Bitcoin’s Bid for Legitimacy

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Aug. 27 (Bloomberg) –- Bitcoin Foundation Member Jim Harper and Convergex Chief Market Strategist Nock Colas discuss yesterday’s meeting between the Bitcoin Foundation and members of the U.S. Treasury Department’s Financial Crimes Enforcement Network, regulators and law-enforcement officials to discuss the digital currency. They speak with Trish Regan and Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Joining us is bitcoin foundation member jim harper and convergence chief market strategist nicolas who has been traveling bitcoin since its emergence.

You were there yesterday.

What was the goal with this meeting?

Were you able to a compass it?

I think the goal was to educate and open communications between bitcoin and the interested regulators in washington about how bitcoin works.

They are going to have to recalibrate what they do.

Washington should generally stay away from bitcoin and let the existing regulation service purpose.

They risk if they don't is that it still continues on and they have no say?

Roughly so.

There are already businesses making choices about where they house themselves.

They're thinking about going to canada, germany, places that have signaled a more welcoming stance.

I have to ask you, how is the government expected to say, we are all right with this currency that is completely anonymous?

You can purchase things online that you shouldn't be purchasing.

How can the u.s. government say that is ok?

That was one of the main topics covered at the meeting.

Bitcoin is quite public.

There is a thing called the block chain which is a public ledger.

It is online forever.

You can take a look at it.

With real names, real addresses, a real record history?

Without real names, but with account names that can be used to track economic behavior very closely.

The problem for law enforcement is different but it is not necessarily harder.

I have done a lot of reporting on terrorist financing over the years, and what am the -- one of the things the u.s. treasury looks at our bank records.

They look for these opaque areas.

You look at something like bitcoin and i imagine, whether it is purchasing drugs or an arms deal or god forbid, terrorist financing, there are concerns when you are able to move large amounts of money with no real name attached.

How do they regulate something that doesn't seemingly want and need to be regulated?

Bitcoin phases a lot of adulatory challenges.

It is a very complex global and decentralized system and it will take a good framework to get your hands around it.

This is a good first step.

Germany is saying ok.

This is going to be legal tender.

How are they going to get their hands on it?

Every government is going to have to get its hands around it.

Trans for local currency to bitcoin is the step that governments are going to have to regulate just like they do right now.

When you talk about regulation, if you for example choose to transfer your dollars into bitcoin, that is your choice.

The only thing to regulate is any tax on possible games of what becomes a foreign exchange transaction.

It could become that.

When you go to a bank with $11,000 in cash, the bank make to fill out a form.

It will have to be regulated in a similar form.

How do we prevent those kinds of things from happening?

I would rather talk about fostering innovation in the financial services area which bitcoin is ripe to do.

$50 billion each year goes in interchange fees to credit cards.

It costs three dollars to get money out of an atm.

I hear you.

But at the heart of this issue, the regulators don't like the idea that things can anonymously change hands.

I understand your point that there is a record of accounts, but there is not a record of names.

It is effectively like cash and you are able to move lots and lots of it.

Since june, it has been clear that the american public has an interest in privacy.

Requiring every transaction to be fully disclosed is wrong.

If i go to a restaurant and pay for it using bitcoin, that is nobody's business but my own.

One of the problems might be lack of consumer option because the block chain is public.

There is so much information out there, it is only a matter of piercing that anonymity to find out everyone's personal financial transactions.

There is a balance to be struck.

It will not be struck entirely on the side of making all bitcoin transactions public with identities attached.

We need privacy and bitcoin may be -- a way to do it.

Do you think it will survive?

Absolutely.

The question is, where bitcoin survives.

Will it be a product that will innovation come to the united states first?

Bitcoin has tremendous possibilities for providing financial services to the third world.

The future of bitcoin is bright, but the regulatory issues are substantial.

They are important and legitimate.

As long as it continues to move that i look forward, it will have a future.

The following -- would you showed on the screen shows a lot of interest.

This text has been automatically generated. It may not be 100% accurate.

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