A new Californian bill introduced on 1 January 2015 states that digital and alternative currencies, including Bitcoin, can now be used for transactions in California. Bill AB129 is a huge step in the right direction for cryptocurrencies which have faced opposition form global banks and regulators, and up until the beginning of this month were illegal to use in California.
Cryptocurrencies have faced a number of scandals over the last few years such as its use on illegal website Silk Road which was seized by the FBI and shut down in August 2013, the collapse of the Bitcoin exchange Mount Gox which filed for bankruptcy after admitting it had lost over 700,000 of its user’s bitcoins and allegations of fraud against Cyprus-based bank-like portal, Neo & Bee’s CEO who is still on the run.
Under the new bill, vendors do not have to accept cryptocurrencies, it merely provides them with the opportunity to support Bitcoin and its rivals. Roger Dickenson, chair of the California state Assembly on Banking and Finance said: “This bill makes clarifying changes to current law to ensure that various forms of alternative currency such as digital currency, points, coupons, and other objects of monetary value do not violate the law when those methods are used for the purchase of goods and services or the transmission of payments.”
However, it has been reported that the battle to gain global acceptance isn’t over for cryptocurrencies and some banks have already voiced their concerns over their safety. It also has to been taken into consideration that because of negative press and lack of understanding about Bitcoin, not everyone is comfortable making a transaction using digital currencies.
The implementation of the Californian bill is a step forward for cryptocurrencies, however, other US states are being more cautious. New York state authorities have introduced plans for a BitLicence which intends to control and regulate Bitcoin companies and impose record keeping and registration requirements.
Globally, Bitcoin has faced opposition particularly in China, where the government have banned banks from using Bitcoin because they do not recognise it as a legitimate currency. In the UK, at the end of 2014, HM Treasury called for more information on digital currencies to which the IBOS Association (an alliance of international banks which include a Santander, HSBC and RBS) argued that digital currencies must fall within the remit of financial services regulation and regulators whether this is through amending the scope of regulation or the powers of the regulators.
Robert Lyddon (general secretary of IBOS) said that there are many unanswered questions concerning digital currencies such as the nature of the offering, who is offering it, where it is from and what the regulatory regime is. He also said that virtual currencies are dangerous because they are not properly regulated which puts consumers at risk.
By Nicole Miskelly, bobsguide Lead Journalist