Category Archives: Regulation

Official Document Confirms Bitcoin’s Legal Status in Russia

Via newsbtc.com

  • “As a result of this official document, there is no legal prohibition related to Bitcoin or other cryptocurrencies in Russia. Additionally, buying or selling Bitcoin is perfectly legal, albeit considered a foreign currency transaction
  • “It is due time some clarification regarding the Bitcoin situation in Russia is provided. No ban on Bitcoin and other currencies is a positive development. Any draft law regarding banning Bitcoin usage has been put on the back burner for the time being. However, new regulations may be written in the coming months”

Read more here…

Russia’s Deputy Minister of Finance, Nation will not Ban Bitcoin

Via Evander Smart @ Bitconnect.co

[Editors note: The most powerful nations in the world are slowly realising that Bitcoin is more powerful than all of them combined.

In my opinion, the 4 main reasons for nation states not to regulate are the following:

  • Risking out on future Industry, Business and Job growth through Regulatory arbitrage.
  • Bitcoin could potentially become a strategic asset in the ongoing global currency war.
  • Nations are realising more than ever that a politically neutral platform is needed for international settlement.
  • For every action there is an equal and opposite reaction and because Bitcoin is a technology that can be incrementally developed, state regulation risk creating a more hostile version of Bitcoin.

Read more here..

 

New California digital currency bill is a step backwards

BY PETER VAN VALKENBURG & JERRY BRITO @ coincenter.org

[Editors note: The Bitfinex hack showed the risk of heteronomous regulatory interference in a system, platform and technology that regulators do not understand.

But this will not stop regulators determined to either take their cut and or hinder a disruptive technology on behalf of banking powers]

  • “Enrollment costs $5,000 and failure to enroll can result in fines of up to $25,000 per offence. The DBO can levy fines or revoke one’s enrollment without judicial review. If you are not allowed to do X unless you get Y from the state, then—”enrollment” branding aside—you might as well call Y a state license to do X”
  • “The bill has a loose definition of “digital currency business” and can easily be interpreted to mandate “enrollment” of several parties beyond the exchanges and hosted wallet providers who we can all agree present genuine consumer protection risks to customers”

Read more here..

Australian Government “Committed” to Removing Double Taxation of Bitcoin; Backs FinTech Growth

Via cryptocoinsnews.com,

[Editors Note: One of Bitcoins most important attributes is the fact that it is a global network and currency that completely bypasses the control and influence of individual nation states.

Because of this, like we have seen recently in the EU and now Australia; startups and entrepreneurs can continue to take advantage of regulatory arbitrage which should continue to put a cap on regulatory pressures from any one country, as these countries compete to attract the top talent.

This is one of the most important factors pushing back against the rhetoric and claims from the likes of Jamie Dimon that any one government can simply ban the use of this new technology]

A real test of this trend could come as governments become more desperate to support ailing fiat currencies and potential capital flight.

  • “The Government is committed to addressing the ‘double taxation’ of digital currencies and will work with the industry on legislative options to reform the law relating to GST as it is applied to digital currencies”

Read more here..

Australian Senate Committee proposal – Bitcoin should be deemed as regular currency

Via Anthony Cuthbertson @ IBTimes.co.uk

“Bitcoin and other digital currencies will be treated the same way as traditional currencies under expected proposals from the Australian government, reports suggest”

“A Senate inquiry is set to overturn a ruling from the Australian Taxation Office (ATO) from July 2014 that classified bitcoin as an “intangible asset” for Goods and Services Tax (GST) purposes, according to the Australian Financial Review, giving a much needed boost to local bitcoin businesses”

Read More here….

China Announcements V Bitcoin price – And why investors should look at the bigger picture

[The Following Article is by Renegade Investor Chief Editor – Edward Blake] Originally Posted 2014

In the last few months, there is no doubt that many in the Bitcoin investment space are getting weary of the constant threats emanating out of China and the PBOC with relation to Bitcoin regulation. In particular with how Bitcoin exchanges and financial services can operate within China.

In fact whilst many investors obviously want China and the Chinese citizens to participate in the Bitcoin economy, especially due to the high trading volume they bring to the market. They are now looking to the Chinese government to officially state their position regardless of what it is, to try and underline the ambiguity surrounding their regulatory stance.

The goal of this? To end the uncertainty which has plagued the bitcoin price over the last 5 months (which we will look at shortly). This has no doubt played a part in frightening away the weaker hands which helped fuel Bitcoin’s $1000+ move back in November 2013.

Whilst there is no definitive answer or evidence as to why there has been so much ambiguity and uncertainty regarding China’s official stance on Bitcoin regulation. Possibilities discussed range from a lack of understanding on the part of regulators grappling with this new technology, to deliberate manipulation in order to lower the bitcoin price.

So what has been the effect of the announcements on the bitcoin price? And should current or potential investors really fear the regulatory stance of China?

The effect of the announcements:

The following charts show the price drop following Chinese regulatory announcements/rhetoric from the beginning of the announcement to the end of the short term down trend.

Dec 5th: Peoples bank of China Starts rhetoric on restricting financial institutions from handling Bitcoin, issues statement Baidu and China Telecom stop accepting Bitcoin

Price drops $1130 to $540 – 52% drop.

China Price drop December 5th 1130-540

Dec 16th:  China’s payment processors told not to deal with Bitcoin.

