Virtual currencies are definitely trending. You know that’s true when even the politicians are jumping on the bandwagon. It won’t be long until Ed and Dave are asking if they can pay for their Cornish pasties with Bitcoins.
Maybe we’re not quite there yet, but the fact that in the run-up to a general election, the Treasury is looking at measures to make the UK a centre for virtual currency trade shows how much interest there is in digital/virtual/crypto currencies. But while
everyone jumps on the bandwagon, Bitcoin, the world’s largest virtual currency, is finding it hard to shrug off its past association with the black market and Silk Road. If crypto currency providers really want be taken seriously in the long-term, they must
prepare for inevitable regulation and begin to develop their own compliance processes.
The current world of cryptocurrency is like how the automotive world would look without the DVLA – people driving with no consequences or accountability. We would still have speed limits and road rules, but without a method of tracking road users, there
is no way to track who is responsible if people break them. It might seem like Jeremy Clarkson’s idea of utopia – but it’s not good. Instead, to make the roads a safe place for everyone, driver’s licenses and number plates provide a way to track drivers. While
I’m not saying cryptocurrency users need a license, there has to be a way to keep people accountable.
Bitcoin expert Radoslav Albrecht predicts that by 2020 Bitcoin will handle as many transactions as PayPal does today. As people start to trust that the value
of the currency will increase, they start to invest in it, further fuelling demand. The potential is huge and one of its key attractions is its independence. And as an independent currency, free from the regulations that cover other more traditional currencies,
it is still viewed with caution by many potential users and investors. Regulation, whether from financial industries or virtual currency companies themselves, is the key to changing this.
Not everyone is in favour, but forward-thinking exchanges are already anticipating government action and developing their own compliance programmes. As the market expands, these savvy companies will be the ones which take a greater share and will make attractive
acquisition targets for potential buyers.
It will be important for these early movers to educate users on the value of taking this step. If they engage with users, educating them on why they now need to take steps such as verifying their identity, they will have the chance to reassure users that
their data is safe and will not be used for anything they don’t approve of. In doing so they will help build trust which is at the core of repeat custom.
Virtual currency companies need to move first, anticipating the inevitable regulation and get themselves ahead of the game. Adopt rigid sign-up processes for new users and policies to detect and deter money laundering. Educate users on the reasons behind
the moves and trust will be built. We all know virtual currency is seen by many as this season’s must-have, but the companies that put reliable infrastructures in place will convert this interest into long-term success.
Blog updated: 29 May 2015 10:56:51