Digital Currency: Bitcoin

The debate over Bitcoin regulation is the most recent polemic surrounding alternative currency exchange. Bitcoin, a stored digital asset rather than an actual currency, has gained momentum as a primary and secondary market securities value, as well as a form of peer-to-peer exchange. How far Bitcoin traders will go to advance their cause will likely have something to do with the results to government policy.

If U.S. regulators establish a framework of rules to control for risks related to bitcoin or other virtual currencies, those assets will become even more attractive to reticent investors. Some concern over bitcoin’s status as an unsecured asset followed when the closure of the Tokyo bitcoin exchange, Mt. Gox disappeared off the Internet after the company filed for bankruptcy in response to losses sustained from a hacking attack. Headline news of losses just after the highest valuation of bitcoin in November 2013, when trading of bitcoin rose to a USD $1000 price.

Standardization Bitcoin as a currency is one such objective mentioned by regulators. Popular CEO’s around the internet have started adopting Bitcoin as currency on their ecommerce sites, one of those supports being Patrick Byrne of The general consensus by governments around the world is that bitcoins are not ‘currency’ per se, and must be treated like an asset. In spite of the fact that the U.S. Securities and Exchange Commission, has warned investors about the potential risks of scams of virtual currency trading, miners argue that bitcoin is a finite issue that can be made infinite by way of disaggregation.
Supporters of bitcoin currency as an instrument for universal valuation has challenged suggestion by regulators that the stored asset is actually safer than many other financial products. The fact that a number of companies offering bitcoin exchange are high liquidity firms or institutions now, has made those assets more attractive. If safety is connected to liquidity, then bitcoin exposure is relative to the form of exchange.

Integration of bitcoin instruments within traditional primary and secondary market investment products has boosted popularity of the asset as a standard ‘currency’. Clients of Bitcoin ATMs are establishing ‘customary practice’ in exchange of hard currency for bitcoins. Confidence in transaction promotes the legitimacy of those assets in some countries, yet traders should pay attention to changes within regulation to ensure that their bitcoins are legal exchange. For those trading Bitcoin via digital exchange in foreign jurisdictions, this issue is even more relevant.

Other factors playing into calls for regulatory reform by policymakers and opponents to virtual currencies, involve the address records of bitcoins. Once mined from transactions, bitcoin units are accorded an address. Bitcoin addresses are the mechanism for online exchange. When traded, bitcoin addresses are registered in the wallet of the buyer. Concerns about hacking of bitcoin records and attached banking or financial institution accounts from cloud storage are valid, say regulators.

The popularity of Bitcoin as an alternative currency and method of exchange has induced broad support among financial and IT professionals interested in capitalizing on digital transactions. If investor confidence is sustained for a more prolonged period, it is highly probable that allowances for bitcoin exchange will continue. At present, the ‘buy’ and ‘sell’ of bitcoins is legal, as well as purchases. How far Bitcoin traders will go to ensure that their value is secured will inevitably rest on profit margins, but also on the belief in civic liberties to establish value outside of the State.