The idea that a digital currency like bitcoin could someday be used for illicit finance was a bit of a wild-eyed dream back in the early days of the Internet.
But a handful of regulators have signaled that the currency is about to get a big boost from regulators, as bitcoin continues to grow in popularity.
Read moreRead moreThe biggest concern is that bitcoin is likely to end up being used to make illicit payments that are harder to trace.
That means money laundering is a concern.
“Bitcoin is a digital asset that’s really difficult to trace,” said Adam Green, chief technology officer at Coin Center, a San Francisco-based research and advocacy group.
“That’s a huge concern because it’s an asset that is really difficult for criminals to track and trace.”
Coin Center said it has seen a surge in bitcoin trading volume in recent months, with an estimated $200 million worth of transactions in December alone.
But it added that it’s unclear how much money criminals are using the currency to launder.
Bitcoiners say the currency’s volatility has allowed it to grow quickly.
Bitcoin is a decentralized cryptocurrency that has no central authority.
It is designed to provide a virtual currency that can be transferred from one person to another and to avoid the risks of holding the coins in physical form.
There are also some legal issues associated with bitcoin, including its potential to be used as a means of financing terrorism.
In the wake of the attacks in Paris and San Bernardino, California, last year, regulators started cracking down on the digital currency and cracking down more broadly on money laundering and terrorist financing.
On Wednesday, the New York Department of Financial Services announced that it would begin issuing new guidance to help banks and other financial institutions better understand the new technology.
The guidance, which will go into effect in April, is meant to address what’s known as the “Bitcoin-related transactions rule,” which governs how businesses, including banks, should handle digital currencies.
The agency’s guidance says banks should not accept or handle bitcoin as a medium of exchange or as a store of value.
It says businesses should consider the digital asset a form of payment rather than a currency, and that it may not be permissible to accept or hold digital assets as a method of payment.
While the guidance does not prohibit bitcoin from being used for money laundering or terrorist financing, it does recommend banks take steps to monitor its use and make sure it’s not being used as part of the laundering process.
“We want banks to make sure that digital currencies are regulated like traditional currencies,” said Daniel Bresnahan, the head of regulatory compliance at Coin Institute, a nonprofit group that advocates for better regulatory oversight of bitcoin.
“We’re not saying it’s legal, but it’s important that we make sure banks know what they’re dealing with.”
But Green said that even if regulators decide that bitcoin’s volatility is too high to allow it to be a means for illicit money laundering, it’s unlikely to be as problematic as people believe.
The problem with Bitcoin is that it was never designed to be useful for anything other than buying and selling things, he said.
Bitcoin’s primary use is for online payments, but that could change, he added.
“If the economy is going to be so dependent on Bitcoin, then there’s going to need to be something that can replace it,” Green said.
“There’s going, I think, going to have to be some other way to get around the existing banking system,” he said, referring to the possibility of a digital-only banking system.
But for now, bitcoin is in a very interesting place.
With regulators trying to curb the currency, banks are making moves that could make it a less-cash-friendly way to move money around.
If the Bitcoin bubble bursts, as some expect, Green predicts it could cause other cryptocurrencies to follow suit, which could hurt bitcoin’s value.
But, Green added, it could also open up the digital economy to a whole new set of potential uses.
The biggest question is how long it will take for regulators to realize that bitcoin could potentially be used to larceny, Green said, noting that bitcoin has the potential to become so big that the rules governing how businesses operate in it will become more complicated.
What does this mean for the economy?
The most immediate impact of this change will be on banks, who have been able to get by with a system that doesn’t include a central bank or a regulatory body.
Banks are also not subject to federal regulations, and regulators are likely to follow the lead of their counterparts in Europe and Japan.
The U.S. government has said it will be considering a proposal to impose a 10 percent capital gains tax on bitcoin.
The measure is likely part of a broader effort by lawmakers to regulate bitcoin, which some experts say is already too risky.
Bitcoin could also be on the verge of becoming more of a store, Green argued, something that could cause