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of which bitcoin is the most widely known. The authors used the case
study approach to analyze both the promise and the difficulties associ-
ated with the increased use and acceptance of virtual currencies such as
bitcoin. The widespread use of virtual currencies, if it does materialize,
will have implications for public administration, laws and regulations,
business, and economic policy. In public administration, allowing the
proliferation of bitcoin as “currency” will challenge the existing prem-
ises that surround the sovereignty of the state with respect to what con-
stitutes “legal tender.” Bitcoin also has the potential to redefine not only
business transactions but also transactions between citizens and gov-
ernment agencies. Likewise, it has the potential to change international
transactions among countries and businesses and all types of cross-
border developments. The authors will trace and explain the workings
of bitcoin and the development of its national and international reach.
Issues regarding its constitutionality and economic viability as well as
its public policy implications will be addressed.
Keywords:
virtual currencies, bitcoin, international exchanges, hashrate,
mining
10.1 introduction
Major newspapers such as
he
Wall Street Journal
and magazines such as
Newsweek
and the
Economist
have carried numerous items on the growing use and acceptabil-
ity of digital currencies, particularly one known as bitcoin, in electronic payment
transactions. One reason for its increasing popularity is the freedom it has from
government and central bank intervention and regulation. This raises the question
of whether the existence of such virtual, unregulated “currencies” poses a challenge
to the premises surrounding the sovereignty of the state in declaring what consti-
tutes “legal tender.” Should such unregulated virtual currencies be allowed to pro-
liferate for domestic and international transactions, the methods by which citizens
of any country conduct transactions with businesses and government agencies are
bound to change significantly.
This chapter takes a look at the role of virtual currencies, of which bitcoin hap-
pens to be the most well-known example. The chapter will trace bitcoin's national
and international reach and raise issues with regard to constitutionality, economic
viability, and feasibility as well as its political relations/public policy implications.
Both the possible positive and negative effects of the widespread use of bitcoins
will be examined. It is hoped that information provided by the authors will allow
for the critical evaluation of the role of bitcoin and other virtual currencies in both
domestic and international matters.
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