Bitcoin essay ignacio henriquez

Laws868 – Technology and E-Commerce Law
Convenor: Julian Dight
Ignacio Henríquez A. Student ID: 44165994 1
2nd Assessment– Due date: 27 October 2017
Ignacio Henríquez A.1
Student ID: 44165994
Word count: 3,150/3,500

1 LLB graduated Law School, Universidad Diego Portales (2012); Diploma in Tax Planning and Management, Universidad
de Santiago de Chile (2014); currently reading for an LLM at Macquarie University Law School.

THE FUTURE OF MONEY:
CRYPTOCURRENCIES AND BITCOIN
“The importance of money flows from it being a link
between the present and the future.”
John Maynard Keynes
Introduction
During July 2017, a group of hackers under the name of Mr. Smith stole and launched several episodes
of some HBO shows, including episodes and the scripts for the last season of Game of Thrones. After a few
days, Mr. Smith threatened to release HBO entire episodes and seasons of these shows in addition to confidential
information (such as the contact number, email and address of famous actors/actresses) equivalent to 1.5
Terabytes of data, demanding blackmail payment of USD$7 million. This was not an isolated case of hacking
and blackmailing companies during the last year. In fact, on May and April a malicious software called
WannaCry affected `Britain´s National Health Service, some of Spain´s largest companies including Telefonica,
as well as computers across Russia, the Ukraine and Taiwan, leading to PCs and data being locked up and held
for ransom.´2 People behind this ransomware demanded a lower payment compared to the HBO blackmail,
three hundred to five hundred thousand dollars, but the computers infected and the companies under attack
were hundreds, increasing its number hour after hour. Although both cases were technically different, they had
something in common, the payment that hackers were asking for should be paid in Bitcoin.
Created by Satoshi Nakamoto3 in 2009, Bitcoin is the first and most popular cryptocurrency.4 According
to James J. Angel and Douglas McCabe, `[a] bitcoin is basically a combination of a digital address and a number

2 The Guardian, `What is WannaCry Ransomware and Why is it Attacking Global Computers?´, [ONLINE] available at
https://www.theguardian.com/technology/2017/may/12/nhs-ransomware-cyber-attack-what-is-wanacrypt0r-20,
viewed 15 October 2017.
3 Satoshi Nakamoto is the pseudonym used by the person –or group of persons- that created and published an article were
Bitcoin system is explained. In his paper, Nakamoto indicated that `[a] purely peer-to-peer version of electronic cash would
allow online payments to be sent from one party to another without going through a financial institution.´ The identity of
Nakamoto is still a mistery. Satoshi Nakamoto, `Bitcoin: A Peer-to-Peer Electronic Cah System´, [ONLINE] available at
https://bitcoin.org/bitcoin.pdf, viewed 15 October 2017.
4 There is a difference between Bitcoin (capital letter B) and bitcoins, the first one being the system or service for
transactions, and the latter the actual monetary units. For further information, see Jarice Hanson, The Social Media Revolution:
An Economic Encyclopedia of Friending, Following, Texting and Connecting (ABC-CLIO, 2016).

that is known as a private key, a cryptographic tool that is the only way to unlock the bitcoins belonging to that
address.´5 All this information is stored in a special software known as Bitcoin Wallet, or digital wallet.
One of the main characteristic of Bitcoin is that it was created to run decentralised, which means that
whilst fiat currencies, such as Euros, US Dollars and AUS Dollars, are issued and dispatched by central
monetary authority, bitcoins are issued by a mathematical process known as `mining´. Through this process,
miners will issue a total of 21 million bitcoins for the year 2140, which is the beforehand fixed limit of bitcoins.
Since Bitcoin´s cap is set at 21 million, with no possibility of mining/releasing more units, it would be almost
impossible to inflate the currency, providing some financial certainty similar to gold.6 Moreover, each bitcoin
can be divided in one hundred million parts, the minimum portion (0.00000001 bitcoin) being a “Satoshi”, the
smallest unit of the bitcoin.
In addition, every transaction made by this system can be traced through the `Blockchain´, a public
ledger where all transactions are recorded. The system protects to certain degree the privacy of users, it does
not transfer personal information, but transactions are not entirely anonymous. To reach this goal, every Bitcoin
user has an encrypted entity that gives them pseudonymity, not anonymity.7
However, there is no unanimity whether Bitcoin is effectively a currency. Three are the traditional
features economics requires to constitute a currency: a) in first place must serve as a medium of exchange, b)
in addition, must be used as a unit of account, and c) finally, should allow to store value. It has been indicated
that Bitcoin does not fulfil these properties, since `[i]t is barely accepted as a medium of exchange, it is not used
as a unit of account, and we can hardly believe that, given the great swings in price, anyone can consider Bitcoin

