Bitcoin Foundation director shrugs off currency’s reputation

In Argentina, you are not allowed to purchase hard currency or gold. In China, citizens live under immoral capital controls.

Bitcoin Foundation founding director Jon Matonis has defended the virtual currency during a visit to Auckland, saying it is doing more good than harm despite its popularity with fraudsters.

The virtual currency has come under attack from the executive director of New Zealand cybersafety organisation NetSafe, Martin Cocker, who has said he personally would not be sad to see Bitcoin’s demise.

Because Bitcoin transactions are impossible to trace, they have been favoured by cyber-criminals as payment when extorting money in ‘‘ransomware’’ scams.

These occur when criminals use malware to encrypt the contents of people’s computers and then demand a ransom in return for not deleting their files forever.

Matonis said Bitcoins were the digital equivalent of cash and having such a ‘‘surveillance-proof currency’’ had big advantages in countries such as Argentina and China, if not New Zealand.

‘‘In Argentina, you are not allowed to purchase hard currency or gold. In China, citizens live under immoral capital controls.’’

He indicated there was no way to address the fraud issue. ‘‘Any medium of exchange is going to be subject to abuse. You can’t eliminate that. You can’t change the protocol of what Bitcoin is.’’

Cocker said his views had not changed. ‘‘I fully hear the arguments people make for these currencies, but in the New Zealand context they don’t really add anything and they are the currency of choice for lots of criminal outfits so we wouldn’t lose any sleep if Bitcoins disappeared.’’

The Bitcoin Foundation was established in the United States in 2012 to promote the virtual currency and Matonis served as its executive director until December.

He was visiting Auckland on Monday to speak at AMP’s Amplify Festival, an event to discuss emerging financial trends and ‘‘disruptive technology’’.

Wall Street regulator, the New York State Department of Financial Services, announced new controls on Bitcoin transactions last week.

The rules mean Bitcoin exchanges in the state will need to establish the identity of both parties to a transaction when they convert Bitcoins to cash.

Matonis said that was unnecessary and such rules could push Bitcoin companies to other countries and jurisdictions such as Luxembourg and the Isle of Man.

‘‘If governments and regulators aren’t careful, they are going to regulate themselves out of business opportunities.’’

The department had taken the wrong approach and banks may have influenced its thinking, Matonis said. The quoted value of a Bitcoin has slumped from nearly $1500 to $315 over the past 18 months.