Four trends in Bitcoin regulation in 2016

About the Authors: Jason Weinstein and Alan Cohn work at Steptoe & Johnson in Washington, D.C., and are advisors to the Blockchain Alliance. Jason was a deputy assistant attorney general at the Justice Department and is currently a member of the advisory boards of BitFury, the Chamber of Digital Commerce, and Coin Center. Alan was an assistant secretary at the U.S. Department of Homeland Security, responsible for strategy, planning, analysis, and risk.

1. Strengthen supervision of money service businesses

As multiple federal regulatory agencies have roughly formulated their regulatory frameworks in the field of Bitcoin and blockchain, laying the foundation for how to deal with digital currencies in the future, we also see the great possibility of "law enforcement supervision" next year.

That is, we may see more enforcement actions against companies in certain industries, while other companies may receive actual regulatory rulemaking from enforcement.

The focus of enforcement will be money services businesses, which sit between bitcoin and other digital currencies and fiat currencies.

In reality, there are still many companies that deliberately do not comply with anti-money laundering (AML) rules. Therefore, in this case, companies involved in money service businesses should be incentivized to obtain operating licenses to ensure that they have appropriate AML compliance programs and take their obligations seriously, such as being able to submit suspicious transaction reports to relevant authorities where appropriate.

In addition to money services businesses, we will also see the Financial Crimes Enforcement Network (FinCEN), the Commodity Futures Trading Commission (CFTC), and the Securities and Exchange Commission (SEC) continue to monitor business activities related to Bitcoin and other digital currencies.

2. Focus on terrorist financing

In the aftermath of the Paris attacks, governments and media have begun to pay more attention to the methods terrorists use to trade and transfer funds.

We have seen some governments and media focusing on Bitcoin and other digital currencies.

Nevertheless, government authorities have recognized that the traditional financial system does pose high risks.

The UK Treasury recently released a risk assessment report on money laundering and terrorist financing, finding that digital currencies present the lowest risk of money laundering and that there is "little evidence that criminals use digital currencies for terrorist financing activities."

That being said, the reality is that terrorists and criminals are using a variety of techniques to try to hide their activities through the internet, so it is very likely that they will seek to raise funds for their activities through digital currencies.

The huge concerns about terrorist activities by extremist groups have naturally driven concerns about the potential misuse of digital currencies by terrorists.

Therefore, the best way for the digital currency industry to help solve these problems is to communicate and dialogue with law enforcement agencies and educate people.

3. Review of blockchain applications

This year, traditional financial services institutions have shown great enthusiasm for experimenting with blockchain technology, with some developing Bitcoin blockchain applications as well as private blockchains or applications similar to blockchain systems.

On the one hand, applications based on blockchain technology can reduce costs such as transaction fees. On the other hand, the decentralized blockchain is tamper-proof and transparent, which helps companies comply with regulations.

However, as more and more “traditional” service providers enter the blockchain-based application market, regulators may seek to regulate activities in this area, I believe, first through investigations and information exchange meetings, and then through targeted investigations and even enforcement actions.

4. Bitcoin’s reputation improves

In October, a broad alliance called the Blockchain Alliance was formed, led by digital commerce and coin centers, with industry representatives. This is a forum for government and civil dialogue to assist law enforcement agencies in combating criminal activities involving Bitcoin and blockchain.

The Alliance provides law enforcement with the best resources available, with extensive industry knowledge that will help solve problems law enforcement encounters during investigations and enforcement.

Of course, it also provides a channel for people in the Bitcoin blockchain community to learn about law enforcement-related policies.

This kind of dialogue between the public and the government will help improve the public's sense of security and eliminate public misunderstandings about Bitcoin.

Although the blockchain alliance has just begun to operate, it has made great progress in raising government awareness of the Bitcoin blockchain and further demonstrated the digital currency industry’s willingness to comply with regulations.

Misunderstandings about the digital currency industry exist not only in the United States, but also around the world, so the Blockchain Alliance has decided to engage in dialogue with other law enforcement agencies in the world, including Europol and Interpol, in the future.

I believe that the positive actions being taken by the Blockchain Alliance will help government agencies better understand the advantages of Bitcoin and blockchain technology, and will also help promote a legal environment that is conducive to innovation. Bitcoin technology will make new progress in 2016.

Original article: http://www.coindesk.com/4-pressures-shaping-bitcoin-regulation-in-2016/
By Jason Weinstein & Alan Cohn
Translator: printemps
Editor: printemps
Source (translation): Babbitt Information