Regulatory Ambiguity in the Market for Bitcoin

Abstract

Economists are fond of employing simple models for policy analysis. However, these models tend to neglect the prospect of regulatory ambiguity. I consider the effects of regulatory ambiguity on entrepreneurial activity. I explain how jurisdictional redundancy exacerbates regulatory ambiguity, increasing the costs of compliance, the probability of regulation, and the potential for political opportunism. To illustrate, I provide a brief description of the regulatory environment of bitcoin in the United States.

Keywords: ambiguity, bitcoin, cryptocurrency, currency, regulation, political economy

JEL Classification: E40, E42, E58, G2, H1, K2, K4