As noted above, various countries are assessing the impact of Bitcoin and addressing taxation and regulatory treatment. As Bitcoin raises questions about consumer protection, fraud, anti-money laundering, counter-terrorism legislation and trade in illicit goods, it is likely that government policies will evolve to regulate cryptocurrency trades more broadly. Dec 21, · However, according to gasthausamflughafen.de, % of Bitcoin owners hold 10, or more units of the cryptocurrency, amounting to approximately million Bitcoin in total. One River and Ruffer LLP's. Rose Law Partners represents clients with the personalized attention of a boutique practice, at lower rates than large firms. Alan D. Rose and Alan D. Rose, Jr. have been recognized on the list of.
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The Partners and Senior Staff. Lawrence W. Kaye Senior Partner. Bradley M. Rose Managing Partner. These exchanges can be based anywhere in the world and are unregulated, although some, such as Bitstamp - based in Slovenia -claim to voluntarily comply with anti-money laundering and terrorism legislation. The conversion to a recognised or fiat currency will normally be through an exchange which will ultimately require an account held with a traditional bank.
This is an example of how a cryptocurrency connects with a regulated entity such as a bank. The legal and commercial basis of Bitcoin is being examined by governments and regulators in various countries. It is therefore apparent that there is as yet little consensus on what Bitcoin is or how it should be treated.
Central banks and monetary authorities around the world have issued warnings to consumers on the use of Bitcoin and other cryptocurrencies, citing various price and security risks. The value of cryptocurrencies can fluctuate dramatically based on a wide variety of factors, from trends in popularity to government intervention in trade, and large amounts of money can be lost very quickly. For example, a Chinese Government announcement last year restricting the trade of Bitcoin by financial institutions caused the value of Bitcoins to practically halve overnight.
The recent collapse and bankruptcy of Mt Gox, a leading Bitcoin exchange, has also had a significant impact on Bitcoin value, as users watched their cryptocurrency disappear.
There are also significant risks associated with storing cryptocurrencies. Digital wallets can be hacked, computer equipment can be lost or stolen and exchanges can be hacked or may close, taking the cryptocurrency with them. In addition to the losses arising from the Mt Gox collapse, in November last year alone, the contents of 4, digital wallets stored on the Czech exchange Bitcash.
Bitcoin has been criticised because of its lack of transparency and inability to comply with anti-money laundering and counter-terrorism legislation. Reputational issues have arisen again following the recent arrest of the Chairman of the Bitcoin Foundation for money laundering and connections to the notorious Silk Road drug marketplace. The pseudonymous nature of Bitcoin means that businesses trading legitimately may have no means of knowing where the currency they receive has come from or where their payments are going, risking unwitting involvement in illegal activity.
Similarly, consumers falling victim to fraudulent sellers do not have the benefit of consumer protection legislation. The risks associated with Bitcoin are significant. The nature of these risks and the rising popularity of Bitcoin make it likely that either domestic or global authorities will attempt to regulate it and potentially, other cryptocurrencies. In the absence of a clear understanding of the nature of Bitcoin and other cryptocurrencies, the task of regulation will be made more difficult, necessitating a shift in thinking that may result in a hybrid approach by financial product, electronic transactions and commodity regulators.
As noted above, various countries are assessing the impact of Bitcoin and addressing taxation and regulatory treatment. As Bitcoin raises questions about consumer protection, fraud, anti-money laundering, counter-terrorism legislation and trade in illicit goods, it is likely that government policies will evolve to regulate cryptocurrency trades more broadly.
But how might that be achieved? How are exchanges to be regulated if they are based offshore? How are transactions to be regulated when both the buyer and seller are pseudonymous? How are fraudulent transactions to be invalidated when every transaction is irreversible? There are various sources of government power under which Bitcoin might be regulated in Australia.
As all financial transactions in Australia must be made in Australian currency or the currency of another country, it is unlikely that Bitcoin or any other virtual currency would be considered valid currency or legal tender.
It may be possible to impose regulation on banks that hold accounts belonging to the exchanges or to users. If considered to be a payment system, Bitcoin may fall under the jurisdiction of the Reserve Bank, but without the co-operation of the Bitcoin community, any controls would be difficult — if not impossible — to enforce.
Regulating through tax laws has been a common starting point for those countries addressing Bitcoin regulation, capturing businesses trading in Bitcoin rather than anonymous users or offshore exchanges. In December , JPMorgan Chase applied for a patent for a new online payment scheme that would allow users to make payments anonymously with currency stored on their computer memories and with a common log to be used for verifying transactions, as is currently used by Bitcoin.
However, the key libertarian element of Bitcoin — a lack of fee or charge for its use or exchange - is unlikely to be present in bank-run cryptocurrencies. Bitcoin and other cryptocurrencies have the potential to affect all kinds of businesses. Perhaps your overseas suppliers are asking to be paid in Bitcoin to reduce fees associated with paying in foreign currency, or with transacting through a bank, or to reduce their tax liabilities.
You may be a business that needs to be seen to be at the cutting edge of payment technology, or perhaps your customers have asked for it. If you are a credit card provider, perhaps customers are bypassing your services entirely and choosing instead to transact online in virtual currency. Choosing to engage with Bitcoin may give rise to significant concerns for businesses in terms of compliance with anti-money laundering and counter-terrorism legislation, and of the potential reputational risk in being associated with a form of payment that is unregulated and non-transparent.
Businesses may wish to monitor the use and discussion of Bitcoin and other popular cryptocurrencies to assess whether they are likely to impact their operations and the risks and benefits of becoming involved. The Bitcoin Wiki page provides useful security information for traders and may be a source of information for interested businesses.