The innovative online payment network Bitcoin made some waves this week, sparking new interest in the United States and triggering the release of a comprehensive report from the United Kingdom government that could foreshadow regulatory activity. And despite wariness from some of alternative currencies’ earlier framers, regulation still looks to be an important step toward increasing the legitimacy of Bitcoin as a payment method.
Nasdaq OMX Group Inc. announced on Tuesday that it will provide Noble Markets, a New York-based company for trading Bitcoin, with technology to run a marketplace that allows companies to trade digital currency. “Noble’s platform will use Nasdaq’s X-stream trading system, a high-tech system for matching market participants’ orders that is used by more than 30 exchanges and marketplaces worldwide,” according to a joint statement to The Wall Street Journal.
Also on Tuesday, the U.K. government issued a report that looked into the benefits and risks associated with digital currencies like Bitcoin. The 28-page report took into account responses from 120 people who use digital currencies and/or related services.
“The government considers that digital currencies represent an interesting development in payments technology, with distributed, peer-to-peer networks and the use of cryptographic techniques making possible the efficient and secure transfer of digital currency funds between users,” the report reads.
However, the report also recognizes that regulations need to be put in place in order to avoid the potential for criminal usage. “The government intends to apply anti-money laundering regulation to digital currency exchanges, to support innovation and prevent criminal use,” the report states. “The government will look at how to ensure that law enforcement bodies have effective skills, tools and legislation to identify and prosecute criminal activity relating to digital currencies, including the ability to seize and confiscate digital currency funds where transactions are for criminal purposes.”
Digital currency values took a hit earlier this year after London-based bitcoin exchange Bitstamp suspended services following a hacking incident that accounted for more than $5 million in losses, with at least two filing for bankruptcy protection since then. Although not driven by internal fraud or reaching the scope of the infamous Mt. Gox/Bitcoin exchange collapse, the news rattled some mainstream media outlets.
- Jennifer Lehman, NACM marketing and communications associate