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== Bitcoin and state ==

[[Bitcoin]] was conceived as a system of data exchange independent from state ([[cryptocurrency]]). And that system was indeed independent from states of the whole world while [[Bitcoin]] was not as popular.

2013 can be considered as the beginning of [[Bitcoin]] explosion (during just the first four months exchange rate has risen from $20 to $200). [[Bitcoin]] was recognized by major investors (brothers Winklevoss, Andreessen Horowitz have invested more than $25 million in the Coinbase). More and more people were becoming involved in [[cryptocurrency]] system. By the end of 2013 the rapid growth of [[Bitcoin]] exchange rates has drawn the attention of the whole world. The amount of users started growing at even more fast rate. As such the phenomenon of [[cryptocurrencies]] could no longer be ignored by governments of the world.

In the U.S. Senate hearings on [[bitcoin]] started to take place. At the end of 2013 during one of such hearings on the topic of risks threats and prospects of virtual currencies Ben Bernanke the head of the U.S. Federal Reserve spoke in support of [[bitcoin]] and has outlined its benefits for the financial system as a cheaper alternative to the current system of international money transfers. Perhaps it was the only piece of news so good that it raised the price to $1000 for 1 [[Bitcoin|BTC]].

== Bitcoin influences on the state ==

[[Bitcoin]] is disadvantageous to governments because of following principal reasons:
* It is a threat to national currencies
* Government loses control over cash flows
* Better conditions for illegal goods circulation are created

=== Threat to the national currencies ===

[[Bitcoin]] has a lot of advantages compared to national currencies:

* [[Bitcoin]] rotation will never fill the state treasury because the [[transaction commission]] isn’t issued to any of the banks and there’s currently no way of taxing [[cryptocurrency]] capital.
* [[Anonymity]] of [[cryptocurrencies]] allows citizens to avoid the ever-present control over money operations.
* Relative speed of [[bitcoin]] transfers from one person to another – usually within a few minutes. (Some interbank transfers may take up to several days)

Just these advantages of [[cryptocurrencies]] already adversely affect the national currencies, through which the state can control many aspects of society. And with the growing popularity of [[cryptocurrency]] the state control reduces.

=== Loss of control over cash flow ===

[[Bitcoin]] is somewhat anonymous and that prevents the state’s control of finance movement. This makes possible unchecked withdrawal of money away from the country.

=== Illegal goods circulation ===

It is very hard to find out who exactly sent and who received a [[bitcoin transaction]]. Thus it becomes much easier to buy and sell illegal goods inside a country. It is worth noting that guns and drugs aren’t the only things that can be prohibited by the government. Usual goods such as books, technical devices and others can be declared illegal if they don’t fit government’s agenda.

An example of this is the “underground” website [[Silk Road]] accessible through [[Tor]] network which was mainly trading illegal drugs, but also had some other goods to offer.

Thereby the existence of [[cryptocurrency]] systems is hampering to government and any country should either ban [[Bitcoin]] altogether or try and find means of regulating [[cryptocurrencies]].

== State’s attitude towards Bitcoin ==

The first general reaction of governments to [[Bitcoin]] was overwhelmingly negative. Representatives of almost all countries which stated their opinions on [[Bitcoin]] were informing population with one voice of caution of using [[Bitcoin]] which has no controlling organization above it and thus no money will be returned to investors in case of failure of the system. These warnings were obviously aimed forming a negative perception of [[cryptocurrency]] in uninformed people rather than at protection of citizen’s finances. Effort was made to protect government’s ability to control its economy and people’s wealth.

Some central banks (Central Bank of Russia for example) were mentioning in their press releases that [[Bitcoin]] can be used for purposes of funding terrorists and money laundering and that citizens using [[cryptocurrencies]] will be considered co-participants of such felonies.

Many governments were trying to create a negative image of [[cryptocurrencies]].

China being a country going through a period of rapid growth and trying to impose its control on every sphere of citizen life has prohibited trading on one of the biggest [[cryptocurrency]] exchange BTCChina.

However no government has yet enshrined the [[cryptocurrencies]] [[status]] in law. And all the consequences of “warnings” are just people’s ignorance and panic. But not all countries were as negative in their reaction to [[Bitcoin]]. Some have refrained from commentary and some were more favorable than those mentioned above.

== The regulation of Bitcoin ==

Not every country has reacted to the appearance of [[Bitcoin]] with prohibition attempts. USA and some countries of Europe still can’t make a final decision about the [[status]] of [[cryptocurrency]].

=== USA ===

In USA the regulation of [[bitcoin]] in general is a prerogative of particular states. There’s currently an effort of creating a set of rules regarding [[cryptocurrencies]] going on in Silicon Valley and Wall Street.

The state Washington was first of all USA states to announce that digital currency is considered as money. Money which is not approved or recognized yet by any government. Now digital currency falls under the definition of money given in the law concerning currency transactions (UMSA) in this state. As a result the state of Washington now asks from the companies, which want to [[trade]] with citizens of this state, to check if they need a USMA license. If license is needed, companies must acquire it before the beginning of their activities.

The state of New York started to discuss the necessity of introducing special “BitLicenses” last year to make [[Bitcoin]]-using startups keep additional records of their operations. During hearings on [[cryptocurrency]] regulation issues the participants demonstrated open hostility toward [[Bitcoin]].

The state of California demonstrates a more liberal approach. In this state those companies which conduct credit transferring have to receive their license from Department of Commerce. Though many questions still remain unanswered.

=== Luxemburg ===

Officials of Luxemburg’s financial sector are offering their cooperation to the whose [[Bitcoin]]-using companies which want to operate in the country and also promising to employ a personal approach to every regulative decision. Michael Jackson a partner of Luxemburg-based Mangrove Capital Partners has noted that regulation authorities in this country (in contrast to other countries) treat businesses related to digital currency without any prejudice.

Regulators stated that they are ready to assist any companies that will provide a detailed description of their business practices and assure that [[Bitcoin]]-using companies will have no problems if their activities will meet the stated objectives .

Also Luxembourg’s officials note that digital currency is considered as money as they are accepted by "a sufficiently large group of persons". At the same time, the regulators do not consider digital currencies as "legal means of payment ".

Other European countries are more neutral towards [[Bitcoin]] and haven’t yet clearly express their position.

=== Japan ===

In the near future, the Japanese government will set the rules of taxation and operations in [[Bitcoin]], and later they will be extended to other [[cryptocurrencies]]. General guideline from the Japanese Cabinet determines [[cryptocurrencies]] not as money, but as a commodity, with appropriate forms of taxation. Taxes will have to be paid for trading on [[exchanges]], shopping with [[Bitcoin]], as well as the profits earned for transactions (commissions, etc.). Banks as well as stockbrokers and broker services will not be allowed to carry out operations in bitcoins.

== Methods of regulation ==

The main tool for regulating [[bitcoin]] is [[cryptocurrency]] [[exchanges]] since [[bitcoin]] is rarely used as a direct means of payment and is exchanged for the currency of user’s wish immediately after the transaction.

=== Tax collection ===

Adoption of [[Bitcoin]] as a commodity, makes it possible to tax all transactions, in particular exchange trading and profit earned for operations, as the Japanese government intends to do.

=== Liquidation of anonymity ===

The Government may require [[cryptocurrency]] [[exchanges]] to be registered in their territory, and also require a proof of identity of [[exchanges]]’ clients by providing copies of passports or other documents. [[Exchanges]] themselves may also introduce such a requirement.
One of these [[exchanges]] – [[Bitstamp]] already requires identity confirmation to access all the features of Exchange.

== Government influence on mining ==

[[Bitcoin]] [[mining]] wasn’t yet brought to official discussion by any state. Danger is presented by major miners, who mine bitcoins commercially. State regulators can find a way to affect the emission of [[bitcoin]] through the owners of such mines.

== Conclusion ==

At the moment, no country has officially designated [[bitcoin]] [[status]] or [[cryptocurrencies]] as a whole. Creation of [[Bitcoin]] businesses is prevented by an unclear position of regulators or their unofficial ban. The most favorable to [[digital money]] are USA and some countries of Europe while China and Japan are reacting quite harsh to it.

== See also ==
* [[Mining]]

== References ==
[https://vip.btcchina.com/ BTCChina]
[https://www.bitstamp.net/]

[[ru:Bitcoin и государство]]
[[Category:Cryptocurrency]]

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