5 James J. Angel and Douglas McCabe, `The Ethics of Payment: Paper, Plastic or Bitcoin´ (2015) 132 Journal of Business
Ethics 603.
6 It has been said that Bitcoin and cryptocurrency were born to provide some certainty to the financial market, i.e.
developed as a `response to central bank failure to manage financial crises, as the one occurred in 2008.´ Aurelio F.
Bariviera et al., `Some Stylized Facts of the Bitcoin Market´ (2017), 484 Physica A: Statistical Mechanics and Its Applications 82.
7 Edward V. Murphy, M. Maureen Murphy and Michael V. Seitzinger, `Bitcoin: Questions, Answers, and Analysis of Legal Issues´,
Congressional Research Service (2015), [ONLINE] available at https://fas.org/sgp/crs/misc/R43339.pdf, viewed 16
October 2017.

as a suitable option to store value.´8 For the purpose of this essay, we will understand Bitcoin as currency and
new payment method.9
In consequence, although it is normally associated with illegal activities, as we will analyse, Bitcoin is
becoming popular in the e-commerce, with over 10,000 venues around the world10 and more than 70 retailers
accepting it as payment in Australia.11
The purpose of this essay is to examine how Bitcoin has earned a position in a brief span of time as a
reliable currency, and to analyse if it should be further regulated in order to protect the Australian market. To
achieve this goal, this essay is divided into three sections. The first section explains what is and how Bitcoin
works. The second section describes the use of Bitcoin in particular cases and states some problems or
challenges that Bitcoin must face. The last section analyses how should be the treatment of Bitcoin at domestic
level and see how this fits in the Australian legislation having the report prepared by the Economic References
Committee by request of the Senate in 2015 as background.
How does Bitcoin work?
To understand how bitcoin works, there are some principles that must be considered. In first place,
Bitcoin is a decentralised system that does not depend on a central entity, such as the Reserve Bank of
Australia;12 one of its principal characteristics being its independence from monetary authorities. It was designed
to work on a peer-to-peer computer network basis, like BitTorrent. In addition, Bitcoin guarantee their users

8 Aurelio F. Bariviera et al., Ibid N 6.
9 According to the Section 9 of the Currency Act 1965 (Cth), `every sale, every bill of exchange or promissory note, every
security for money, and every other contract, agreement, deed, instrument, transaction, dealing, matter or thing relating to
money, or involving the payment of, or a liability to pay, money, that is made, executed, entered into or done, shall, unless
it is made, executed, entered into or done according to the currency of some country other than Australia, be made,
executed, entered into or done according to the currency of Australia provided for by this Act.´ Moreover, Section 8
indicates that `[t]he monetary unit, or unit of currency, of Australia is the dollar.´ Currency Act 1965 (Cth) [ONLINE]
available at http://www6.austlii.edu.au/cgi-bin/viewdb/au/legis/cth/consol_act/ca1965120/, viewed 17 October 2017.
10 Coinmap, [ONLINE] available at https://coinmap.org/#/world/-2.98692739/26.36718750/2, viewed 16 October
2017.
11 Steemit, `List of Businesses Accepting Bitcoin in Australia´, [ONLINE] available at
https://steemit.com/bitcoin/@cryptodog/list-of-businesses-accepting-bitcoin-in-australia, viewed 15 October 2017.
12 The Reserve Bank of Australia is responsible for all aspects of the production and issuance of Australian banknotes.
Reserve Bank of Australia, `Banknotes´, [ONLINE] available at https://www.rba.gov.au/banknotes/, viewed 17 October
2017.

