Bitcoins are a virtual currency that’s currently unregulated, but that could change in the U.S., according to The Financial Times. The publication reports that the Commodity Futures Trading Commission is examining whether bitcoins need to be regulated.
The virtual currency was worth $225 about a month ago, but it fell suddenly after Mt. Gox, which handles 80 percent of all bitcoin trades, reported stronger than usual denial of service attacks which caused its system to lag. Today bitcoins are only worth about $106.
Bitcoins: Whose Jurisdiction?
The CFTC is in charge of regulating derivatives contracts in the U.S., and as part of the Dodd-Frank act, it now oversees retail foreign exchange dealers. Although the agency’s jurisdiction doesn’t usually include cash markets, it does include them if the exchanges have derivatives contracts that are based on them. Some experts say that bitcoins would not fall under the agency’s jurisdiction unless they become the basis for a derivatives contract.
Bitcoins have been around for about four years, and the attraction of the currency at this point is the fact that it isn’t regulated. Buyers who make transactions that are not regulated often use bitcoins to make their payments. However, the volatility of the currency is now causing regulators some concern.
Avoiding Regulators By Moving Out Of The U.S.
Earlier this year, the U.S. Treasury Department said firms which transfer or exchange bitcoins must be considered “money services businesses,” which means they have to provide certain information to authorities and put policies in place to prevent money laundering. Financial institutions which don’t comply with these regulations could pose a risk to businesses which work with them.
According to The Financial Times, at least three North American companies have had their business accounts shut down by their banks. Bitfloor said it would close completely, and it hasn’t given funds back to customers yet. A bitcoin expert told the publication that some business owners moved to Panama to look into creating operations outside the U.S.