Growing Bitcoin Regulations And Its Constituencies

Several federal and state regulators have now begun creating regulations governing Bitcoin and other virtual currency. This year alone, regulatory guidance or proposed rules have been issued by FinCEN, the IRS, the Consumer Financial Protection Bureau (CFPB), along with several states, including New York, Texas, and Maryland.  Last month, a Commodities Futures Trading Association (CFTC) commissioner urged his agency and others to create a regulatory framework for virtual currency.

Reaction from the Bitcoin community has been mixed. Some Bitcoin supporters have welcomed, or at least accepted, greater federal and state involvement, while others have criticized both the specific rules and the rulemaking process. It would be a mistake to place all Bitcoin advocates in one of these two categories. There are actually multiple Bitcoin "constituencies," and understanding these groups helps explain why effective regulation will be such a challenge.