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May 7, 2013updated 04 Apr 2017 4:12pm

US regulators eyeing Bitcoin

Senior officials at the US financial regulator, the Commodity Futures Trading Commission, are considering regulating the virtual currency Bitcoin.

By Sandra Kilhof

Senior officials at the US financial regulator, CFTC, are considering regulating the virtual currency Bitcoin.

Bart Chilton, a commissioner at the Commodity Futures Trading Commission (CFTC), told The Financial Times that Bitcoin "is for sure something we need to explore".

According to Chilton, the CFTC is seriously examining the issue:

"It’s not monopoly money we’re talking about here – real people can have real risk in these instruments, and we need to ensure that we protect markets and consumers, even in what at first blush appear to be ‘out there’ transactions."

Bitcoin has attracted the interest of regulators after severe volatility in the value of Bitcoins resulted in large losses for investors. In early April Bitcoin value dropped by nearly 80% from an all-time high of $266 before crashing to $55 in just a few hours.

Furthermore, growing concerns over online cash being used for illicit activities, in March led the US Treasury Department to say that Bitcoin and other virtual currency firms must provide information on transactions above $10,000 and be subject to new money-laundering rules.

This means that companies issuing or exchanging online money are regulated according to standard federal banking rules and subject to new bookkeeping requirements.

With new regulatory scrutiny, proponents of the virtual currency might find themselves hard-pressed to maintain Bitcoins independence from the financial authorities.

Roger Ver, founder of Bitcoinstore.com told the FT that he knew of entrepreneurs who had moved to Panama to explore setting up operations outside of the US.

"Even if US regulations make it hard for Bitcoin businesses to operate in the US, that doesn’t mean it will make it difficult for people to use Bitcoin as a currency in the US," he said.

The CFTC regulates derivatives contracts and has the authority to oversee retail foreign exchange dealers. According to the Financial Times, the regulator’s jurisdiction does not extend to cash markets unless exchanges list derivatives contracts based on them.

However, Chilton maintains that Bitcoin could fall under CFTC regulation: "In essence, we’re talking about a type of shadow currency, and there is more than a colourable argument to be made that derivative products relating to Bitcoin, falls squarely in our jurisdiction."

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