they will not be identified by their names, since no private information is required to make transactions.
However, the system does not provide anonymity to its users as some people believe. Indeed, every user has
an address consisting of an alphanumeric character that must be revealed to receive payments. In other words,
the system use a pseudonymous to identify the user, although using the proper software it is possible to reach
the person behind the Bitcoin account.
Besides, three concepts are crucial to comprehend Bitcoin´s performance, these are: a. mining bitcoins;
b. Blockchain, and c. Bitcoin walllets.
The process to create and issue bitcoins is known as mining, and consists in solving mathematical
problems/tasks by computers. Once a miner solves a problem and release certain units of bitcoins, the process
will be verified for the rest of the network. In case it is confirmed and validated it will be added to the block
and will grant the miner a reward, i.e. the bitcoins extracted.13 The system was created in an autopoietic14 form,
therefore as indicated by The Economist, `[t]he entire network is used to monitor and verify both the creation
of new bitcoins through mining, and the transfer of bitcoins between users.15
Every transaction made using Bitcoin system is recorded in a cloud known as Blockchain.16 To avoid
double spending of bitcoins, the system is organised in a way that
`transactions are grouped into blocks, which serve to timestamp the transaction they contain and vouch for
their validity. Blocks are themselves formed into a chain, with each block referencing to the previous one
(and thus further reinforcing the validity of all previous transactions). This process yields a block chain,
which is then publicly available to every user within the system.´17

13 When the system was created, the reward were 50 bitcoins. This amount is halved every 4 years, in consequence, for the
year 2012 this amount was 25 bitcoins, and for years 2016 to 2020 will be 12,5 bitcoins.
14 Autopoieses is `the property of a living system (such as a bacterial cell or a multicellular organism) that allows it to
maintain and renew itself by regulating its composition and conserving its boundaries.´ Merriam-Webster Dictionary,
Autopoieses, [ONLINE] available at https://www.merriam-webster.com/dictionary/autopoiesis, viewed 17 October 2017.
15 The Economist, `The Economis Explains: How does Bitcoin Work?´, [ONLINE] available at
http://www.economist.com/bitcoinexplained, viewed 17 October 2017.
16 According to Parsons, `the blockchain is a distributed public ledger, and a permanent algorithmic record of all bitcoin
transactions…it is therefore possible to determine how much value belonged to each address at any time.´ Louise Parsons,
`Bitcoin: Consumer Protection and Regulatory Challenges´ (2016), 27 Journal of Banking and Finance Law and Practice 184, p.
188.
17 Sarah Meiklejohn et al., `A Fistful of Bitcoins: Characterizing Payments Among Men with No Names´, University of California,
San Diego, [ONLINE] available at http://www0.cs.ucl.ac.uk/staff/S.Meiklejohn/files/imc13.pdf, viewed 17 October
2017.

The Blockchain is linked to the principle of pseudonymity discussed in the precedent paragraphs since
transactions can be checked in real time, although the data does not comprise real name or personal information
of the account holder, instead, a pseudonym of numbers and letters is shown to the public.18
To transact on Bitcoin system, users must have a Bitcoin wallet. This consists on a `[s]oftware that holds
all your Bitcoin addresses and secret keys. Use it to send, receive and store your bitcoins.´19
Use of Bitcoin in particular cases and challenges
Bitcoin is called to become the payment method par excellence in electronic-commerce or e-commerce,
understood as `commercial transactions enabled through electronic technologies, particularly computers and
other communication devices.´20 Since it was released, the usage of Bitcoin has expanded its borders and is now
a common way of payment in countries like Japan, where over 4,200 locations accept it to transact different
products in the market.21 In Australia Bitcoin is not as popular as in Japan, still you can use it in places such as
Subway, which is running over 1,400 stores in Australia,22 or to simply buy a coffee in The Little Mule in
Melbourne.
Furthermore, Bitcoin represents a solution for some countries that are experiencing problems with their
fiat currencies. Venezuela, for instance, has experienced an inflation rate that reached 1600%, the highest
inflation rate in the world. 23 To fight this situation, many stores are accepting Bitcoin as payment method.
Considering its decentralisation, the Venezuelan Government cannot “print” more bitcoins, providing a
solution for the volatility of the Venezuelan Bolívar. In addition, the number of Venezuelan citizens mining
bitcoins raised exponentially in the last years.24 This strategy is not new, similarly in the past complicated

