Innovation is the primary distinction between leaders and followers. It represents disruption and a challenge to our way of life. Bitcoin is, without a doubt, among the top five technological innovations we have ever seen, and it needs progressive legislation to unlock its full potential.
Clear and progressive legislative guidance will give aspiring bitcoin experts & entrepreneurs the confidence they need, to find new use cases, and bring bitcoin to the masses.
Thus, the question of legislation is more important than ever. With the deadline for the BitLicence passed on August 8th, we talk to 10 bitcoin experts, and ask them:
What experiences have you had with European legislation, and do you think it would be better/worse to have your HQ in the U.S.?
Emphases have been added by the author, answers have otherwise remained unchanged.
1. Eric Larchevêque, CEO of Ledger Wallet
As we are mainly a hardware/software solutions provider, and Ledger is not custodian of any funds, we completely escape regulatory aspects.
However, by being in Europe and especially in France, we do have major benefits. France has a strong tradition of excellence in smartcards and security industry; finding experimented hardware security engineers would be extremely difficult and costly in the USA.
We also have access to a large range of state sponsored grants, helping us fund of R&D or develop production facilities.
2. Meinhard Benn, CEO at SatoshiPay
The undecided regulation process in Germany caused us to establish SatoshiPay in the UK where all signs point towards a cryptocurrency-friendly legislation. Luckily also the investment climate was much more in our favour in London, so it was a good move overall.
I didn’t look into U.S. legislation all too much, but from what I gather it gives advantage to well-funded companies, which in term dampens innovation in my eyes.
3. Stu Lustman, Author of P2PLendingExpert
The UK, who has specifically not taken any stance yet, seems to be really open to Bitcoin.
In this case minimal seems to be good since we have one US federal judge saying that Bitcoin is money, an agency (CFTC) saying its a commodity, the SEC saying its a security sometimes in some situations and the IRS saying that BTC is property in terms of how it should be taxed.
This is an incredibly confusing landscape of regulation to work through and I can see situations where compliance with one agency could mean non-compliance with another here in the US. In this way, what the Europeans are doing seems to be better for Bitcoin operating companies at the moment.
4. Henrik Hjelte, CEO at ChromaWay
We were really close to move the company to the US around a year ago, and discussed it a lot. But the thought of expensive legal bills scared us so we decided that we should settle down in Europe instead. So far we have not regretted it.
We are technology provider and don’t need to do much direct work on the legal side, but we can see around us that it seems quite possible to get permission from legal authorities here in Europe to operate bitcoin-related companies. What is great with the US is of course access to investors, and a huge home-market. Sometimes we feel like what happens in Europe is neglected in media as well, even in Coindesk.
Now we are in the Plug and Play Fintech accelerator and have a presence in the Silicon Valley, it is great that they accept applications from companies all over the world. Americans are very open and friendly.
5. Kaja Ribnikar, Executive Assistant at Bitstamp
Bitstamp had good experiences with the European regulators. It goes without saying that they are open for dialogue, they are receptive and have more balanced view on bitcoin.
It is evident that U.S. is much tougher environment to run bitcoin business. For instance, banks are much more resilient towards working with bitcoin related companies.
6. Dr Smith, CEO at Elliptic
Our COO Dr. Tom Robinson began lobbying HMRC in 2013, to overturn their decision to levy VAT on the sale of bitcoins. After months of meetings, HMRC eventually agreed to change their stance and reverse this policy – a watershed moment in terms of government policy on digital currencies, and one that had been emulated around the world.
However, digital currency businesses still remain unregulated in the UK. Without regulation, digital currencies are unlikely to achieve the legitimacy and consumer confidence necessary for their mainstream adoption, especially among conservative financial institutions.
Elliptic helped to found the UK Digital Currency Association in 2014, to provide a single point of contact for policymakers and regulators to interact with industry. The UKDCA’s response to the Treasury’s call for information was instrumental in shaping government policy – including AML regulations for digital currency exchanges, together with a self-regulatory standards framework to ensure consumer protection.
