,000 to Your Social Security Checks

Industry participants have just launched a self-regulatory organization, the Committee for the Establishment of the Digital Asset Transfer Authority, that will develop guidelines for combating money laundering and other common rules.

"Although SROs can be extremely beneficial in advancing an industry, clear political lines must be drawn to mitigate the risk that an SRO would be co-opted by government and this is where it gets tricky," Matonis says.

The government could ask the SRO to implement certain guidelines or rules to be incorporated among its membership.

"If such modifications are objectionable to the majority of industry participants," he cautions, "the SRO faces the dilemma of challenging the authorities and risking its relevance, or being complicit in harmful and over-reaching backdoor legislation."

The group could stray from its core constituency and be absorbed by the government as a direct regulatory body, he warns.

"As self-regulatory organizations are excellent non-governmental solutions for industry best practices, they need to be vigilant about maintaining the integrity of the original mission."

Industry players must protect Bitcoin's core characteristics: perfect fungibility, payment irreversibility, and user-defined privacy, the same characteristics of cash.

"Over-regulation tends to drive innovation to more lightly-regulated jurisdictions or underground where it thrives," Matonis says. "And, this is even truer with the cryptographic bitcoin."

Other virtual currency advocates were more optimistic about the new SRO.

"DATA will hopefully be a new type of organization, respectful of existing structures and working to evolve the virtual currency industry to benefit everyone," writes Stan Stalnaker, founder of the Ven digital currency, in an article for The Huffington Post.
The group, he says, will "ensure protection of consumers and adherence to law in an effort to make sure the advantages provided by progress are not derailed by the unscrupulous."

Virtual currencies, which can be used without involving a financial intermediary, have drawn attention of regulators concerned that the currencies are used for money laundering and other illegal transactions. Creation of the SRO is designed to counter new possible government regulations, according to The Wall Street Journal.

Editor's Note: Weird Trick Adds $1,000 to Your Social Security Checks


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