Since the collapse of Mt. Gox and the numerous thefts that have taken place at various bitcoin exchange platforms, there have been many calls from cryptocurrency insiders and financial experts to install consumer protections so that investors and bitcoiners are not subjected to fraud and theft. Without such measures, the bitcoin market could undergo a downturn.
One of the latest industry professionals to call for such steps is Peter Smith, COO of Blockchain.info, who urged bitcoin startups to improve their products’ safety otherwise they could face the legal and regulatory scrutiny of government agencies at the federal and state levels.
In addition to enhancing the safety of products and services, the industry needs to a better job of educating consumers. An important teaching method that should be utilized is making consumers aware that they should only maintain small amounts of digital currency units in their online wallets.
When the world’s largest bitcoin exchange platform went bankrupt, hundreds of millions of dollars belonging to investors were stolen or lost. This suggested that consumers were content with keeping large sums of bitcoin holdings in their digital wallets and on exchange outlets.
Although he supports consumer protection initiatives, Smith believes the industry needs to begin regulating itself rather than being forced to by the arms of Washington.
“As an industry we need to be much more committed to consumer protection than we already are,” Smith said in an interview during TechCrunch Disrupt in New York. “I’d like to see the Bitcoin Foundation [a nonprofit trade organization] take a more active role on this front. I’d like to see them take a much more active role on consumer protection and self-regulation.”
If the cryptocurrency market refuses to adopt changes then it could disrupt growth, development and the entrance of new businesses because the industry would be hit with an enormous sum of regulations that could prove to be more damaging than helpful, especially in terms of dollars.
“It means that we spend a burdensome amount of our money on legal fees,” Smith noted. “And so this uncertainty has a very real cost.”
Smith isn’t the first industry executive to deliver these remarks. Gavin Andresen, chief scientist at the Bitcoin Foundation and one of the primary developers, told an audience at the Council on Foreign Relations (CFR) on Wednesday the government could assist bitcoins and consumers by passing consumer protection legislation.
“For me personally, I think things like consumer protection make sense,” said Andresen. “You should have some idea of who you’re interacting with if you’re trusting them with money or whatever. So you know, things like that make a lot of sense.”
In the past month, the price of bitcoin has surged dramatically from as low as $400 to as high as $670. At the time of this writing, the peer-to-peer decentralized digital currency is trading at just over $660.
