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Study: The divergent paths of digital currency regulation

Authorities globally have taken a wide variety of positions on the regulation of digital currency, making it hard for payment industry players to provide technology that will support digital currency transactions.

October 21, 2014

Since this spring, a number of countries have announced new regulatory positions (or indicated that action is imminent) affecting the ability of consumers, businesses and financial entities to handle and process digital currency transactions.

Authorities globally have taken a wide spectrum of positions on the regulation of digital currency. This makes it increasingly difficult for payment industry players to provide technology that will support digital currency transactions.

The analyst considers the force that digital currency regulations might exert on the growth of currencies such bitcoin.

"The global payments industry has been taken aback by the rise of the new payment technology represented by bitcoin and other digital currencies, which at its core has the potential to radically change the paradigm in which electronic payments are handled," said Tristan Hugo-Webb, the associate director of the Mercator international advisory service, and author of the note. "Understandably, the response to this paradigm-changing technology has been mixed among regulators since true understanding of the benefits and opportunities as well as the disadvantages and consequences is hard to come by."

Highlights of the research note include:

• an overview of the history of digital currencies and their regulation;
• a map of digital currency regulation around the world; and
• a review of the types of regulation imposed on digital currencies and specific country examples.

One of three exhibits in the 10-page research note: