Regulator: Brace for the bitcoin future

One of the nation’s top financial regulators called on Tuesday for a “flexible and rational” set of rules for virtual currencies such as bitcoin.

Mark Wetjen, one of the five commissioners on the Commodity Futures Trading Commission (CFTC), wrote in an op-ed that regulators need to steer clear of a strategy that could harm future growth of the money.

{mosads}“Regulators should work quickly to understand how these technologies work and how they affect specific regulatory jurisdictions, with the ultimate goal of creating a regulatory framework should the public begin adopting or using these technologies in greater numbers,” he wrote in The Wall Street Journal.

“That will lay the groundwork for future innovation in virtual currencies.”

Bitcoins only exist online but can be traded for cash or used to pay for goods and services at a number of outlets including Overstock.com and Dish Network.

A handful of recent events have raised concern about the money, however. Because it can be traded largely anonymously, bitcoin has become the preferred currency for some money launderers and criminals. The recent collapse of Mt. Gox — a once-major bitcoin trading service — has also added to suspicions that the money is not safe enough for public use.

But supporters say that bitcoin or a similar technology can revolutionize the way that people spend money, just as the Internet has transformed the way people communicate over the last two decades.

The best way to respond to those crises with bitcoin, Wetjen wrote on Tuesday, is to create a “flexible and rational regulatory framework.”

“[S]erious innovators will choose to work within such a regime in the U.S. rather than avoid it, which in turn will build more confidence in consumers currently leery of embracing the new technology, or something like it,” wrote Wetjen, a Democrat.