Strengthening Australia’s identity requirements for purchase of Bitcoins

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A day ago congress held a hearing on virtual currencies. I watched parts of the hearing live and my feeling was that there was a consensus embracing distributed-network currencies, like Bitcoin, as an innovative, potentially efficient and useful, payment system. I agree with the idea that there is a need to encourage innovative payment mechanisms and that to do this it makes sense to have a certain degree of government oversight.

I am very enthusiastic about the possibility of wide adoption of unmediated-distributed-network payment systems in Australia for legitimate-transaction settlement and even remittance. I think that what needs to be done, at this stage, is requiring identity-verification for purchasing Bitcoins in Australian exchanges—essentially extending the identity verification requirements that we have in Australia for the activation of  mobile phone Sim cards. My hope is that eventually people can go to Woolworth’s to buy Bitcoin recharge cards just like a prepaid Sim card.

Thorough identity verification is required for purchases of the Bitcoin currency on US exchanges such as Coinbase.com.  Identity verification  is also required by European exchanges such as Bitstamp.net. However, as far as I can tell  there are no identity verification requirements is Australia, or they are not enforced. You can simply go to an Australian exchange website (say https://www.spendbitcoins.com/buy/), get a Bitcoin quote, walk to your local NAB branch, make a cash deposit, and have your Bitcoin sent to your anonymous Bitcoin wallet. Alternatively, a person wanting to purchase Bitcoins can go to localbitcoins.com find an Australian seller, make a cash deposit into the seller’s Westpac account, and have their coins sent to one of their Bitcoin wallets. Of course, there is probably no way of preventing a buyer and seller of Bitcoins from conducting a person to person cash exchange at a local pub.  But my guess is that most anonymous Australian purchases of Bitcoins involve cash deposits into an Australian bank account:    

bitcoin-brisbane   

One Response to "Strengthening Australia’s identity requirements for purchase of Bitcoins"
  1. You must be reading different news than I do, Rabee. From your post one could be forgiven for believing that bitcoins have been officially adopted as the internet’s online currency! That is not the case. Bernanke’s letter does not mention bitcoins, but speaks about the value of having a regulated online currency. The Senate committee seems to agree, end of story.

    So yes, online currencies would be useful and, yes, bitcoins have not been declared illegal and, yes, the issue of identity verification for online transactions will come up more and more. But none of that means we will be using bitcoins the next 10 years for our online transactions. Indeed, for the reasons Posner and others have given, bitcoins will probably remain a speculator-driven curiosity whilst other online currencies get real traction.

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