A token airdrop may not spare you from securities regulation.

A token airdrop may not spare you from securities regulation.

Blockchain token based projects need network effects.

There needs to be a mechanism for fairly and widely distributing tokens to in order for the project to function well upon launch. A popular method thus far has been to sell those tokens in advance to prospective users of the network that are interested in crowdfunding its development. Another, lesser known, strategy is an “airdrop.”

In an airdrop, a project’s creators can take a snapshot of a public blockchain, such as Bitcoin’s or Ethereum’s, and send tokens to all wallet addresses containing some number of bitcoin or ether at the time the snapshot was taken. This requires no action on the recipient's part other than to take whatever steps are needed to take control of the tokens once they have been gifted. It can be a way to jumpstart a community by instantly putting tokens in the hands of a lot of people with a proven level of cryptocurrency savvy. This seems like something totally new and unique to token projects, right? Not really. It turns out people have tried airdropping before, but with stocks. And the SEC did not look favorably

upon the tactic.

In each of the four cases, the investors were required to sign up with the issuers' web sites and disclose valuable personal information in order to obtain shares. Free stock recipients were also offered extra shares, in some cases, for soliciting additional investors or, in other cases, for linking their own websites to those of an issuer or purchasing services offered through an issuer. Through these techniques, issuers received value by spawning a fledgling public market for their shares, increasing their business, creating publicity, increasing traffic to their websites, and, in two cases, generating possible interest in projected public offerings.

So, since the SEC has found that some tokens can be securities, if you are considering using an airdrop token distribution be warned that even giving away tokens is not necessarily free from scrutiny under securities law.e briefed Congress on tracking illicit cryptocurrency use and moderated a convening on ICO regulatory uncertainty.

This was a big week for cryptocurrency in DC.

On Tuesday, members of Congress and over 50 representatives from the crypto industry convened at the Library of Congress for a roundtable entitled “Legislating Certainty for Cryptocurrencies.” The event was organized by Rep. Warren Davidson and also attended by Reps. Tom Emmer, Ted Budd, and Darren Soto. Coin Center executive director Jerry Brito moderated the event, and entrepreneurs voiced their concerns about the lack of clarity around when exactly a cryptocurrency token is or is not a security.

Following the roundtable, 14 members of Congress, led by Rep. Budd, sent a letter to SEC Chairman Jay Clayton echoing the concerns of cryptocurrency innovators and asking for more clarity around the regulatory treatment of these networks. In another event in Congress on Wednesday, in conjunction with the the Congressional Blockchain Caucus, Coin Center put on a briefing about the tools law enforcement has to track illicit use of cryptocurrencies. Blockchain forensics company Elliptic presented how their product works with real-world examples of illicit funds being traced by law enforcement. Reps. Emmer and Schweikert also gave remarks highlighting the importance of getting the regulatory approach to these technologies right and preserving a fertile climate for innovators in America.

Article Produced By

Peter Van Valkenburgh

https://coincenter.org/link/a-token-airdrop-may-not-spare-you-from-securities-regulation

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Italy’s Economic Pain Is the Bitcoin Price’s Gain

Italy's Economic Pain Is the Bitcoin Price's Gain

Italy’s Economic Pain Is the Bitcoin Price’s Gain

Perhaps it took an economic crisis of another kind to lift the cryptocurrency markets. Italy’s economy is reeling amid a political crisis that has placed a spotlight on the cracks in the EU’s economic foundation.

Bitcoin Price Trends up as Italy’s Economy Falters

Italian bonds are going bust, and the negativity has spilled over into stocks as well. But as the global financial markets are reeling, bitcoin is finally beginning to see the light of day again, and it could just have something to do with the fact that a potential threat to the euro highlights the benefits of a decentralized currency like bitcoin.

The bitcoin price is currently trading above the $7,400 threshold after falling to a May low earlier in the day.

Reason to Rally

The cryptocurrency markets have been searching for a reason to rally, and many of us have been looking to the centralized governments of the world to provide that catalyst.

