2013-08-20 Politico: ... Bitcoin policy primer ... leading to Mercatus report

[wingspan]

http://www.politico.com/morningmoney/0813/morningmoney11456.html

2nd section is on bitcoin specifically - I recommend following the link provided to this great analysis of Bitcoin for regulators:

http://mercatus.org/  then click on main feature "Bitcoin: A Primer for Policymakers" which is a PDF I think all regulators need to read.

FIRST LOOK: BITCOIN POLICY PRIMER FROM MERCATUS -- As Washington gets to know Bitcoin better, the Mercatus Center at George Mason University is releasing a “primer” for policymakers Tuesday. Mercatus senior research fellow Jerry Brito and program associate Andrea Castillo warn that applying existing rules to the digital “cryptocurrency” could impede its development. Bitcoin doesn’t fit into any existing regulatory category – it’s not a foreign currency, traditional commodity or a payments network – and they said policymakers may want to consider a new regulatory category.

They also urged policymakers not to “overreact” to illicit uses of Bitcoin and said regulators need to consider the criminal uses alongside its legitimate uses. In addition, they said lawmakers and regulators should consider whether it’s necessary to preempt state-by-state licensing for Bitcoin businesses — what they call one of the technology’s “greatest obstacles.” The full report: http://bit.ly/19C3rod

BITCOIN 101 — Don’t know what a Bitcoin is, much less why the government is interested? POLITICO’s Zachary Warmbrodt breaks it down: http://politi.co/1bK5PGB

which leads to the PDF at http://mercatus.org/publication/bitcoin-primer-policymakers

which leads to the 48-page Bitcoin primer for policymakers. I found a lot to like, so here is but one example:

As we have seen, Bitcoin does not easily fit into existing regulatory boxes. That is often the hallmark of a disruptive technology.  Indeed Bitcoin is a revolutionary technical achievement that heralds amazing potential benefits to human welfare.

[knight22]

Great report! Very neutral and they got it!

Don’t Restrict Bitcoin
Because Bitcoin is essentially online cash, some who trade in drugs and other illicit goods online have found it to be an ideal medium of exchange. Confronted with this fact, the initial impulse of some policymakers will be to call for restrictions on the technology. There are many good reasons, however, to resist such an impulse.

First, as a technology, Bitcoin is neither good nor bad; it is neutral. Paper dollar bills, like bitcoins, can be used in illicit transactions, yet we do not consider outlawing paper bills. We only prohibit their illicit use. Furthermore, there is only anecdotal evidence about the extent to which bitcoins are utilized in criminal transactions. It would be wise to put the criminal use of the technology in perspective alongside its legitimate uses. As the bitcoin economy grows, legitimate uses of bitcoins will likely dwarf criminal transactions, just as we see with paper dollar bills.

 Second, any attempt to restrict Bitcoin technology will only harm legitimate uses while leaving illicit uses largely unaffected. Because it is a decentralized global network, Bitcoin is virtually impossible to shut down. There is no Bitcoin company or other entity that can be targeted. Instead, Bitcoin and its ledger exist only in the distributed peer-to-peer network created by its users. As with the peer-to-peer file-sharing service
BitTorrent, taking down any of the individual computers that make up the peer-to-peer system would have little effect on the rest of the network. Therefore, making the use of Bitcoin illegal would not undermine the network; it would only serve to ensure that law-abiding users are denied access to the technology. As a result, society would forgo enjoying the many potential benefits of Bitcoin without seeing any drop in criminal use.
.....

Finally, even if the United States prohibited the use of Bitcoin, it is likely that many other countries would not, recognizing the technology’s many potential benefits. The Finnish central bank, for example, has stated that the digital currency is not illegal, and as a result many Finnish businesses have begun to accept bitcoins. By prohibiting Bitcoin use, the United States could put itself at an international competitive disadvantage in the development and use of what may be the next-generation payments system.

[LiteCoinGuy]

Jerry Brito and Andrea Castillo of the Mercatus Center have released

Bitcoin: A Primer for Policymakers

http://mercatus.org/publication/bitcoin-primer-policymakers

"As the world’s first decentralized digital currency, Bitcoin has the potential to revolutionize online payments systems in a way that benefits consumers and businesses. Instead of using an intermediary such as PayPal or submitting credit card information to a third party for verification—both of which often include transaction fees and other restrictions—Bitcoin allows individuals to pay each other directly for goods or services.

The characteristics that make Bitcoin so innovative have also made it a target for regulators, who fear that the cryptocurrency will aid tax evasion, money laundering, and other crimes. While it is true that it can be used for nefarious purposes, the same can be said of cash. But, unlike cash, Bitcoin transactions are recorded in an online ledger.

In this new primer, Jerry Brito and Andrea Castillo describe how the digital currency works and address many of the common misconceptions about it. They also analyze current laws and regulations that may already cover digital currencies and warn against preemptively placing regulatory restrictions on Bitcoin that could stifle the new technology before it has a chance to evolve. In addition, they give several recommendations about how to treat Bitcoin going forward.

Here, at the forefront of the debate, Brito and Castillo both support innovation and provide much-needed clarity for policymakers and law enforcement."