18 Transactions can be reviewed in real time in the following website: https://blockchain.info/.
19 Andreas M. Antonopoulos, `Mastering Bitcoin: Unlocking Digital Cryptocurrencies´ (O´Reilly, 2014), p. xxi.
20 Samantha Traves, `Commercial Law´ (3rd Edition, LexisNexis 2014), p. 447.
21 Business Insider, `Bitcoin Acceptance Growing in Japan´, [ONLINE] available at http://www.businessinsider.com/bitcoin-
acceptance-growing-in-japan-2017-4/?r=AU&IR=T, viewed 7 November 2017.
22 Bitcoin Australia, `List of Retailers Who Accept Bitcoin in Australia´, [ONLINE] available at https://bitcoinaustralia.net/list-
of-retailers-who-accept-bitcoin-in-australia, viewed 7 November 2017.
23 Kevin Rands, `Why Venezuela´s Currency Crisis is a Case Study for Bitcoin´, Forbes, [ONLINE] available at
https://www.forbes.com/sites/realspin/2017/02/03/why-venezuelas-currency-crisis-is-a-case-study-for-
bitcoin/#69c8273e19b2, viewed 20 October 2017.
24 Rene Chun, `Big in Venezuela: Bitcoin Mining´, The Atlantic, [ONLINE] available at
https://www.theatlantic.com/magazine/archive/2017/09/big-in-venezuela/534177/, viewed 20 October 2017.

financial issues were solved by swapping the national currency of a nation for the US Dollar. This was the path
adopted by countries such as El Salvador, Panamá and Ecuador, where the inflation reach a sixty percent rate
and the currency `lost two-thirds of its value.´25
Nevertheless, Bitcoin has a few challenges to confront. In first place, some countries –such as Bolivia,
Nepal and Bangladesh- banned cryptocurrencies since they believe it may create financial chaos. China was the
last country adopting measures against Bitcoin, by shutting down several cryptocurrency exchanges venues.26
In addition, part of the society links Bitcoin to illegal activities such as selling drugs, guns, child
pornography, among others, Silk Road being the most popular case. Silk Road was a website accessible just by
the Dark Net or Deep Web,27 administered by a person under the pseudonym of “Dread Pirate Roberts” that
generated USD$1.2 Billion (its equivalent in Bitcoin to 2013) as a profit for the sale of drugs, hacking services,
among other transactions.28 Since Bitcoin runs decentralised, and nobody can provide the identity of the
manager of the website, it was difficult for the Federal Bureau of Investigation (FBI) to find the person behind
Dread Pirate Roberts; this was possible just because of the mistakes of Ross Ulbricht, the person behind the
mask, who was condemned for `selling narcotics, money laundering and ongoing criminal enterprise´29 and
sentenced to life in prison.30
A third challenge relates to the possible hacking attacks Bitcoin exchange companies may suffer. The
role of an exchange platform is to

25 Carlos A. Dejuana, `Ecuador Accepts Dollar as its New Currency´, [ONLINE] available at
http://abcnews.go.com/International/story?id=82666&page=1, viewed 11 November 2017.
26 Sara Hsu, `China´s Cryptocurrency Crackdown: Is Bitcoin a Threat?´, Forbes, [ONLINE] available ar
https://www.forbes.com/sites/sarahsu/2017/09/15/chinas-cryptocurrency-crackdown-is-bitcoin-a-
threat/#4eb39a9d6667, viewed 20 October 2017.
27 The Darknet has been described as the underground internet where several clandestine activities are carried on, `[f]rom
small file sharing networks to elite and exclusive cyber clubs, to databases unreachable by cyber robots, to venues for
cybercrime and internet terrorism, the darknet evokes increasingly nebulous and threatening activities.´ Jessica Wood, `The
Darknet: A Digital Copyright Revolution´, (2010) XVI Richmond Journal of Law and Technology 4.
28 Jonathan Lane, `Bitcoin, Solk Road, and the Need for a New Approach to Virtual Currency Regulation´, 8 Charleston
Law Review, Summer 2014, 511.
29 Sam Thielman, `Silk Road Operator Ross Ulbricht Sentenced to Life in Prison´, The Guardian [ONLINE] available at
https://www.theguardian.com/technology/2015/may/29/silk-road-ross-ulbricht-sentenced, viewed 8 November 2017.
30 For the entire history of the Silk Road case, see Eileen Ormsby, `Silk Road´ (Macmillan, 2014).