Meanwhile, the mechanics of the cryptocurrency markets are working just fine, and have pulled off a rally — albeit on modest trading volume — on a development that highlights the very strengths of a decentralized world. Bitcoin and its altcoin peers have proven once again the power of a digital currency that is not controlled by the central bank but instead the masses.

The crisis in Italy has placed a great deal of pressure on the euro, sending Europe’s common currency to its lowest levels against the USD in months. Italian bonds have similarly sold off amid the possibility of Europe’s third-largest economy staging a Brexit of its own. A decentralized currency like bitcoin becomes even more attractive when the common currency of Europe becomes unstable.

Fundstrat’s Thomas Lee cheered the crypto market’s response, telling Business Insider:

“To an extent, I think its good to see Bitcoin rallying with Gold, as the adverse developments in Italy and globally are pushing investors to risk-off. It’s good to see Bitcoin as an uncorrelated trade on a risk off day.”

Take the Latin American economy of Venezuela as an example. While the economic conditions in Venezuela are specific to the region, comprised of hyperinflation, food crisis and a broke government, the end result is a currency whose value has been destroyed. As a result, Venezuela’s currency was being exchanged for bitcoin at a record pace in mid-April, when more than $1 million in “bolivar-to-bitcoin” conversions occurred in a single day.

Italy’s fate in the EU has yet to unfold, and a snap election appears to be taking shape for the coming months there. In the meantime, it’s not just bitcoin that’s benefitting. Other leading digital currencies including ethereum, ripple, bitcoin cash and litecoin were all trading between 2%-4% higher while cardano soared nearly 10%.

AUTHOR Gerelyn Terzo CNN

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Is Investing in Bitcoin and Other Cryptocurrencies Worth the Gamble

The Technology Behind Cryptocurrencies

The creation of Bitcoin back in 2008 fueled the exponential growth of the cryptocurrency ecosystem, facilitating the creation of a rich diversity of coins and applications that many would deem revolutionary. Those who invested in cheap coins at the outset are reaping huge returns on their capitals, dwarfing the average returns one can acquire in the stock markets. Think about it; if you had bought $1,000 worth of Bitcoin in 2010, you’d be worth a staggering $35 million now. The possibility of earning colossal returns has attracted many to the arena, and this begs a crucial question: Is the hype on cryptocurrencies warranted or it is just a game of Russian Roulette?

The birth of Bitcoin – the first digital cryptocurrency that is decentralized by design – gave rise to a technology with the potential to redefine the very fabric of our status quo. This technology is called the Blockchain, which underpins Bitcoin’s protocol.

“Every informed person needs to know about Bitcoin because it might be one of the world’s most important developments.” — Leon Luow, Nobel Peace Prize nominee

Blockchain is essentially a distributed, digital ledger where every transaction is broadcasted publicly and recorded chronologically. The database is ever growing, expanding in tandem with the amount of transactions made on the network. The decentralized nature of Blockchain technology ensures that transactions are immutable and thus immune to change, offering full transparency for each and every transaction. Add to that the traits of increased security, higher efficiency, error-resistant and reduced transaction costs, it leaves no doubt as to why many are excited about Blockchain’s possible use cases. The utility of Blockchain technology is endless, with an ever-growing list of governments, industries and companies looking to further explore its usage.

Hotbed for Money Making

The birth of a revolutionary technology would always entail those looking to capitalize on its profitability. Blockchain is no different. Investors, traders and speculators can get in on the action by buying cryptocurrencies, which are digital currencies manifesting as variant applications of the Blockchain technology. There are over 900 coins available, with each offering a slightly different approach to solving a range of problems. Many early adopters have made a great sum of money, by buying the coins cheaply at its outset and realizing them much later on. Based on the statistics provided by ICOSTATS, the return on capital of 40 cryptocurrencies since their inception stands at a staggering 6703%! In order for you to earn similar rates of returns in the stock market, it will take you approximately 957 years.

These stellar returns inevitably attract many who are looking to earn multiples over their capital. Given the extreme technicality of cryptocurrencies and the underlying Blockchain technology, many do not fully understand the fundamentals of what they’re investing in. The immaturity of the current infrastructure – stemming from the relative infancy of the cryptocurrency industry — results in an inefficient price discovery mechanism, thereby creating an extremely volatile market environment. This poses huge risks for those looking to invest in a comprehensive list of coins.

