Look Before You Invest: Bitcoins, Virtual Currencies, Emerging Payment Products, and Regulatory Compliance
Margo H.K. Tank, a partner with BuckleySandler LLP in Washington DC, advises financial institutions on electronic financial services, mobile payments, prepaid access and virtual payment methods, in the areas of anti-money laundering, privacy, trade sanctions, and regulatory compliance.
Emerging payment products, such as Bitcoin, present tantalizing investment opportunities. The claim that these products are “unregulatable,” or “free of the power of the state” increases the temptation to participate, because if true, regulatory uncertainty associated with traditional financial industries would be eliminated. Notwithstanding these claims, virtual currency laws and regulations seem primed to explode. Acknowledging that “virtual currency systems offer ‘legitimate’ financial services,” the Department of Justice, for example, has investigated and prosecuted illegal activities involving virtual currencies. As a result, risk-related issues like money laundering, terrorist financing, and economic and trade sanctions remain critical to evaluating investments in emerging payment products. To understand why, consider how the emerging payments industry is regulated now and what additional regulation might emerge.