[p]rovide a market for the exchange of bitcoins for national currencies (or other digital currencies); these
intermediaries are the main entry and exit points for the Bitcoin system. Exchanges operate order books,
matching buyers and sellers of bitcoins and the price (in national currencies or other digital currencies) at
which they are willing to trade.31
Regarding this issue, Mt. Gox –biggest exchange platform at the time- suffered two attacks; the last one
in 2014, where 850,000 bitcoins were stolen, a lost equivalent to USD$46 million. Consequently, Mt. Gox
declared itself in bankruptcy and hundreds of investors were deprived of their money. This episode prompted
Japan´s government to regulate Bitcoin, to avoid uncertainties and grey areas.32
Recommended treatment of Bitcoin in national laws
Having analysed what Bitcoin is, how it works and its uses, the next step consists in determine why it is
important to regulate cryptocurrencies by law.
It is generally accepted that crime and cyber-crime are always one step ahead of legislation. In this sense,
it is not surprising that although Bitcoin was launched eight years ago, and it has been used to commit several
offences,33 there are no regulations regarding Bitcoin in most of the countries. However, since 2014 the
Parliament of Australia is working in the reform of Anti-Money Laundering and Counter-Terrorism Financing
Act 2006 (AML-CTF) to punish crimes committed using cryptocurrencies.34 In this sense, the Attorney-
General´s Department started by analysing the emergence of Bitcoin and how this could impact the AML-CTF.
One of the conclusions was that although the AML-CTF was recently adopted (in 2006), it does not cover

31 Reserve Bank of Australia, `Submission to the Inquiry into Digital Currency´, [ONLINE] available at
https://www.rba.gov.au/publications/submissions/financial-sector/pdf/inquiry-digital-currency-2014-11.pdf, viewed 10
November 2017.
32 Samuel Gibs, `Head of Mt. Gox bitcoin Exchange on Trial for Embezzlement and Loss of Millions´, The Guardian
[ONLINE] available at https://www.theguardian.com/technology/2017/jul/11/gox-bitcoin-exchange-mark-karpeles-
on-trial-japan-embezzlement-loss-of-millions, viewed 8 November 2017.
33 In his report “Organised Crime in Australia 2017”, the Australian Criminal Intelligence Commission (ACIC) indicated that
`[v]irtual currencies, such as Bitcoin, are increasingly being used by serious and organised crime groups´, [ONLINE]
available at https://www.acic.gov.au/sites/g/files/net1491/f/2017/08/oca_2017_230817_1830.pdf, viewed 10
November 2017.
34 David Chau, `Bitcoin One Step Closer to Being Regulated in Australia Under New Anti-money Laundering Laws´, ABC News,
[ONLINE] available at http://www.abc.net.au/news/2017-10-23/bitcoin-one-step-closer-to-being-regulated-in-
australia/9058582, viewed 8 November 2017.