Simply entering the market with the hopes of massive short-term gains without understanding the coins and their technology is akin to playing a deadly game of Russian Roulette. The radical volatility of the coins’ prices may significantly put your capital at risk. Just to draw a picture, Bitcoin’s price lost 40% of its value in a matter of days in December 2013, and at the start of this year, Bitcoin lost approximately 34% of its value in a week. While this can spell doom for many, there are those that find gratification by profiting from the intense gyration of prices.

The Verdict?

Nine years after Bitcoin kickstarted the technological revolution, the ecosystem centered around Blockchain technology has flourished and is looking ever so promising. New coins solving real world problems are launched at a tremendous pace, with new functionalities and applications pushing the boundaries of this nascent technology. With increasing user adoption and a keen interest by nations and corporations, it is only a matter of time before Blockchain technology becomes ubiquitous in our lives.

A flip side of this emergent technology is the great risks associated with investing in cryptocurrencies, especially for those with a short-term horizon and an absence of understanding in the coins they have invested in. Truly, the extraordinary volatility unique to cryptocurrencies creates a superficial impression of high stakes gambling in the eyes of many. Armed with the right understanding and knowledge of Blockchain technology, you would begin to appreciate its innate beauty.

David Ogden
Entrepreneur

Author: Aziz Bin Zainuddin

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Bitcoin Could Hit Near $4,000: Goldman Sachs’ Chief Analyst

Bitcoin Could Hit Near $4,000: Goldman Sachs' Chief Analyst

Bitcoin Could Hit Near $4,000: Goldman Sachs’ Chief Analyst

Although bitcoin price has grown 3x at peak levels this year, better gains are yet to come, according to Goldman Sachs’ chief technician.

Bitcoin has been on a historic tear in 2017. After ringing in the year at $1,000 on the very first day of January, bitcoin price reached an all-time high of $3,000 in mid-June. The remarkable rise amid an overall boom period for cryptocurrencies has seen skepticism from some observers who have pointed to inflated values amid accusations of a bubble. Others are looking at more bullish gains.

In a note sent to clients, Sheba Jafari – Goldman Sachs’ head of technical strategy predicts bitcoin to climb higher, ultimately getting near $4,000.

Jafari, who was persuaded into covering bitcoin by Goldman Sachs’ clients recently, sees the current corrective course to tread longer with upward gains to be the ultimate outcome.

Jafari, who is also the vice president of the investment bank’s securities division, sees bitcoin “still in a corrective 4th wave”, as reported by the Business Insider.

That fourth wave “shouldn’t go much further (lower) than $1,857”, the head analyst told her Wall Street clients.

The upcoming 5th wave is to take a bullish turn, according to her analysis.

She wrote:

From current levels, this has been a minimum target that goes out to $3,212. There’s potential to extend as far as $3,915. It just might take time to get there.

It was “due to popular demand” that Jafari began covering bitcoin a month ago. The first analysis, in comparison, was a more bearish take based on price trends at the time.

As things stand, bitcoin is up 5.28% on the day, according to data from CoinmarketCap. The cryptocurrency is trading at $2573 on a global average and struck a high of $2,601 on Monday, a 7-day high following the downward turn a week ago.

On Bitstamp, bitcoin hit a high of $2,595 on Monday.

David Ogden
Entrepreneur

David Ogden

Author:Samburaj Das

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Traders Plan for Correction as Crypto Market Falls Below $100 Billion

The total value of all publicly traded cryptocurrencies may be at an all-time high, but trader confidence isn't keeping pace.

After rising more than 1,500% from just over $7bn on 1st January, the market is beginning to show signs that its rapid ascent in 2017 may be slowing.

According data from CoinMarketCap, the cryptocurrency asset class fell from a high of $117bn yesterday to just under $100bn today, a period in which more than 80 of the top 100 cryptocurrencies have seen double-digit declines.

While this decline may just be a speed bump in the world of cryptocurrencies, some analysts report it is sufficient enough that they are beginning to reassess their positions in light of recent activity.

Hedging for a crash?

Indeed, several traders spoke with CoinDesk about the strategies they're currently using to hedge against a potential decline in cryptocurrency prices, with some indicating they're employing simple strategies by reducing their holdings.

For example, Charlie Shrem, a bitcoin entrepreneur and over-the-counter (OTC) trader, is in this camp. He reported he's been buying more bitcoin lately, with "less than 10%" of his portfolio in alternative assets.

Marius Rupsys, a cryptocurrency trader and co-founder of fintech startup InvoicePool, took a bolder approach, telling CoinDesk he liquidated his entire cryptocurrency portfolio and has started shorting bitcoin, actively betting its price will go down.

Rupsys predicted:

"There should be larger correction at some point which will cause altcoins to fall and bitcoin to fall at the same time."

While several traders identified portfolio management and active trading strategies as ways to hedge against a cryptocurrency price crash, cryptocurrency trader Kong Gao offered a different solution.

One way to hedge against this decline, he said, is to begin mining on alternative asset protocols, and simply hold the coins they receive instead of selling them.

Irrational exuberance

Elsewhere, Rupsys spoke to how he believes the increasing price has been largely caused by highly optimistic newcomers, a prospect that leads him to believe the bull run could soon fade.

"Many of these new traders are retail traders that have little knowledge of crypto-assets or trading in general," Rupsys told CoinDesk.

He added, many people have contacted him interested in getting rich quick.

Tim Enneking, managing director of cryptocurrency hedger fund, Crypto Asset Management, also spoke to the exuberance in the market.

While cryptocurrencies have been experiencing sharp gains, they will reverse direction at some point, Enneking predicted. Crypto Asset Management has set up stop loss orders to liquidate positions in certain cryptocurrencies should these digital assets suffer an "abrupt crash", he said.

And according to Charles Hayter, co-founder and CEO of cryptocurrency exchange CryptoCompare, a crash is likely. The attention alternative asset protocols have gained lately have highlighted some of this overconfidence, he said.

While there may be no clear signs yet, Hayter is still putting his money where his mouth is, noting CryptoCompare is going so far as to reallocate its active positions in the market.

David Ogden
Entrepreneur

Author: Charles Bovaird

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Getting High on Cryptocurrencies

There are now four times as many cryptocurrencies in circulation as fiat currencies.That's amazing. And encouraging.According to the Swiss Association for Standardization, which maintains the International Standards Organization database, there are 177 national currencies currently in use. That list generously includes four precious-metals and four bond-market units (codes XBA to XBD, for the curious).NUMBER OF DIGITAL CURRENCIES753The CoinMarketCap website lists 753 cryptocurrencies, all the way from Bitcoin and Ethereum down to StrongHands and Paccoin (current value: $0.00000014).With a retired basketball star promoting one such incarnation — tied to marijuana — on a recent trip to a repressive Asian nation lying to the north of South Korea, I'm tempted to call Peak Crypto.But let's not kid ourselves: The madness is far from over. Bitcoin skeptics have been eating their words ever since the leading digital currency reached $1,000. January seems like such a long time ago now that Bitcoin is trading above $2,700.

Bruised Bears

Although Bitcoin has climbed 300 percent in the past 12 months, giving its "coins" in circulation a value of $45 billion, Satoshi Nakamoto's brainchild is actually declining in relative importance. From more than 95 percent in late 2013, Bitcoin now accounts for 39 percent of the value of all cryptocurrency in circulation. Ethereum has caught up fast, from 3.9 percent at the start of the year to 31 percent of the total now, according to CoinMarketCap. Ripple is in third place at around 8.8 percent after briefly overtaking Ethereum last month.

VIRTUAL VALUE

The other 20 percent of cryptocurrency value is unevenly distributed among the 750 wannabes along a very long tail. It's possible some will rise to a level of legitimacy that will make them viable in the long term. Many are betting not on mass uptake but on niche acceptance — one pitches itself as the payments platform for online games; another limits the amount of coins to the number of kilometers between Earth and its moon; one seeks to be the official currency of a fictitious nation.

Market Force

Bitcoin remains the world's biggest cryptocurrency, but its dominance has waned

Yet Bitcoin itself remains so niche that the WannaCry hackers reaped a minuscule harvest after infecting more than 200,000 computers, because they insisted on being paid in the cryptocurrency.Just because the boom is ridiculous doesn't mean it lacks momentum — it just tells you that consolidation also is inevitable. Not in the traditional M&A sense, but in the way that messenger apps like AIM, ICQ, Yahoo and MSN quietly gave way to WhatsApp and WeChat, which then led to the ubiquity of instant-messaging technology.Morgan Stanley posited last week that government acceptance will be key to Bitcoin's continued rise, with the flipside being some kind of regulation of the currency. That's probably right, and if proponents of cryptocurrencies think they'll achieve widespread uptake without a nod from the authorities, they're probably smoking something.

David Ogden
Entrepreneur

Author : Tim Culpan

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Bitcoin, Ethereum and a New Direction for Cryptocurrency Investment

This week CoinDesk released its State of Blockchain Q1 2017 study, which details recent trends, statistics and sentiment around cryptocurrencies and blockchain technology.

While the entire report is worth a read (there are some surprises), two slides especially caught my attention. When put together and compared with current data, they point to what could be a fundamental shift in market dynamics.

Now, why would investors give up bitcoin to buy into ethereum? Either they believe that bitcoin will soon start heading down – slide 62 shows that almost 45% of respondents are negative on the cryptocurrency – or that it could continue to go up, but that ethereum will increase by even more. Either way, we’re looking at an asset reallocation.

If you take a look at the ether trading volumes today, though, you see a different picture.

The volume of fiat purchases of ether has shot past that of bitcoin to account for approximately 70% of volume (at time of writing). A large part of that growth is due to a jump in interest from South Korea, but US dollar purchases have also increased significantly.

This looks like ‘new money’ is coming into cryptocurrencies and choosing ethereum over other alternatives. Bitcoin’s trading volume is also increasing (and still dwarfs that of ethereum), but not by as much.

What could this mean?

While trading data of a few weeks does not necessarily translate to new market trends, it could hint at a shift in portfolio prominence. While bitcoin has traditionally been the main cryptocurrency holding for both private and institutional portfolios, ether is emerging as a strong contender.

One interesting effect from this will most likely be a change in the conversation. It should move from the 'bitcoin isn't money' diatribe, to one of 'what can ethereum do?'.

Although over 85% of our survey respondents felt that ether could serve as a currency as well as bitcoin could, it has never worn the currency cloak like bitcoin has. Ether has traditionally been positioned more as a ‘digital token’ that can engage with scripts and contracts, and can be used to enable apps across a wide range of sectors.

From an asset allocation and a sentiment perspective, ether’s rise in prominence is encouraging. A shift in focus from threat to innovation would be more constructive for all, and should push development in the cryptocurrency sector even further.

David Ogden
Entrepreneur

Article by Noelle Acheson

Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.

David

Hedge Funds Are Quietly Investing in Bitcoin

Bitcoin’s price has gained over 180 percent this year, while hedge funds have only returned 3.5 percent on average. Most hedge fund managers have stayed away from bitcoin. However, the few that have included it are significantly outperforming their peers.

Average Hedge Funds Return 3.5% This Year

Hedge fundsHedge Funds Are Quietly Investing in Bitcoin are investment funds whose clients are accredited or institutional investors. They are less regulated than mutual funds since they are not subject to strict rules designed to protect investors. Some of them are not even required to register or file public reports with financial regulators.

Investments in hedge funds are only restricted by each fund’s mandate. They can effectively be anything including land, real estate and currencies, as long as they seek to maximize investors’ returns while reducing risks.

The comprehensive overall returns of hedge funds are measured by the hedge fund absolute return index (HFRX), which is representative of all hedge fund strategies. Hedge Fund Research (HFR), which provides data on more than 150 hedge fund indices, is the industry’s leading provider of hedge fund index data. According to HFR, the HFRI Weighted Composite Index only returned 0.46% in May and 3.5% year-to-date. In comparison, the S&P500 total return was 1.16% in May and 9.61% year-to-date.

