Matonis: “Fincen’s New Regulations Are Choking Bitcoin Entrepreneurs”

April 30, 2013 Off By Pavan Tumati

I found this informative article written by Jon Matonis detailing the current hurdles in the way of mass adoption of crypto-currencies within the US.  Technology enthusiasts (like me) tend to dive headfirst into the “how things work” angle of emerging trends like bitcoin, but much of what determines the fate of new technology lands in other domains such as government and public policy.

Matonis talks about past efforts (PayPal, E-Gold) and moves into descriptions of how current bitcoin businesses are navigating the landscape.  I thought the content presented was an excellent summary and worth the read.  Here’s a snippet from the article:

In a recent speech, Fincen Director Jennifer Shasky Calvery said the new guidance aims “to protect [digitial currency] systems from abuse and to aid law enforcement in ensuring that they are getting the leads and information they need to prosecute the criminal actors.” She reiterated that the guidance does not apply to everyday users who pay or accept bitcoin for goods and services.

But by saddling startups with compliance requirements, and making them unattractive clients for regulated banks that despair of serving MSBs, Fincen is choking these businesses that facilitate conversion of bitcoins into dollars. Fewer exchanges and more red tape will make it harder for merchants or consumers (who, after all, must still pay the bills with dollars) to take advantage of the Bitcoin payment system’s speed, privacy and competitive costs.