Bitcoin because this currency it is not backed in physical assets, such as gold and bullion, but in mathematical
formulas.
The recommendation made by the Senate Economics References Committee was to apply and
incorporate Bitcoin and cryptocurrencies to the Anti-Money Laundering and Counter-Terrorism Financing Act
2006.35 To fulfil this goal, the measures suggested comprises: a. exchange platform will be registered and under
inspection of the Australian Transaction Reports and Analysis Centre (AUSTRAC); b. in case a person is not
registered, would not provide services related to cryptocurrencies, since it will be considered an offence; c.
registered person should implement and publish Anti-Money Laundering and Counter-Terrorism Financing
programmes; d. as part of the duties, registered persons would have to keep proper books and records, among
others.36
Moreover, Bitcoin should be regulated to cover its financial impact. As was have indicated through this
essay, Bitcoin works decentralised, setting aside any financial institutions like banks. The high value bitcoins
have reached has led people to invest in Bitcoin rather than using the formal bank instruments. The problem
is that whilst the banks are strictly regulated by several laws, such as the Banking Act 1959, Bitcoin appears as
deregulated and not secure. As stated by Guy Halford-Thompson, founder of QuickBitcoin an exchange
platform, `Most of the dangers are because the protection that investors would normally enjoy on a stock
market are not present. If you own bitcoin, you need to make sure you know how to buy, sell and store it
properly or you risk losing your entire investment.´37
Finally, Bitcoin must be regulated to anticipate tax issues. The first approach made by the Australian
Taxation Office (ATO) was to indicate that deciding whether Bitcoin is money or not is beyond its faculties
and this decision must be adopted by the government, by the Reserve Bank of Australia specifically.38 In this

35 The Senate Economics References Committee, `Digital Currency-Game Changer or Bit Player´, [ONLINE] available at
www.aph.gov.au/senate_economics, viewed 10 November 2017.
36 David Chau, Ibid N 34.
37 Shayne Hickey, `Will Bitcoin Ever be a Safe Investment or Always a Gamble?´ [ONLINE] available at
https://www.theguardian.com/money/2017/oct/01/will-bitcoin-ever-be-safe-investment-gamble, viewed 11 November
2017.
38 The Senate Economics References Committee, Ibid N 35.

scenario, concerns regarding the Goods and Services Tax (GST) raised in the cryptocurrency community.
Whilst the RBA does not declare bitcoins as a currency, the only treatment the ATO can give them is like a
commodity, which means that transactions will be treated as barter transactions (the goods and services are
exchanged without the use of a monetary medium). The associated problem to barter transactions is that the
GST is charged twice, when you buy bitcoins you pay GST and when you exchange them for goods or services
you pay it again.39 This inconvenient was covered by The Senate Economics References Committee, who
recommended to modify the definition of money in the Goods and Service Tax Act 1999 in order to treat
cryptocurrencies as money.40
In consequence, the problem indicated in the previous paragraph was reinterpreted by the Australian
Government, who decided to `align the GST treatment of digital currency (such as Bitcoin) with money.´41 To
do this, the purchase of cryptocurrencies is exempt of GST from July 2017, following the example of United
Kingdom´s VAT. This will confer simplicity and neutrality to the taxation system.
Regarding other aspects of taxation, the regulation of Australia seems to be clear. If you mine some
bitcoins and then sell them, the profit you obtain will be part of your assessable income. Those bitcoins stored
in your digital wallet are deemed trading stock until you dispose of them. The expenses you incurred to carry
the activity, e.g. the cost of electricity and internet or a computer you acquired for the exclusive purpose of
mining, are deductible from your assessable income. Additionally, in case you are receiving bitcoins as
remuneration, that part of your salary will be susceptible of the Fringe Benefits Tax, which is `calculated on the
taxable value of the fringe benefits provided.´42 Lastly, if you acquire some bitcoins for investment (not as part

39 Will Ockenden, `Bitcoin: Australia´s Tax Office Announces It Will Not Treat Popular Digital Currencies as Money´ [ONLINE]
available at http://www.abc.net.au/news/2014-08-20/bitcoin-will-not-be-taxed-as-money-ato-says/5683974, viewed 11
November 2017.
40 The Senate Economics References Committee, Ibid N 35.
41 Australian Government – Australian Taxation Office, `GST – Removing the Double Taxation of Digital Currency´, [ONLINE]
available at https://www.ato.gov.au/General/New-legislation/In-detail/Indirect-taxes/GST/GST---removing-the-
double-taxation-of-digital-currency/, viewed 11 November 2017; The reform is part of the measures adopted by the
Australian Government and contained in the Treasury Laws Amendment (2017 Measures No. 6) Act 2017, [ONLINE] available
at https://www.legislation.gov.au/Details/C2017A00118, viewed 11 November 2017.
42 Australian Government, `Fringe Benefits Tax (FBT)´, Business [ONLINE] available at
https://www.business.gov.au/info/run/tax/fringe-benefits-tax, viewed 11 November 2017.