Bitcoin Helps Hedge Funds’ Bottom Line

HFR’s data reveals that most hedge fund strategies underperformed the market both in May and year-to-date, CNBC reported. The index provider noted that technology and currencies were the only two strategies that performed well in both time periods, adding that:

The FX funds did well because of exposure to digital currencies like bitcoin.

The hedge funds that do invest in bitcoin currently do not have large positions. The best performing hedge fund index in May was the HFRI Macro Currency Index which gained 3.49% in the month and 8.22% year-to-date.

“In addition to contributions from Euro, Swiss Franc, New Zealand Dollar and Korean Won, the Currency Index also had strong contributions from exposure to digital currencies,” according to the HFR report.

Why Don’t More Hedge Funds Invest in Bitcoin?

“Many hedge funds are still very reluctant to dip a toe into the asset class,” CNBC recently reported. One hedge fund veteran, with 16 years of experience, told the news outlet:

To be honest, I just don’t know enough about it.

The reasons hedge funds are reluctant to invest in bitcoin “really boils down to concerns over volatility, security and perception,” Louis Gargour, the founder of asset manager LNG Capital, told the publication.

He listed three concerns. Firstly, “bitcoin’s extreme volatility doesn’t sit well with managers working on a risk-adjusted return basis.” Secondly, fund managers are concerned with the digital currency being hacked or stolen. Lastly, “there’s a perception that bitcoin remains a niche, retail investment that does not yet demonstrate sufficient quality to be seriously considered for many reputable institutions,” he explained.

However, as bitcoin continues to outperform other asset classes, more hedge fund managers may start following their peers and invest in the digital currency. At press time, Bitstamp shows that bitcoin has gained over 180% so far this year and over 70% in May.

By Kevin Helms

David Ogden
Entrepreneur

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Australian Stock Exchange Announces First-Ever Bitcoin Investment

In a first, Melbourne-based Blockchain Global Limited (BGL) has used bitcoin in an AUD$4.35 million investment to acquire a 40% stake in ASX-listed blockchain payments fintech DigitalX.

Details from an announcement today on the Australian Stock Exchange (ASX) reveal DigitalX to receive, in bitcoin, AUD$300,000 in a convertible loan. A further AUD$550,000 will be invested in convertible notes along with AUD$3.8 million in shares.

“DigitalX has received AUD$300,000 by way of a convertible loan in Bitcoin (BTC),” the announcement stated. “The convertible loan is convertible into shares in DigitalX…”

Blockchain Global Limtied (BGL), formerly operating as the Bitcoin Group, began as a bitcoin mining operator before diversifying into a blockchain solutions provider, a corporate incubator and more recently, an ICO specialist. The Bitcoin Group raised AUD$5.9 million and missed out on its target of AUD$20 million following a number of delays to get listed on the ASX itself.

Ultimately, the firm scrapped its efforts to become the world’s first publicly-listed bitcoin miner after the ASX raised liquidity and regulatory concerns.

Perth-based DigitalX, formerly Digital CC, also saw a rebrand in late 2015 and shifted its objectives from mining bitcoin to blockchain software development. As a part of its shift in strategy, DigitalX has now developed AirPocket, a blockchain payments and remittance app that enables payments to 14 countries with a majority of them in Latin America.

“DigitalX welcomes BGL as an investor in the company, and appreciates the confidence it has shown in DigitalX’s growth and understanding within the blockchain ecosystem,” said DigitalX CEO Leigh Travers.

The executive added:

“Having just returned from Consensus, the biggest blockchain conference in the world, the growing support for blockchain, digital currency and decentralized organisations is unquestionable”.

As a part of its investment, BGL is voluntarily escrowing its shareholding in DigitalX for a 12 month period from the date of issuance.

Meanwhile, the ASX is invested in blockchain technology itself, having paid AUD $14.9 million for a 5% equity interest in New York-based blockchain startup Digital Asset Holdings (DAH). Australia’s biggest private stock exchange is currently trialing a DAH-developed blockchain system to replace its existing post-trade processing system.

