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Bitcoin Regulation

For Bitcoin-IL Meetup, March 2013

by Jonathan S. Rouach

Founder, Bits of Gold LTD

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Intro

What is Regulation

Crackdown scenario

Is Bitcoin a legal-tender?

Money Service Providers, AML / KYC

In Israel

Bits of Gold LTD - in a nutshell

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What is regulation

Goals:

  • Limit criminal / terrorist activity
  • Enforce Tax law
  • Protect consumer

Constraints:

  • Money traceability vs. Privacy
  • Don't prevent legal use (cash is legal)

Industry: Compliance Experts, Software

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Crackdown Scenario

Merchants, Speculators, Bitcoin businesses

One sunny day, all BTC exchanges on the planet are made illegal.

Speculators sell anywhere they can.

Price goes to Zero, end of story?

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Crackdown Scenario - cont'd.

Coordination between Governing bodies ?

On the street exchanges / offshore

Invested players buy low

Intra-bitcoin economy

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Is Bitcoin a Legal-Tender?

No state on the planet forces you to accept Bitcoin, or orders that taxes be paid in Bitcoin.

Practically, it is not backed by any Central Bank.

Bitcoin behaves as a "foreign currency" to all fiat currencies, while being legal-tender in no state.

Winning "Internet Legal-Tender" by merit, not law.

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Regulation on a BTC exchange

Bitcoin exchanges have one leg in "real" currency.

Around the world, legislators debate about "Money Service Providers" status.

In Europe: ECB Report on Bitcoin

US: FinCEN Guidance on Virtual Currencies

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KYC + AML

Know your Customer

Anti-Money Laundering

Extended Due Diligence

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In Israel

Still lacking law about electronic wallets

Debates in the Knesset

Authorities actively studying Bitcoin

  • רשות ניירות ערך
  • אגף שוק ההון, יחידת נותני שירותי מטבע
  • בנק ישראל

BTC vendors will need to adjust

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Bits of Gold LTD - in a nutshell

Registered company offering BTC for ILS.

Sold with pre-made wallet, secure key.

Working closely with regulator on AML compliance.

bitsofgold.co.il