There is still enough research to be done on the topic of regulations in cryptocurrency space. From country to country, ongoing disputes mainly evolve around the status of cryptocurrency (whether it is a financial product or service), the need for a central authority to regulate it, taxation, etc.
While some state authorities prefer to wait and see at how others are dealing with this issue, so as not to provoke any adverse effects, those who are brave enough decide to embrace an opportunity and make the first move.
This week, governors of the New Hampshire, US, have voted in favor of exempting cryptocurrencies from money transmitter regulations. The Bill passed on Wednesday clarified the definition of cryptocurrencies:
“A virtual currency is a digital representation of value that can be digitally traded and functions as a medium of exchange, a unit of account, or a store of value, but does not have a legal tender status as recognized by the United States government.”
The Bill also exempted individuals transacting with cryptocurrencies from registering as money transmitters. It might be viewed as a revision of previous and rather hasty regulations, and certainly as a significant move, which is expected to attract cryptocurrency businesses to the state.
In October last year, state authorities tightened financial regulations, what resulted in suspending of business operations by a number of cryptocurrency exchanges. The introduced rules required licensing of all money transmitter services, including those working with virtual money. Trading platforms were obliged to pay an annual fee of $5,000 for operating as money transmitter and post a continuous surety bond of up to $100,000. Once the newly introduced Bill takes effect, a number of exchanges are expected to return to the state.
The state of New Hampshire is said to have the highest per-capita bitcoin usage. Creation of a favorable regulatory climate will certainly accelerate adoption of cryptocurrencies. Advocates for the introduction of similar bills emphasize the need to at least start getting involved into cryptocurrency discussions, as there is a high chance it is a “Join in or Lose” kind of game.
Central Bank of Nigeria: We don’t intend to stop Bitcoin
In another part of the world authorities shrug their shoulders and adapt warning but non-intrusive approach towards cryptocurrencies. Recently, Chartered Institute of Bankers in Nigeria held a Bitcoin-focused meeting, where key players in the country’s fintech space discussed the impact of cryptocurrencies, specifically Bitcoin, and the blockchain technology, which underpins it.
The Deputy Director of the Central Bank of Nigeria’s Banking and Payment System, Musa Itopa-Jimoh said that the Central Bank cannot control or regulate Bitcoin in the same way no one can control or regulate Internet.
Previously, state authorities have issued several warnings that concerned the use of cryptocurrencies. In January, Nigerian banks were strongly advised to take certain actions against digital currencies. A circular issued by CBN stated that Virtual currencies such as Bitcoin, Litecoin, Onecoin, etc, are not legal tenders and any bank or financial institution that handles operations involving cryptocurrencies does it at its own risk. At the same time, citizens were advised to exercise an extreme caution with regard to digital currencies as investment tools.
Musa Itopa-Jimoh clarified that the CBN does not intend to stop usage of cryptocurrencies, its only mission is to issue caution to Nigerian citizens. He emphasized that decision to use cryptocurrencies is in citizens own responsibility and consequences of any fraudulent actions that involve cryptocurrencies unfortunately cannot be dealt with at CBN, because cryptocurrencies are not within authority’s control.
Uche Olowo, first Vice President of the Central Bank of Nigeria said that this topic is crucial for the Nigerian financial market. On the one hand, some consider Bitcoin as the highest performing and one of the most valuable currencies in the world, however, traditional financial players view it as highly unstable and complicated. Nevertheless, no one can deny that it has the power and potential to disrupt traditional means of payments and settlement systems.
PBoC adopting a calm and rational approach towards Bitcoin exchanges
The People’s Bank of China continues being one of the most influential players in cryptocurrency space. This week it has renewed its efforts to regulate Bitcoin exchange platforms.
Zhou Xuedong, Director of the PBoC’s Business Administration Unit suggested that the PBoC takes a break and observes the situation while at the same time work on defining certain rules to which cryptocurrency exchanges must adhere. Among the rules Xuedong suggested a list of prohibited activities, imposed on Bitcoin exchanges, which includes offering leverage and margin trades, producing fake volume and manipulating the market using zero fees, violating AML laws, replacing fiat by using Bitcoin to purchase goods, tax evasion, engaging in false advertising or participating in Ponzi schemes, and providing financial services without a permit, including credit, securities, and futures trading.
He also advocated for the use of blacklists against those platforms that violate authority’s directives. In his opinion, embarking on trading cryptocurrencies involves a number of risks that concern customer funds security, risk of money laundering, and the risk of leveraged transactions, therefore it is up to PBoC to keep a watchful eye on the industry. In the long run, PBoC intends to focus more on researching the properties of Bitcoin, exploration of management policies for the exchanges on the national level, and considering introduction of licensing for certain exchanges. Authority decided to adopt a calm and rational approach, as oversimplified measures, such as closing exchanges down would not provide any solution to the situation. It would only lead to investors flocking into the underground black market, which are even more difficult to deal with.
CheapAir reports increase in Bitcoin sales
While there is still a lot of confusion in the regulation space, in real life cryptocurrencies slowly, but steadily increase their presence. Many companies nowadays allow their products and services to be paid with Bitcoin, and they often report that this form of payment is gaining in popularity.
This week, online travel agency CheapAir.com, headquartered in Calabasas, CA, has announced that they have seen 74% increase in Bitcoin sales over the last 6 months.
In November 2013 CheapAir.com became the first online travel agency in the US to accept Bitcoin as a form of payment when one customer asked if he could use it to pay for a flight. Since then, the company has processed approximately $15 million in Bitcoin payments for flights and hotels.
CheapAir.com CEO Jeff Klee commented:
“Since we began accepting bitcoin we’ve had the opportunity to meet some incredible Bitcoin enthusiasts. These are passionate, well intentioned people who have devoted considerable time and energy to trying to improve a financial system that increasingly doesn’t work in the average citizen’s best interest. I think it’s great that many of these individuals are enjoying a nice windfall right now and, of course, we want to help them spend some of that windfall on travel!”
According to Klee, the volatility of Bitcoin has affected sales in the past in both directions from dipping down to skyrocketing. He mentioned that recently investors have been encouraged by the favorable valuation to buy airfare at a record high.
Writer: Alisa Tciriulnikova, Content Editor at Prasos Ltd
Alisa Tciriulnikova is an explorer curious about the future of cryptocurrencies, blockchain, and fintech. Alisa holds a MSc in Social Sciences from the University of Tampere (Finland) and is currently pursuing a PhD researching integration of PPP model into pension industry.
Alisa Tciriulnikova is Content Editor at Prasos Ltd. She is an explorer curious about the future of cryptocurrencies, blockchain, and fintech. Alisa holds a MSc in Social Sciences from the University of Tampere (Finland) and is currently pursuing a PhD researching integration of PPP model into pension industry.