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Bitstamp exits Washington State: Regulation hampering innovation?

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Tightening regulations are hindering the development of fintech companies currently in US. The latest state to join this list is the State of Washington where regulations on digital currency startups have made significant impact on businesses. Following regulations many companies have ceased to serve the residents of the respective region and Washington is no different. Following the same, Luxembourg-based bitcoin exchange Bitstamp has announced effective 20 December, it will stop serving residents of the state. The exchange operates out of U.K and U.S with good volumes and has been one of the leading exchanges in the market of cryptocurrencies. Though the strong reason behind this move is still unclear, let’s look into the details of the exit:

Regulation in the past:

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Most notable step towards regulation took place in 2015 with the introduction of BitLicense in New York. While most people saw it as a ‘necessary evil’, this move saw a huge impact on various bitcoin based businesses.  Exchanges like Coinsetter, MonetaGo payed the licensing fee and decided to stay and serve the customers in the area. Many small businesses like Poloneix exchange and GoCoin ceased their operations in New York due to cost and many other factors. Many companies like ShapeShift stopped their operations after seeing that they would have to drive up their service charges.

Washington and Regulatory moves:

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In the State of Washington, Nations capital Washington DC has been a very pleasant environment for the development of Bitcoin and Blockchain ecosystem. In September, Coin Center, a Washington D.C.-based non-profit and advocacy center focusing on public policy issues facing bitcoin started a Congressional caucus. The function of the caucus is to study bitcoin and blockchain technology deeply and resolve the issues. It also aims at making policy makers to understand open technologies like bitcoin and ethereum.

Is Bitstamp withdrawing proactively?

Bitstamp has launched the trading of the biggest traditional currency trading pair – Euro/Dollar in June. This marked the entry of the exchange into mainstream trading apart from cryptocurrency trading. After such a move, this move came out to be suspicious. There has been speculations around this that after federal Judge approving IRS summons, Bitstamp is protecting itself. In this recent incident, the Judge has instructed bitcoin wallet and exchange Coinbase to disclose transaction records of bitcoiners. Hence this can be seen as a preemptive move on part of Bitstamp.

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