Author: Samburaj Das

David Ogden
Entrepreneur

David

Russia is looking to regulate bitcoin but still doesn’t see it as a currency

Russia is looking to regulate bitcoin but still doesn't see it as a currency

Russia is looking to regulate bitcoin but still doesn’t see it as a currency

Russia is exploring ways to regulate bitcoin, the country's central bank governor has told CNBC, but sees "doubts" over the benefits of the cryptocurrency and even questions whether it should be considered a virtual currency at all.

In an interview with CNBC, Elvira Nabiullina, governor of the Russian Central Bank, explained that she views bitcoin as a digital asset rather than a currency, and this is the way it should be thought about with regards to regulation.

When asked whether the Russian Central Bank is looking to regulate bitcoin, Nabiullina said that the authority is "analyzing" the possibility and needs to "understand more about this internalization of bitcoin and our regulatory systems." She added that there are "risks" with the cryptocurrency.

"We don't consider that bitcoin can be considered as a virtual currency. It's more digital assets with the regulation of assets," Nabiullina told CNBC in a TV interview.

The central banker did not elaborate on what specific regulation would look like and said she is in no rush to put any policy into place. The governor said that the central bank does have doubts about bitcoin.

"We have some doubts, we don't see some huge benefits from introducing digital assets in our economy," Nabiullina said.

Bitcoin recently hit a record high of $2,791, according to data from industry website CoinDesk, marking around a 180 percent rally year-to-date. There's bullishness in the market with some predicting the price could go as high as $6,000 this year and even $100,000 in a decade.

With surging prices and a market capitalization of around $38 billion, governments are becoming increasingly interested in ways to regulate the digital currency, especially as more retail investors are getting involved in the market.

Japan recently passed a law to legalize payments in bitcoin which helped boost the price, with major trading volumes now coming from the country.

The stance of Nabiullina marks a changed view from Russian authorities who have been trying over the years to ban bitcoin. If Russia somehow regulates bitcoin, this could potentially affect the price, especially if more investors get involved in the asset.

Sean Walsh, a partner at Redwood City Ventures which invests in bitcoin and blockchain companies, said that further regulation could boost the price of the cryptocurrency and get rid of the handful of "bad actors" using it for illegal things.

"I agree with the view that for retail and professional investors greater regulatory structure is very supportive because it adds to the legitimacy of the whole network," Walsh told CNBC in a phone interview.

Taxation plan?

Still, it's unclear where Russia plans to go with bitcoin regulation. The country's Deputy Finance Minister Alexey Moiseev recently said the authorities hope to recognize bitcoin and other cryptocurrencies as a legal financial instrument in 2018 in a bid to tackle money laundering.

"The state needs to know who at every moment of time stands on both sides of the financial chain," Moiseev told Bloomberg in an interview.

"If there's a transaction, the people who facilitate it should understand from whom they bought and to whom they were selling, just like with bank operations."

The Russian Central Bank's Deputy Chairwoman Olga Skorobogatova has also reportedly revealed plans to tax the cryptocurrency.

"(Digital currencies already circulating in Russia will see) certain regulations with regard to taxes, monitoring and reporting, as a digital commodity," Skorobogatova said, according to news agency Interfax.

Blockchain in focus

Bitcoin has traditionally been known to allow users to make payments and money transfers anonymously. So it may seem that any taxation policy from the authorities could be difficult. But Walsh said some developments in the bitcoin community could make this policy feasible.

Firstly, bitcoin transactions have become slower and more expensive. This makes the practice of trying to split up transactions to cover your tracks very difficult. Secondly, several start-ups have emerged that are able to use algorithms to track transactions on the blockchain – the public ledger of bitcoin activity. This could allow authorities to see who owns bitcoin.

While Nabiullina admitted there were still risks with bitcoin, she expressed the Russian Central Bank's interest in blockchain technology. Because of the way blockchain technology can create a tamper-proof ledger of activity, many major banks are looking into how it can be used for tasks such as trading.

"I think it's more important to understand (the) benefits of new technologies … like blockchain which is on the basis of bitcoin," Nabiullina told CNBC.

David Ogden
Entrepreneur

Authors :
Arjun Kharpal Technology Correspondent
Geoff Cutmore Anchor, CNBC

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