In contempt of the difficult hurdles bitcoin and other digital currency startups are left to handle, Coinbase CEO and co-founder Brian Armstrong believes that compliance is the key to bitcoin’s success.
Armstrong laid out a simple case; for bitcoin or ethereum users to purchase digital currencies on an exchange, they will have to utilize conventional and regulated forms of payment including bank transfers, credit card payments, and checks. Essentially, for users to convert government controlled assets, they need to be compliant with the existing laws on money and financial services.
Realistically, more bitcoin users purchase the digital currency through banking services than direct acquisition. That means, less people are capable of setting up mining rigs, getting paid in bitcoin, or setting up in-person meetings to purchase bitcoin physically from one another. Thus, for bitcoin exchanges to expand their reach, Armstrong believes that it is of utmost importance for exchanges to fully understand and embrace regulations instead of being competitive.
Armstrong’s analogy that digital currency is an island and exchanges are the bridge to the island is somewhat accurate. For digital currency or the island to attract customers, it needs to find a way to move people from the other side with ease.
This is where the regulatory framework comes in; fully compliant exchanges provide a more evenly paved road for digital currency buyers to enter because it offers a variety of legal methods of purchasing bitcoin and other digital currency,
“Enabling convenient payment methods requires digital currency companies to comply with existing laws. We can’t have one without the other. If we want a convenient way for people to move large amounts of money into digital currency, we need digital currency companies who embrace and excel at compliance. Specifically, they need to be able to block criminals from using their systems to stay in business,” explains Armstrong.
However, being compliant with the regulations currently in place in the digital currency market is much harder than it may sound. Some states in the US require bitcoin exchanges to pay up to hundreds of thousands of dollars, while other states require startups to pay fixed fee as an application fee and to strictly follow all regulations traditional money transmitters would.
Joseph is a web developer and designer, writer and a passionate musician who loves to travel often. He’s worked as a researcher for a number of venture capital firms and as a freelancer designer for resorts and corporations in Korea and the Philippines. Joseph will be covering new technologies, startups, technical analysis and breaking news in the bitcoin industry.