On January 22, 2015, the Winklevoss brothers announced that they were creating a new exchange for the virtual currency, Bitcoin. They hope that, unlike other Bitcoin exchanges, this one will be fully compliant with all applicable regulatory laws. While their efforts at compliance may curb some of the illegal activity surrounding Bitcoin, ultimately, it will be insufficient. Instead, Bitcoin should be regulated on a more micro-level in order to protect the average Bitcoin users.
According to the guidelines issued by the Financial Crime Enforcement Network (FinCEN), Bitcoin exchanges must comply with all regulations that apply to Money Services Businesses. However, these regulations only apply to the exchanges—that is, the businesses where users can turn their government-backed money into Bitcoin. While regulating these exchanges is helpful in theory, in practice, many of the exchanges have few incentives to comply. Most are hosted internationally and are run by people who retain a large degree of anonymity. Plus, many exchanges do not charge significant transaction fees and make fairly little money. So, many exchanges would cease to exist if complying with regulations would cause them to incur significant fees. Continue reading Does Bitcoin Bite?