Voice of the Industry

Jacob Boersma, Innopay: "Bitcoin 2014: It`s not about regulation (yet), it`s about best practices"

Monday 2 June 2014 09:48 CET | Editor: Melisande Mual | Voice of the industry

 Bitcoin businesses are better off simply adopting best practices for KYC and anti-money laundering right now

On May 15-17 2014, the Bitcoin Foundation hosted its yearly conference, which for the first time was held in Amsterdam. In his keynote, Patrick Byrne (Overstock) referred to the historical role of the Netherlands for the invention of liberalism, which he considered the ‘operating system’ on which Bitcoin runs.

In the panel on Blue Sky Thinking, which I was a part of, we imagined the future crypto-currency and blockchain technology to enable everything from privacy friendly digital identity, autonomous corporations, micro-transactions for smart devices and decentralized trading of financial instruments likes stocks and bonds. A noteworthy question was from a banker in the audience about how these new applications would interact with regulation, which sparked an immediate discussion about rules and regulations around Bitcoin. Clearly, the subject was top-of-mind for a lot of conference attendees.

In a great talk about civil rights in the digital world, Rick Falkvinge of the Swedish Pirate Party gave historical examples of very restrictive laws that were passed in attempts to shackle new technologies such as the Red Flag Laws. The implication was clear: there will be opposition to the idea of Bitcoin and companies with vested interests in fiat money/centralized payment systems will attempt to block it by lobbying regulators.

But is the regulatory environment really so harsh? The world overview given in the regulatory track showed most countries adopting a ‘wait and see’ attitude.

Curiously, during the AML panel, 70% of the room raised their hands when asked ‘do you want regulation?’ A rather dangerous request if you don’t know whether regulation might take the form of a Bitcoin Red Flag Law.

In my opinion, Bitcoin businesses are better of simply adopting best practices for KYC and anti-money laundering right now. Showing that you’re taking responsibility will go a long way to convince regulators and, more importantly, to gain trust from the general public. Safello is one of the Bitcoin companies already on the right track, using the services of Jumio to verify clients’ ID documents. Jumio recently announced the Bitcoin Identity Security Open Network (BISON) to enable KYC and anti-fraud services for Bitcoin companies similar to what they already do for merchants accepting credit cards. BitPay, the leading Bitcoin PSP, similarly partnered with ID Checker for specialized online verification of identity documents.

The DATA initiative, championed by Constance Choi of Kraken.com, is another big step in the right direction. With its goal of unifying the digital asset transfer industry around best practices and fostering better understanding with regulators and influencers, it nicely complements similar efforts by the Bitcoin Foundation. The Foundation by its nature has a much broader focus, like the organization of inspirational conferences such as Bitcoin2014.

The 3 floors of Bitcoin and other crypto-currency related start-ups exhibiting in the hall of the Amsterdam Passenger Terminal showed the enthusiasm and entrepreneurial spirit is greater than ever. Of course actual transaction and user numbers for Bitcoin are still microscopic in relation to established networks like credit cards. But great minds are working on this, from the core Bitcoin developments in Gavin Andresen’s ‘State of Bitcoin Address’ to the multitude of added value services and alt-coin experiments. The growing willingness to learn lessons from established players about KYC and AML will help ensure that when Bitcoin grows large enough to really warrant regulatory attention, the regulators will be able to give it the green light rather than the red flag.

Jacob Boersma is active in the areas of e-identity and electronic payments innovations. He began working in information management and information security after a Masters study in Science & Policy. He has worked on European and Dutch e-authentication projects, the iDEAL payments protocol and Innopay’s annual Online Payments reports. He frequently advises both government agencies and businesses on questions of digital payments and online currencies such as Bitcoin.

Innopay is an independent consulting firm, specialised in payments and related transaction services. Our mission is to improve the transaction services industry in close, open collaboration with stakeholders. We provide our clients with expert knowledge of online payment, e-invoicing, e-identity, mobile payment, cards and rules. 

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Keywords: Jacob Boersma, INNOPAY, Bitcoin, regulation, online, payments , Netherlands
Countries: World