Price drops $857 to $381 – 55% drop.

China price drop December 16th 857-381

Mar 28th: Rumours of new China bank restrictions.

Price drops $570- $339 – 40% drop.

China price drop Mar 28th 570-339

April 25 2013: – PBOC further restrictions Bitcoin exchanges, restricting Bitcoin transactions through rechargeable funding codes.

Price drops $500 – $438 – 12.5% drop (currently)

China drop April 25th 500-438

 

Summary:

Chinese price drop summary table

Whilst you have to take into account other factors such as profit taking, technical weakness, momentum trading and the Mt.Gox affair over this 6 month consolidation period. It is clear that these Chinese announcements have had a profound effect upon the drop in the bitcoin price.

But looking at the summary, the effect of these announcements appears to be diminishing as bitcoins move into stronger hands and new investors enter the market looking for bitcoins that are potentially offering a discount under fair market value.

The Bigger picture:

For people currently invested or looking to invest in bitcoin, it is important to remember that Bitcoin is a lot bigger than any one country, even if that country is one of the biggest players on the world stage.

It could and has been argued that Bitcoin is one of the biggest and most important technological innovations in human history and the likelihood of it going away anytime soon, could be conceived as being very low. Whilst bitcoin remains a speculative high risk investment in the near term, it is worth bearing this in mind.

In addition to this, regardless of China, there are approx 200 sovereign states in the world not all of which are taking such a hard stance towards Bitcoin regulation.

These states cumulatively have tens of trillions in wealth currently located in stock markets, pensions, savings accounts, bonds, forex and commodities. Not to mention the wealth in offshore accounts that some estimate to be around $21 trillion.

If even a small percentage of this money makes its way into the Bitcoin market, it is not difficult to conceive a bitcoin price many multiples of its current $5-6 billion market cap.

It is also worth remembering that bitcoin is a global currency. As such, the opportunity for regulatory arbitrage ensures that there will always likely be a state that recognises the value of Bitcoin and are open and willing to cooperate with Bitcoin entrepreneurs, exchanges and start-ups to help build a robust Bitcoin economy. Evidence of this is the growing amount of Venture capital (VC) moving into the Bitcoin space, which is estimated to total approx $500 million by the end of 2014. A number almost in line with the rate of VC the internet attracted during its early stages.

It is these states that will likely force the hand of the more reluctant states in the long term, as they enjoy the competitive advantage that comes from a growing Bitcoin economy that benefits from the use of an efficient, low cost, frictionless transaction network.

Conclusion:

Whilst it is likely beneficial to take note of any regulatory moves from individual states that affect the bitcoin price, when making an investment decision to enter of leave the market. It is always worth bearing in mind the bigger picture of Bitcoin as a whole and why the underlying fundamentals perhaps offer an opportunity much greater than can be affected by any individual state.

Disclaimer

 

 

Russia & Bitcoin – Growing proof that Bitcoin is bigger than any one country

As I previously stated in my article ‘China V Bitcoin prices – Why investors should look at the bigger picture’:

“For people currently invested or looking to invest in bitcoin, it is important to remember that Bitcoin is a lot bigger than any one country, even if that country is one of the biggest players on the world stage.”

“It is also worth remembering that bitcoin is a global currency. As such, the opportunity for regulatory arbitrage ensures that there will always likely be a state that recognises the value of Bitcoin and are open and willing to cooperate with Bitcoin entrepreneurs, exchanges and start-ups to help build a robust Bitcoin economy”

“It is these states that will likely force the hand of the more reluctant states in the long term, as they enjoy the competitive advantage that comes from a growing Bitcoin economy that benefits from the use of an efficient, low cost, frictionless transaction network”

We began to see proof of this today when Bank of Russia deputy chairman Georgy Luntovsky indicated a loosening in the central banks stance on Bitcoin and Cryptocurrencies:

“At this stage we need to watch how the situation develops with these kinds of currencies. These instruments should not be rejected,”

Andrey Ostroukh from the WSJ reports:

“Russian authorities have softened their tone on Bitcoin; the central bank now says it won’t hamper the usage of the virtual currency whereas previously it had vowed to crack down on the electronic payment instrument.
The Bank of Russia is now accumulating information about so-called crypto-currencies and is not blocking Bitcoin, the central bank’s first deputy chairman Georgy Luntovsky said Wednesday”

While is waits to be seen if Russian authorities follow through fully on the back of this rhetoric, what is perhaps of significant value here is the speed in which the stance has changed from the beginning of the year.

This may have been contributed to by the rapid speed of developments in the Bitcoin space, especially in regards to its growing legitimacy. We have recently seen the first large and mid-cap companies begin to adopt Bitcoin as a payment method ( DISH, Expedia, Newegg) and many other large cap companies have stated there interest.

In addition to this, recent US sanctions against Russia as well as perceived overreach by a prominent US bank could have possibly been taken as another warning that Russia may need a more diverse set of tools to facilitate international trade in the future.  This will only be compounded as the existing global financial system becomes more unstable and trust between major powers (especially the US) continues to deteriorate.

It will be interesting to see in the near future if this reversal in rhetoric from a superpower like Russia, creates further announcements from governments that have so far been more hardline inclined towards Bitcoin and Cryptocurrencies as a whole.

Disclaimer