The Case for the Regulation of Bitcoin Mining as a Security

37 Pages Posted: 5 Feb 2015

See all articles by Jason Gordon

Jason Gordon

Georgia Gwinnett College Business School

Jennifer Chapman

Georgia Gwinnett College

Benjamin W. Akins

Georgia Gwinnett College, School of Business

Date Written: January 30, 2015

Abstract

Bitcoin is rapidly increasing in use throughout the world. Instrumental to the Bitcoin system, the process for introducing new bitcoin into the system is known as “mining.” Mining involves the use of powerful computer systems and complex, computational algorithms to verify or validate prior bitcoin transactions. The reward for successfully undertaking this process is the creation and award of new bitcoin to the miner. Bitcoin mining has become a tedious and difficult process. The race to verify transactions, and thereby earn bitcoin, necessitates more sophisticated processes for verification and greater computational power.

Many bitcoin miners band together in groups called “pools” to create a powerful mining platform. Some miners invest time and effort to build or maintain a suitable computer system, while others passively provide money or other resources toward the creation of the mining system. Many such mining pools have grown to allow individuals to collectively contribute effort to the transaction verification process in exchange for an interest in the proceeds from the mining activity. The bitcoin mining pool has largely escaped regulation. This paper argues that the mining pool should be regulated under the existing federal securities regulation regime.

Keywords: Bitcoin, Securities, Virtual Currency, Regulation

JEL Classification: K22, G18, O30

Suggested Citation

Gordon, Jason and Chapman, Jennifer and Akins, Benjamin W., The Case for the Regulation of Bitcoin Mining as a Security (January 30, 2015). Available at SSRN: https://ssrn.com/abstract=2559769 or http://dx.doi.org/10.2139/ssrn.2559769

Jason Gordon

Georgia Gwinnett College Business School ( email )

1000 University Center Lane
Lawrenceville, GA 30043
United States

HOME PAGE: http://www.ggc.edu/

Jennifer Chapman

Georgia Gwinnett College ( email )

1000 University Center Lane
Lawrenceville, GA 30043
United States

Benjamin W. Akins (Contact Author)

Georgia Gwinnett College, School of Business ( email )

1000 University Center Lane
Lawrenceville, GA 30043
United States

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