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Chicago Journal of International Law Volume 14 | Number 1

Article 12

1-6-2013

Regulating Digital Currencies: Bringing Bitcoin within the Reach of the IMF Nicholas A. Plassaras

Recommended Citation Plassaras, Nicholas A. (2013) "Regulating Digital Currencies: Bringing Bitcoin within the Reach of the IMF," Chicago Journal of International Law: Vol. 14: No. 1, Article 12. Available at: http://chicagounbound.uchicago.edu/cjil/vol14/iss1/12

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Regulating Digital Currencies: Bringing Bitcoin within the Reach of the IMF Nicholas A. Plassaras* Abstract This Comment examines thepotentiallydestabiingeffects ofemerging digitalcurrencies on the internationalforeigncurrengy exchange market. Spedficaly, it examines 'Bitcoin, "a decentralized,partially anonymous, and largely unregulated digitalcurreny that has become particularlypopular in the last few years. This Comment argues that the International Monetagy Fund, the institution responsiblefor coordinatingthe stability offoreign exchange rates, is ill-equippedto handle the widespreaduse of digital currencies in theforeign curreng exchange market It highlights the inability of the Fund to intervene in the event of a speculative attack on a curreng by Bitcoin users. This Comment concludes by suggesting two interpretalionsof the Fund's incorporatingdocument, the Articles ofAgreement, that would allow it to intervene in the event of such an attack.

*

The University of Chicago Law School, JD Candidate, 2014. The author would like to thank his father for his constructive criticism and encouragement. The author also thanks Jennifer H. Chemel, Elizabeth White, Sam Boyd and the rest of the CJIL staff for their guidance and support.

ChicagoJournalof InternationalLaw

Table of Contents 379 I. Introduction ............................................................................................... U. The Emergence of Bitcoin as a Digital Currency ....................................... 382 382 A. W hat is Bitcoin? .................................................................................... 384 B. How Does Bitcoin W ork? ...................................................................... 384 1. Bitcoin's basics ................................................................................... 384 2. Bitcoin's security. ............................................................................... 386 3. O btaining Bitcoins ............................................................................. 387 C. The Virtues of Digital Currency ............................................................. 388 1. Superior medium of exchange ............................................................ 389 ...................... of relative worth and measure 2. Superior unit of account 389 3. Superior store of value ....................................................................... D . The Vices of Digital Currency .......................................................... 390 390 1. Uncertainty ......................................................................................... 391 2. Lack of regulation .............................................................................. 391 3. N etwork externalities .......................................................................... 392 E. The Current State of Bitcoin and Beyond .............................................. 393 .... Exchange Currency the Global Fund and Monetary The International 1II. 394 A. The History behind the IM F ................................................................. 395 B. H ow the IMF W orks ............................................................................. 396 ....................................