Bitcoin likely has a long way to go before regulators step in and start controlling the market, and once it does get there it may not be for the right reasons.

The digital online currency, which has been around for four years, essentially flew under the radar until the past two months or so, when tumult in Cyprus sparked a flight to bitcoins and sent it on a wild price ride.

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Now that things have settled and the chatter has faded, the next step will be to watch whether bitcoin graduates from a cyberworld fad to a legitimate currency.



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Ironically, that could come because regulators think bitcoin is being used for nefarious purposes—say, funding drug or terrorist organizations, or if holders start getting ripped off.

"They are not there yet," said Peter Dugas, director of government affairs at the Clark Hill law firm and a former deputy assistant Treasury secretary.

"What would probably trigger that would be some sort of significant outflow, whether it's currency or transactions abroad and they start to see patterns of people trying to hide finances abroad," he added.

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In the worst-case scenario for bitcoin, that type of malfeasance would bring in regulators who then would enact the toughest measure of all: shutting down the whole operation.

Short of that, U.S. bitcoin regulation would have to start in Congress, and then would spill over into the global currency market and its $4 trillion a day of action.



A number of agencies would be involved, including the Commodity Futures Trading Commission, the National Futures Association and the Financial Services Authority.

That would take bitcoin out of the murky world of online creators and dealers and into the public markets.

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When that would happen, though, would likely be a far cry from the current $1.4 billion world in which bitcoin currently exists.