#bitcoinconfseoul

1. Why we need (balanced) regulation
Presented by
William PIQUARD December, 13th 2014

2. Summary
Dec. 13 2014 Inside Bitcoins Seoul 2
What is the Bitcoin regulatory issue?1
Why does Bitcoin need to be regulated?2
How to define a favorable regulatory
framework for Bitcoin?3

3. 1/ What is the Bitcoin
regulatory issue?
Dec. 13 2014 Inside Bitcoins Seoul 3

4. From the startup & user perspective: what is Bitcoin?
Dec. 13 2014 Inside Bitcoins Seoul 4
Open source
protocol
Distributed P2P
network
Math-based
currency

5. From the regulators‟ perspective: what (the f***) is Bitcoin
Dec. 13 2014 Inside Bitcoins Seoul 5
Fiat currency backed
by a central authority
Regular commodity
(tangible resource)

6. Fairly positive/neutral stance towards Bitcoin
Source: Gatecoin market data, 03/12/2014
Dec. 13 2014 Inside Bitcoins Seoul 6
Undefined
Contentious
Permissive
Hostile

7. Regulatory environment overview
 The Bitcoin legal status raises crucial issues such as Taxation, AML-KYC measures,
accounting standards,…
 This can explain why regulators are taking their time before defining a legal framework
Dec. 13 2014 Inside Bitcoins Seoul 7
Bitcoin legal status around the world
Prohibited
product
Commodity Currency
Specific
status
Undefined

8. Still, some local authorities have taken nonsensical positions
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Undefined
Commodity
Specific status
Prohibited
10/08/2014: fines for digital currency
users
09/17/2014: « Bitcoin is not a legal
tender of any country. Any transaction
through bitcoin or any other
cryptocurrency is a punishable offense »
07/29/2013: illegal because of… a lack
of existing laws (!!!)
Source: Gatecoin market data, 03/12/2014

9. Different objectives and vocabulary
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Bitcoiners
Protect confidentiality
Facilitate value transfers
Release the „Money with
wings‟
Regulators
Fight against Money
Laundering
Monitor and tax transfers
Protect from frauds

10. So what‟s next?
 No legal framework
 No regulation
 No cooperation with any authority
Dec. 13 2014 Inside Bitcoins Seoul 10
Ecosystem
Bitcoin becomes
informal (at best)
Possible mainstream
adoption
Radical Moderate
 Cooperative legal
framework
 ~Balanced regulation

11. Why does Bitcoin need to be
regulated?
Dec. 13 2014 Inside Bitcoins Seoul 11

12. Cooperation with regulators is the only way for greater adoption
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 What they want:
 Pay less
 Secure their money
 Easier processes
 What they do not want:
 Use their money for buying
illegal, “said-to-be illegal”,
“in-the-grey-area”
products/services

13. Cooperation with regulators is the only way for greater adoption
 What they want:
 Pay less
 Secure their money
 Easier processes
 What they do not want:
 Use their money for buying
illegal, “said-to-be illegal”,
“in-the-grey-area”
products/services
Dec. 13 2014 Inside Bitcoins Seoul 13
Mainstream people will never even think of using a solution that has not a clear
approval from legal authorities

14. The Bitcoin value transfer protocol must be mainstream
 Bitcoin is a potential improvement factor for many
 Bitcoin startup ecosystem is designed for the Bitcoin tech to go
mainstream
Dec. 13 2014 Inside Bitcoins Seoul 14

15. The merchant issue: unability to accept bitcoins (>1sec)
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Volatility
 Storing bitcoins = having
risky assets to declare in the
account statement Tax
 Taxation uncertainty
around Bitcoin (taxed at
what value? How usual
taxes apply? E.g VAT in EU)Billing
 Bitcoin transactions lack
proper billing solutions
For the merchants to hold bitcoins and accept full-Bitcoin transactions,
accounting, billing, and tax issues must be cleared-up by regulators

16. The user issue: how to switch from fiat to digital without troubles?
Dec. 13 2014 Inside Bitcoins Seoul 16
Understanding
 Bitcoin is disruptive, but
Bitcoin “comes from Mars”
 No comparison points
(except ~ Internet)
 Primary reaction = defiance
Securing funds
 What about the value of
the funds if Bitcoin is proved
to be illegal?
Paying taxes
 How do I declare BTC
transactions and
revenues?
For the users the holding and transaction process with bitcoins must be cleared-
up by regulators

17. What are the implications?
Dec. 13 2014 Inside Bitcoins Seoul 17
Efficient regulatory
framework
Compliant conversion interfaces
 Only the bitcoin startups
using Bitcoin as a currency
needs to be regulated by
the Monetary Authorities

18. Conclusion
Bitcoin must adapt to the living standards (before
changing them)
Bitcoin must adapt to the business standards (before
changing them)
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1
2

19. Need to learn from the past failures
Crashed due to fraud-
related activities and low
user-base
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Although Bitcoin is very different, being in line with compliant standards
is a key requirement

20. How to define a favorable
regulatory framework for Bitcoin?
Dec. 13 2014 Inside Bitcoins Seoul 20

21. Are regulators ready?
 Regulators usually deal with currencies backed by a central entity
 Regulators are political institutions, usually not focused on complex IT solutions
Dec. 13 2014 Inside Bitcoins Seoul 21
“The challenge that virtual currency schemes might eventually pose for the conduct of
monetary
policy, in the event that these schemes manage to substantially diminish the use of central
bank
sponsored currencies”
EUROPEAN CENTRAL BANK, October 2012
What are they?
Why do they mistrust Bitcoin?
Regulators only will never be able(/willing?) to define a clear and
efficient regulatory framework
 Policy-makers
 Regulators
 Law-enforcers

22. Institutional lobbying
 Creating Commissions, audience with authorities
 Ex: NYFDS audience in 2014
 Creating lobby groups
 Ex: Lobbyist in the US Senate
 Bitcoin Associations
Dec. 13 2014 Inside Bitcoins Seoul 22
Bitcoiners must help regulators to understand Bitcoin potential
Examples of relevant initiatives:

23. Self-regulation – Certifications and norms - Labels
 Protect the customer (user-side)
 Gain credibility (institutions-side)
Dec. 13 2014 Inside Bitcoins Seoul 23
Dual - objective
Nothing official made in this field, informal certification (Reddit, Bitcointalk,…)

24. Situation so far
 Dozens of local bitcoin associations
 More than 120 companies and thousands of
individuals are members of the Bitcoin
Foundation
 No certification system, just informal labeling
(Reddit, Bitcointalk, forums…)
 Pending regulation (NYFDS Bitlicense) at best
Dec. 13 2014 Inside Bitcoins Seoul 24

25. Focus on the BitLicense
Dec. 13 2014 Inside Bitcoins Seoul 25
 Communication with the main US Bitcoin actors:
 E.g audience (released online), 1st draft and open letters, participation in
meetings,…
 Step-by-step approach
 Willingness to preserve the fragile Bitcoin ecosystem
BitLicense can be the model of a smart regulation…
…If the scope is more clearly defined

26. One last word
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« The greatest deception men
suffer is from their own opinions. »
Leonardo Da Vinci.

27. Dec. 13 2014 Inside Bitcoins Seoul 27
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