How should Bitcoin be regulated ?

Abstract

The lack of clarity about Bitcoin’s legal framework has meant that none of the regulators across the EU have yet achieved sufficient clarity in the legal treatment of Bitcoin and its stakeholders. This uncertainty poses a number of substantial risks to Bitcoin stakeholders and creates challenges for regulatory authorities. Therefore, there is a need for a clear strategy for Bitcoin’s regulation aiming to ensure the maximum possible balance between the interests of Bitcoin stakeholders longing for the preservation of Bitcoin’s benefits and mitigation of relevant risks, and the interests of regulators striving for ensuring the compliance of Bitcoin stakeholders with the law. In this paper, the author develops such a strategy. Its implementation provides for the official recognition of Bitcoin as an unregulated technology, the recognition of that Bitcoin users interacting between each other and Bitcoin miners are outside the regulatory scope, and the efficient application of existing legal mechanisms to Bitcoin merchants, Bitcoin exchanges and the relations between these categories of Bitcoin stakeholders with Bitcoin users. Thus, the balanced regulation of Bitcoin is achieved in the form of a partial regulation of the usage of Bitcoin at different levels of Bitcoin’s functionality.