7. Radoslav Albrecht, CEO at Bitbond
For our company Bitbond there would be a few operational and legal differences if we were incorporated in the US. One the one hand I believe there is more venture capital especially on the West and East Coasts of the US which is an advantage for startups. However, on the other hand there are more startups that are competing to get funded. Europe and Germany in particular are still regions with a fairly low share of entrepreneurs in the population. Therefore less startups seek to get funded.
It’s hard to say if it is easier to raise money in a super competitive environment but more supply or a less competitive environment but significantly lower supply. One thing that also needs to be considered is that costs are higher in the US. This makes it harder at the start and more capital needs to be raised.
From a legal perspective Europe is a good place to be for a bitcoin startup. The German financial regulator Bafin has classified bitcoin early on in 2011 as a financial instrument. By that we know how bitcoin is treated from a regulatory perspective while in my view this is not so clear in the US. To know where one stands from a legal perspective is valuable.
8. Alena Vranova, CEO at SatoshiLabs
The legislation in financial markets services and technology in our opinion covers whatever is needed for the bitcoin trade and usage anyway so in general there’s no extra legislation needed. Although Europe, especially Czech Republic, is usually innovative in technologies and Bitcoin, our experience with legislative bodies here in the Czech Republic only prove that the support from the state is very weak.
U.S. may be interesting but the barrier of entry for newcomers to financial services is too high. The banking lobby managed to slow down potential competitors by pushing through BitLicense. US is a good place for investments and software development.
9. Valery Vavilov, CEO at BitFury
According to the news, it seems that European legislations are generally more permissive when it comes to Bitcoin (e.g., Xapo explains why it relocated to Switzerland) compared to the United States legislation (e.g., New York state BitLicense, see also).
It appears that in general European governments recognize and appreciate the great potential behind the innovative technology of Blockchain.
UK Government, for example, is well informed about Bitcoin and the value of Blockchain technology. It is perhaps one of the most informed government bodies in Europe. It has openly supported Fintech after a successful period of developing Tech City in London which created a massive acceleration in startup activity through infrastructure investment, tax incentives and government support. It is taking many of these lessons and now applying them to Fintech.
David Cameron is supporting a massive drive to position the UK as the world center for Fintech. This is evidenced by the fact that George Osbourne (Chancellor of the Exchequer) has developed a wide and deep understanding of Bitcoin and Blockchain technologies. Osbourne personally launched Innovate Finance which acts as a government lobbying group on behalf of Fintech companies.
The UK government is about to produce a second Fintech report, The Blackett Review, which is likely to make suggestions that could inform regulators and wider industry and lead to concreate actions.
We are encouraged by the combined influence of Innovate Finance lobbying group, UK government, Level 39 and some European-based
pro-Blockchain financial institutions and are hopeful about the future of Blockchain in the US and Europe.
10. Brian Fabian Crane, Co-Founder of Epicenter Bitcoin
Epicenter Media is incorporated as a Bitcoin-only UK company but that hasn’t caused any complications so far.
One thing it has taught us, however, how much Bitcoin complicated the accounting. Hopefully, technical solutions will solve that problem in the future.
10 bitcoin experts and 2 takeaways
So now we have heard 10 bitcoin experts giving us their opinion and recalling their experience with legislative bodies in the bitcoin space. The first takeaway seems to be that European legislation is more progressive and more permissive than U.S. legislation at present. The second takeaway appears to be that the UK government is doing a great job in reassuring entrepreneurs, and creating a space where innovation is not only possible but encouraged.
George Osborne’s launch of Innovate Finance and the city of London’s ability to foster Fintech disruption seem to strengthen that opinion. However, anybody who has ever tried to exchange bitcoin for pound sterling will know that the UK still has a long way to go in this regard, with transfers and exchanges for the British pound usually involving hefty fees and longer waiting times than most other EU countries.
Overall, the U.S. needs to change course and steer towards more permissive bitcoin legislation if it does not want to miss out on the huge ecosystem which is currently building around the cryptocurrency. Otherwise, the future of bitcoin lies in Europe.
My thanks to the bitcoin experts from ChromaWay, SatoshiPay, LedgerWallet, SatoshiLabs, Bitbond, Epicenter Bitcoin, BitFury, Eliptic, Stu and Bitstamp for their great correspondence and insights.