Multinational professional services firm Deloitte has questioned whether it is too soon to try and regulate bitcoin.
In a publication titled Bitcoin at the Crossroads – which notes the advantages of both bitcoin and blockchain technology – Deloitte explores whether regulating digital currency could potentially have a negative impact on its future development and potential to reach mass adoption.
It adds:
“In most respects, while policy makers and regulators are acting in accordance with their mission statement to protect the public and the integrity of the financial markets, an important question comes to the fore – is it too soon to try and regulate bitcoin?”
There is, according to the publication, strong historical evidence which suggests that allowing new technologies to develop without interference is initially the best course of action.
‘A drop of water in the ocean’
The publication notes there are three reasons why global policy makers should refrain from regulating bitcoin during its nascent stage.
Firstly, bitcoin’s market penetration is still small compared to traditional fiat currency systems and transaction platforms:
“Bitcoin is receiving a remarkable amount of attention and scrutiny from policy makers and regulators all around the world – far beyond what its current scale and market impact would seem to justify. In fact, by any relevant benchmark, the value currently at risk with bitcoin is just a drop of water in the ocean that is the financial industry.”
The publication then goes on to say that “we could be cycles away from real products that can generate true demand for bitcoin related services from mainstream consumers”.
Impact on mass adoption
Additionally, the authors say other transformative technologies were given more time to develop before they came under regulatory scrutiny.
Citing the telephone (invented in 1876 and regulated in 1913); airplanes (invented in 1093 and regulated in 1938) and the Internet (invented in 1969 which has come under increased regulatory focus in recent times) as previous examples, it adds:
“The open-source platform that is bitcoin was first released in 2009. We are a mere six years into the development of bitcoin and a long way away from the time it has typically taken for new technologies to achieve mass adoption in the past.”
Exploring its potential
Finally, the authors note bitcoin has not yet found its most valuable application.
“While the list of potential use cases for bitcoin and blockchain technology is expanding every day,” the publication says “it is still in its early days and some of the emerging use cases are tremendously exciting.”
Acknowledging the challenge that bitcoin poses for regulators, and its potential to disrupt both the financial services and technology industries, the publication concludes there is a case for industry groups, policy makers and regulators to collaborate at a national level.
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