Bitcoin Industry Must Be More Committed to Consumer Protection

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Start-ups in the bitcoin sector need to get better at fortifying their products or face regulatory and legal challenges, says one executive who workings in the bitcoin industry.

“As an industry we need to be much more committed to consumer protection than we already are,” said Blockchain[.info] COO Peter Smith in an interview that took place during TechCrunch Disrupt in New York City.

According to Smith, whose employer is the largest bitcoin-related website in the world, bitcoin businesses need to educate consumers about different types of services offered in this industry, namely online wallets and exchanges.

Specifically, consumers need to be aware that they should only keep small amounts of digital currency in online services, a point made all too clear earlier this year in February when the world’s once-largest and oldest bitcoin exchanges collapsed. The disaster saw the loss of over 700,000 bitcoins worth hundreds of millions belonging to investors — investors who trusted the exchange with large volumes of money.

This failure has led many to call on government to issue appropriate regulation to make sure such an occurrence never takes place again, but Smith says that the industry should be regulating itself.

“I’d like to see the Bitcoin Foundation [a nonprofit trade organization] take a more active role on this front,” he was quoted as saying. “I’d like to see them take a much more active role on consumer protection and self-regulation.”

For if the industry doesn’t take charge, it could have devastating impact on new businesses entering the field, bombarded with regulatory uncertainty.

“It means that we spend a burdensome amount of our money on legal fees,” says Smith, referring to the cost of complying with government regulation. “And so this uncertainty has a very real cost.”

[textmarker color=”C24000″]Source[/textmarker] AlleyWatch