Barclays Bitcoin Seeking Cryptocurrency Regulation, Find Out How Healthy it Can Be.
On Monday, June 26, CNBC reported that in an interview with Barclays UK Chief Executive Ashok Vaswani, Barclays had discussed with the FCA the possibility of bringing cryptocurrencies, like Bitcoin, ‘into play’ through the introduction of regulation. As one can imagine, such news can have a largely positive impact on Bitcoin. Two years ago, a news article of this magnitude would send the bitcoin market racing. Today this hasn’t happened.
On the other hand, in the interview, Vaswani makes it very clear that Barclays have been in dialogue with the UK regulators about the possibility of bringing cryptocurrencies into the mainstream but points out this is ‘not necessarily Bitcoin’. He also does not expand on what involvement Barclays currently has with Bitcoin but it is widely known of their involvement as the payer and former startup of bitcoin Circle Pay, who were given a business account and money transfers in The UK, as well as an FCA license. In this sense, they became the first Bitcoin company based in the United Kingdom to have a license.
The question arises, why the Regulation is a Buzzword with Bitcoin ?, it is necessary to see the legitimacy that has, the most important reason why people want to be structured a framework of regulation for Bitcoin is because it is an important step Towards the acceptance of cryptocurrency. What this effectively means is that, by structuring regulation for Bitcoin, mainstream authorities are actually acknowledging its place in society and are opening the doors for a new wave of people to get involved.
Equally, the impact that regulation can have on Bitcoin can be monumental and this year we just have to look to Japan to see what has happened. On April 1 of this year, Japan introduced legislation that gave Bitcoin a legal status in the country. Since April 1st, the Bitcoin price has appreciated in value 121% and it is hard to deny Japan’s involvement in this. The legitimisation of Bitcoin in Japan has lead to new capital and people entering the market, who previously were sat on the sidelines. This resulted in a sharp increase in the Bitcoin price and further strengthening the marketplace.
Japan’s stance on Bitcoin has set the precedent for other countries to follow and bring in a positive regulatory structure that does not stifle innovation.
Now, are there problems regulating bitcoin ?. There is a significant problem when trying to structure the regulation of Bitcoin, and is that Bitcoin is decentralized and therefore the token itself can not be regulated. This is because it is impossible to apply the same regulatory structure to Bitcoin as to fiat coins. There are a number of reasons why it is impossible to regulate it.
Therefore, bitcoin is self-regulating. Bitcoin is actually a self-regulated system. Instead of being regulated by a centralised body, Bitcoin is regulated by mathematics in the form of algorithms. These algorithms enables users to predict and measure different elements of Bitcoin’s financial system such as a pre-determined money supply and a constant and measureable rate of issuance, both of which are incorruptible. This means that Bitcoin does not require a central governing body to mediate any transactions, removing the need for centralised regulation.
As for mining. To further argue this point, we can look at the way new Bitcoin’s come into existence. This is done through a process known as ‘mining’. Simply, during this process, thousands or potentially millions of individuals contribute their computing power by running software which solves complex mathematical equations. Whichever computer solves that equation, they are rewarded with a pre-determined reward, currently 12.5 Bitcoins. This is how new Bitcoins are issued. No governments, no central bank and no regulatory accolade.
This is completely unlike all other forms of ‘currency’ we have today and therefore, the same regulatory structure we use for our centralised currencies should not apply to Bitcoin.
Therefore, bitcoin is not a currency. This is often a difficult statement for those who are new to Bitcoin to get it understood and to have the clear idea. Bitcoin is not a currency. Bitcoin is programmable money, backed by cryptography, which shares similar principles to sound money.
In this sense, bitcoin is programmable money. Bitcoin can encompass more use cases than just a currency. These include election voting, property registries, smart contracts and more. In actual fact, most industries can be revolutionised by Bitcoin and Blockchain technology because it changes and adapts to suit different use cases through the utilisation of side chains. To call Bitcoin just a currency is like saying your mobile phone can only be used to make calls when in reality your mobile phone can be used for a number of different uses from banking to photography.
Bitcoin is Sound Money. The Sound Money, may mean some things depending on who you ask, however, is widely used to describe a means of trading that is backed by a commodity such as gold or money that has intrinsic value and therefore more prone to Deflation than inflation.
In the case of Bitcoin, it is the last characteristic. When someone asks me, why is Bitcoin intrinsically valuable? I answer by saying “Bitcoin’s intrinsic value derives from its utilities, Bitcoin is just useful”. All of the future use cases that will be developed will add to the intrinsic value and thus increase the Bitcoin price.
On the other hand, Bitcoin is also deflationary. What this means is instead of the value depreciating as a result of the increase in the money supply (inflation) the supply of Bitcoin decreases over time. This occurs roughly every 3-4 years, last year being one of them. When this happens, the rewards paid out to miners halves in order to maintain Bitcoin’s most basic economic principle, supply and demand. This means that over time, you are not falling victim to the silent tax of inflation but rather growing the value of your coins through a healthy deflationary system.
Likewise, a positive regulatory structure for Bitcoin would be the regulation applicable to companies operating within the Bitcoin space instead of regulating the asset itself. This is what has happened in Japan and the rest of the world must learn from this. By regulating the companies in the space the on and off ramps of Bitcoin will substantially improve as consumers would now be able to feel a degree of trust in the organisations they are transferring their money to. It would also aid in mainstream adoption and thus allowing innovation to thrive as opposed to stifling it. This would lead to a safer and more developed business infrastructure around Bitcoin.
Disclaimer: InfoCoin is not affiliated with any of the companies mentioned in this article and is not responsible for their products and/or services. This press release is for informational purposes only. Information does not constitute an investment advice or an offer to invest.