The virtual currency has reached a critical new stage in its evolution – and is about to become almost respectable

One German pub is convinced by Bitcoin (Image: Sean Gallop/Getty)

IT IS a currency founded by revolutionaries that went on to become the world’s dominant payment method. Well, if the US dollar can do it, why can’t Bitcoin, the peer-to-peer digital currency? Once little more than the plaything of online libertarians and crypto-anarchists, many Bitcoin advocates are now seeking regulatory and financial legitimacy as an ecosystem of companies springs up to support the currency.

In March, the US government sought to actively regulate Bitcoin by requiring companies classified as “money transmitters” to register with the Financial Crimes Enforcement Network (FinCEN). Mt. Gox, the largest Bitcoin exchange, was founded in 2010 but only registered last month, following the seizure of its accounts in May by the Department of Homeland Security.

A new generation of Bitcoiners is taking a different approach. They descended on London last week for a conference to discuss the currency’s evolution from internet curio to serious financial instrument. “You need to show the world you’re not going to try to overtake the government, you’re going to take this global financial system and make it better,” BitInstant founder Charlie Shrem told the Bitcoin London conference. He registered his payment system firm with FinCEN in 2011, before it had even heard of Bitcoin.


“You need to show you’re not trying to overtake the government, but make the financial system better”

Topics discussed included cheap and fast global money transfers and even a Bitcoin ATM, with little mention of the drug trade and other illicit sales hitherto associated with Bitcoin on sites like Silk Road. “Most businesses in the Bitcoin world want to comply,” says Daniel Friedberg, an attorney with Seattle-based firm Graham & Dunn. Friedberg is helping companies get involved in the currency, though he thinks it won’t lose its early reputation. “Bitcoin is never going to be PayPal, and that’s going to bother some established industries and create some risks for governments,” he says.

Meanwhile, Tyler and Cameron Winklevoss, who famously sued Mark Zuckerberg over the creation of Facebook, announced their plans for a $20-million fund selling shares to invest in the Bitcoin market. Buyer beware, though – the pair’s filing with the US Securities and Exchange Commission warned that such an investment is not without the risk of Bitcoins being lost, stolen or completely collapsing.

Members of Bitcoin Talk, a forum for supporters, have broadly welcomed the move. “Thank you Winklevii, this is probably the biggest step to financial legitimacy in Bitcoin’s brief lifetime,” said one, though others are anxious about the increasing centralisation of the currency.

Don’t pay too much attention to these complaints about how Bitcoin is changing, says Peter Vessenes, chair of the Bitcoin Foundation advocacy group and Bitcoin entrepreneur. “We took the coin price from 12 to 200, and they were wrong about whether you’d ever have to engage with regulators and lawmakers.” Anarchist utopian types will always have a stake, he adds. “It’s very important Bitcoin stays decentralised and distributed.”

Perhaps we can learn from history. The first attempt at a US currency, the Continental dollar, failed after just a few years due to a collapse in value. It was only after the founding of regulatory body, the Bank of North America, that the US dollar became a success. Maybe Bitcoin will share this fate.

This article appeared in print under the headline “Bitcoin grows up, sells out”