James Angel, Professor of Finance at Georgetown University, on recent Bitcoins events

Source: Dukascopy Bank SA
© James Angel
Recent incidents, such as the failure of MtGox, a Tokyo-based exchange that filed for bankruptcy after losing an estimated $650 million worth of customer bitcoins, have brought the currency under a new level of scrutiny by regulators. According to Benjamin Lawsky, superintendent of New York's Department of Financial Services, Mt. Gox collapse is a setback on the one hand, but on the other – it will cause "further improvements in this industry and some more regulatory involvement". Lawsky intends to attract healthy Bitcoin operators and he has floated the idea of a "BitLicense" to regulate operators, and to align any new rules with existing financial regulation. In your opinion, how realistic are Lawsky's ideas and plans on Bitcoin? 
Whenever there are major losses to innocent players in any industry, there is a call for regulation. If Bitcoins were to fulfill the dreams of its proponents, it would become a major part of the payment infrastructure. As such, the public will demand that it be regulated for safety and soundness just as it demands regulation of banks and other payment intermediaries. The movement to regulate Bitcoin is a natural and necessary part of its evolution. 
With any form of regulation, the devil is in the details. Just giving a license is one thing, but the regulators have to have the expertise and the resources to understand and monitor the entities they are regulating. Bitcoin entities have many of the same problems as other financial and tech firms, but they also have different ones as well. 

If Mr. Lawsky's outlook for Bitcoins regulations is implemented, will this be a win or lose situation for crypto-currency users and why?

Proper regulation is a win-win for industry and for consumers in any business. Good regulation makes the product safer and more acceptable, while keeping the bad players from ruining it for everyone. Bad regulation is a lose-lose proposition. The regulation could be so burdensome that nothing gets done. 

After the recent MtGox hacker attack, Bitcoins have lost some of its value. However, it still trades around 640 U.S. dollars. Don't you think that is overvalued given the recent events? What to your mind is the fair price for Bitcoins currently?

My prediction is that Bitcoin will eventually fade into obscurity like Esperanto. Esperanto was an attempt to create a universal language, but it failed to gain critical mass. 
I still do not see any killer apps that will make Bitcoin break out of its niche as a technically cool idea with limited application. What is needed is something that will make businesses AND consumers flock to it. Most of the purported value propositions face stiff competition from other solutions. Store of value like gold? Not with the ever looming threat of techno-risk. No chargeback and lower fees for merchants? This pushes all of the cost and risk onto the consumer. Lower cross-border transaction fees? There is still the "last mile" problem in transforming the crypto-currency into something local people use.
Thus, I am still a bit skeptic. The price will continue to bounce around until people figure out that Bitcoin is not going to replace legacy currencies, at which point it will fade away to a value at which only the hard core cyber-libertarian fringe will hoard it along with their gold coins, nitrogen packed bullets, and supply of stored food as they wait for civilization to collapse. 

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