Government agencies are increasingly concerned about bitcoin because it can be used anonymously for money laundering. In the US, regulators that monitor bitcoin include the Financial Crimes Enforcement Network (FinCEN), the Commodity Futures Trading Commission (CFTC), and the Securities and Exchange Commission (SEC). Bitcoin mining involves computers competing to validate transactions by producing a unique code called a hash based on transaction data and being rewarded with new bitcoins for successful hashes.

1. BITCOIN IS LEGAL IN THE WHOLE WORLD

2. What are the concerns
about bitcoin?
Government agencies are
increasingly worried about
the implications of bitcoin, as
it has the ability to be used
anonymously, and is
therefore a potential
instrument for money
laundering. In particular, law
enforcers seem to be
concerned about the
decentralized nature of the
currency.

3. Who regulates it?
Regulators will vary on a per-country
basis, but you can expect to see national
financial regulators interested in bitcoin
and other virtual currencies, potentially
along with regional regulators at a sub-
country level.
F i n C E N :-In the US, the Financial Crimes
Enforcement Network (FinCEN), which is
an agency within the US Treasury
Department, took the initiative. It
published guidelines about the use of
virtual currencies.
C F TC :- The US Commodity Futures
Trading Commission (CTFC), which looks
after financial derivatives, hasn’t
announced regulation yet, but has made
it clear that it could if it wanted to.

4. SEC:-The US Securities and Exchange
Commission (SEC) hasn’t issued solid
regulations on virtual currencies, but its
Office of Investor Education and
Advocacy published an investor alert to
warn people about fraudulent
investment schemes involving bitcoin.
Legislative branch:-he SEC case has
forced the legislative branch of
government to consider bitcoin’s legal
status. Shavers had claimed that he
could not be prosecuted for securities
fraud, as bitcoin wasn’t money.
However, Judge Amos Mazzant issued a
memorandum arguing that bitcoin can
be used as money.

5. How does mining take
place?
Making a hash of it
This general ledger is a long list
of blocks, known as the
'blockchain'. It can be used to
explore any transaction made
between any bitcoin
addresses, at any point on the
network. Whenever a new
block of transactions is
created, it is added to the
blockchain, creating an
increasingly lengthy list of all
the transactions that ever took
place on the bitcoin network. A
constantly updated copy of the
block is given to everyone who
participates, so that they know
what is going on.

6. Competing for coins
So, that’s how miners ‘seal off’ a
block. They all compete with each
other to do this, using software
written specifically to mine blocks.
Every time someone successfully
creates a hash, they get a reward of
25 bitcoins, the blockchain is
updated, and everyone on the
network hears about it. That’s the
incentive to keep mining, and keep
the transactions working.
The problem is that it’s very easy to
produce a hash from a collection of
data. Computers are really good at
this.

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