of your business) and decide to sell them, this will not be part of income tax, but capital gains tax (CGT) may
apply.43
Conclusion
In 1930, between World War I and World War II, John Maynard Keynes –a British economist- proposed
a `supranational central bank (SCB) that would issue and manage an international reserve currency in
accordance with International Tabular Standard rules for the limited purpose of stability of money values and
stable exchange rates.´44 This proposition did not prosper and the US Dollar became the world reserve currency.
Seven decades later, the United Nations raised the concern that a system depending on a national currency is
condemned to depend on the monetary policies adopted by that country.45 Consequently, the UN suggested
the creation of a new global currency that would provide stability in eventual financial crisis. It is predictable
that this recommendation will not be successful since it implies to get the approval of most of the countries
representing international trade and, in addition, countries such as the United States of America, China or
Russia will always want to impose their political power by controlling the world reserve currency. Nevertheless,
Internet is changing everything, including the monetary system. In this context, Bitcoin appears as a platform
that will revolutionise the financial framework from the macro economy to every-day transactions.
To understand how Bitcoin works there are a few essential concepts to consider. In first place the idea
of mining, which refers to the process of acquiring bitcoins from the system by solving some mathematical
problems. Then, the block chain which is the public record of every bitcoin released. The main function of the
block chain is to avoid double spend of the currency. Finally, these bitcoins are stored in the digital wallet.
Moreover, the principles behind Bitcoin, i.e. the decentralisation and pseudonymity, represent a value
and a challenge at the same time. A value since governments cannot manipulate this currency as they wish. A
challenge because the offences and crimes committed using Bitcoin degrade the confidence/trust of people in

43 Australian Government- Australian Taxation Office, `Tax Treatment of Crypto-Currencies in Australia - Specifically
Bitcoin´ [ONLINE] available at https://www.ato.gov.au/General/Gen/Tax-treatment-of-crypto-currencies-in-Australia-
--specifically-bitcoin/, viewed 11 November 2017.
44 Leanne J. Ussher et al., `Keynes and the International Monetary System: Time for a Tabular Standard?´, The European
Journal of the History of Economic Thought, 1 September 2017, p. 1-34.
45 United Nations Conference on Trade and Development (UNCTAD), `Trade and Development Report 2009´, [ONLINE]
available at http://unctad.org/en/Docs/tdr2009_en.pdf, viewed 10 November 2017.

the system. Anyway, the fact that Bitcoin is used in illegal activities `does not make it inherently illegal. Rather,
as with offshore bank accounts and other potentially nefarious financial arrangements, it is how Bitcoin is used
that may create legal risks.46
There are some questions that must be solved in the future. For instance, considering that there is no
central organism behind Bitcoin, what happen when a person dies without transferring its bitcoins funds?
Should inheritance laws apply? Besides, a big portion of bitcoins were originated by illegal business and are
almost impossible to confiscate, what should be the treatment for this wealth?
In conclusion, despite those sceptics who doubt of Bitcoin as a stable store of value,47 Bitcoin is a reality
that governments should recognise and regulate. Denying its existence by ignoring or banning its use is
counterproductive. Is in this understanding that, from my point of view, 3 are the most important issues a
national policy should include: Anti-Money Laundering and Counter-Terrorism Financing laws; Financial
perspectives and tax issues. With these topics covered, Bitcoin is probably the money of the future and can
represent a good instrument for both national and international economies.
Bibliography.
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Antonopoulos, Andreas M., `Mastering Bitcoin: Unlocking Digital Cryptocurrencies´ (O´Reilly, 2014)
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Narayaran, Arvind, et al. `Bitcoin and Cryptocurrencies Technologies´, (Princeton University Press, 2016)
Ormsby Eileen, `Silk Road´ (Macmillan, 2014)
Traves, Samantha, `Commercial Law´ (3rd Edition, LexisNexis 2014)
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