What Increased Regulations Means for Bitcoin Exchanges

Bitcoin exchange

Bitcoin exchanges

It seems like the love/hate relationship traders have with bitcoin exchanges might be taking a turn for the worse.  EU regulators are now preparing for increased regulations regarding the cryptocurrency. This is in response to some reports of ISIS was using bitcoin to move money to help fund the attacks in Paris last November. This is precisely the reason that the regulators and governments are concerned about Bitcoin transactions. The anonymity of Bitcoin makes it a preferred means of moving money for terrorists and criminal enterprises. Proponents of Bitcoin site the anonymity of Bitcoin as a necessary means of protecting individuals’ privacy rights.

Bitcoin Exchanges Deal With Anonymity 

The question remains to what levels government will restrict anonymous transactions and how much this will impact the use of a crypto-currency itself. AML or Anti-Money laundering is one of the main tools governments use to combat terrorism and crime. This is why the first line of defense would be the Banks and Financial institutions. Regulations in many countries require that the movement of funds on the part of their clients be clearly traced back to the same bank of origin and without a doubt not to allow movement of funds to any third parties.

Bitcoin Exchanges Vs. Banks and Financial Institutions

It looks as if there might be two divergent economies forming. The increasingly regulated economy of Banks and Financial Institutions which are closely monitoring the movement of money and the Bitcoin economy of payments done with as little information as an email. At some point, Bitcoin exchanges will need to adopt some this regulation if expectations are to expand its market. Recent regulations in NY have seen many startups there leave because they find the process and requirements too costly. Many Bitcoin companies have cited that since the application process requires legal assistance it can run up to $100,000 to complete.  If the situation in New York is any indication many Bitcoin startups may opt for the unregulated route. Regulations do not need to be such a cost burden to companies nor should they make companies less competitive.

 

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