If you follow financial news, you have seen extensive reports on bitcoins and probably the recent coverage of Mt. Gox, an international bitcoin exchange that spiraled into bankruptcy, resulting in substantial losses to bitcoin owners.
Virtual currencies such as bitcoin have garnered attention worldwide, for good reason. These currencies move unchecked, and regulators are seeking a way forward with respect to these diverse and decentralized payment mechanisms. However, virtual monies are simply the tip of the iceberg when it comes to emerging payment mechanisms.
Payment innovations — such as mobile banking, bitcoin and other virtual currencies, Square, Simple and the like — are the focus of the Conference of State Bank Supervisors' Emerging Payments Task Force. The CSBS created the task force in recognition of the changes in the payments structure and so states could take a leadership role in shaping the innovations and evolution of payment systems.
I am proud to represent Florida as a member of this pioneering group. We recently had our first meeting with other task force members from eight states to share introductions and thoughts on these developing payment systems.
We are hoping to identify the scope of emerging payments and changes coming to payment systems both domestically and globally. The task force will study these while engaging with a broad range of experts including federal regulators, industry participants and other professionals to gain their perspectives and understand how these diverse technologies affect the stability of payment systems and the broader financial marketplace. We hope to engage consumers and consumer advocates to assess and incorporate their concerns and requirements into the framework we develop.
An additional focus is protecting consumers, which is one of the top priorities of the Florida Office of Financial Regulation, and this aspect was dramatically confirmed with the bankruptcy of Mt. Gox, which resulted in losses in excess of $400 million.
Ensuring that we have the best information available, as well as an understanding of the evolving payments structure, will position our group to make the most informed decisions — and that takes time. Far too often, hasty reactions creating new policy and regulations have unintended, negative consequences.
Such consequences can stifle innovation, restrict development, and harm the interests of consumers. It is not the goal of the task force or my office to react hastily, but to consider the viewpoints across the spectrum of the financial services industry, and encourage open-minded ideas and innovation.
Within six months, I hope that Florida, along with our peers on the task force, will have developed a virtual skeleton describing the evolving structure of the new payment systems and marketplace. Then we can begin to develop ideas about the emerging — and rapidly shifting — payments landscape to start building the financial regulatory fabric.
I believe that one of our most important goals will be to encourage innovation, not hinder it, and to ensure that the citizens of our state and nation can safely operate in and benefit from such innovation.
Digital currencies are a small portion of a much larger equation, and these payment systems are not simply the latest craze — they are here to stay. The sooner we embrace these modernizations and challenge ourselves to learn more about how they fit into the marketplace, the better off we will be.
Drew J. Breakspear is commissioner of the Florida Office of Financial Regulation, www.flofr.com. He wrote this exclusively for the Tampa Bay Times.