There has always been a question; Shall virtual currency be regulated? (We will simply address all of the virtual currencies as bitcoins, as for the meaning of this article it is sufficient.) As we know the governments around the globe does not really like Bitcoin as it allows partially anonymous transfers of value. What does it mean for the state? Well, the state is losing two important things and that is money and control. The only answer for them, therefore, is to regulate Bitcoin and try to keep some sort of general awareness.
How does the Bitcoin regulation works at the moment? The legislator found out, that there is no use in regulating technology itself and focused on the Bitcoin subsidiaries. What is being regulated are the places where you can buy and sell Bitcoin crypto exchanges etc., but also places where you can spend Bitcoins. Bitcoin user can only remain anonymous if he is within the bitcoin network, but once he buys something using bitcoin, he reveals his personal information. For example the purchase of a new laptop using Bitcoin requires a home address for the delivery.
You probably know that it is the same case with Bitcoin exchanges. Some of them require at least minimal personal information regarding creation an account. However, even with minimum knowledge about the person the authorities are able to track down all of your transactions, because all of them are stored in the blockchain, right? So at least for now it looks like that the authorities are one step forward and that the regulation of Bitcoin is inevitable. But is it?
You see, we have spent some hours going through the BitLicense and similar Acts, and there is a certain thing they have all forgotten about and that is the further decentralization and bitcoin’s development. All of you have probably heard about the OpenBazaar, well if not it is a fully decentralized marketplace, which work on similar basis as bitcoin, there is no central server and is run by the people for the people. Anyways, this might be the future. Will someone store your personal information while purchasing something from OpenBazaar? No, as simply as that no.
Therefore, if you would like to stay anonymous even when you want to spend you bitcoins, it is fine, its possible. What about the Bitcoin development? Well all of those acts are written on a clear and truthful assumption that Bitcoin is not money nor currency. That is true because bitcoin is merely a medium of exchange, it is unable to hold the same value for longer period of times, and it is not a common denominator – usually you find the price of something in dollars even though you may pay in bitcoins. Why does it matter? It’s easy, if bitcoin once stabilize enough, and we can already see that every year bitcoin is more and more stable, it won’t be necessary to sell it for dollars anymore. You wont need a bitcoin exchange to sell bitcoin, because you will be able to pay with bitcoin for pretty much everything. If someone starts selling food on OpenBazaar, no one will ever know you have bought it using bitcoin. All of those “know your customer” and “anti money laundering laws” applied to Bitcoin subsidiaries will be futile, and it is already happening. There are decentralized markets and the decentralized exchanges are under development.
So what the state can do about it? At the moment not much, it is not a solution of law it is a solution of technology, but the technology that would be able to solve decentralization is not there yet.