Bitcoin is the world's first decentralized digital currency. According to Lawrence Lessig, cryptography is "the most important technological breakthrough in the last one thousand years" and will be transformative. Bitcoin, capitalizing on cryptography, is a revolutionary digital currency protocol--a software system capable of tracking financial transactions without the need for a third party intermediary. The Bitcoin software is a "community-driven open source project released under an MIT license.”
This paper begins by briefly reviewing the mechanics of Bitcoin in Section I. Section II then surveys the rapidly expanding uses of Bitcoin, as well as the emerging application of Bitcoin. Since all new technologies face risk and downside, Section III will address a few of the risks and the highly publicized dark side of Bitcoin. Finally, Section IV will break down how the various governments have initially assessed this new technology and discuss policy implications going forward, as well as touch on the parameters for a twenty-first century regulatory framework by addressing emerging legal and policy issues. As the implementation of Bitcoin and other digital currencies continues, public policy makers should be encouraged to step back and assess the impact of the nascent technology prior to implementing regulatory schemes based upon pre-existing laws based upon outdated assumptions. The multiple applications of the emerging technology suggests policymakers take an innovative approach and adopt public policies and legal frameworks that accommodate the entire scope of its application. The new public policy formulates a regulatory scheme based upon a holistic understanding of the full range of characteristics of Bitcoin and digital currencies. Policymakers, starting with U.S. Congress and state legislatures, should develop public policies that recognize Bitcoin and digital currencies as possessing all of the following characteristics: currencies, payment systems, commodities, properties, investments, systems of commerce, and even systems of contracts. As this dynamic Smartmoney emerges, so emerges the requirement for a new innovative approach to laws and regulations: smart government.
Gregory M. Karch,
Bitcoin, the Law and Emerging Public Policy: Towards a 21st Century Regulatory Scheme,
Fla. A&M U. L. Rev.
Available at: http://commons.law.famu.edu/famulawreview/vol10/iss1/7