Mock Bitcoins are displayed on a table in an illustration picture
Mock Bitcoins are displayed on a table in an illustration picture Reuters

New York's attempt to treat digital currencies such as bitcoin in the same manner as other financial instruments by fitting them into an existing legal framework would harm innovation and consumers' independence, according to a digital currency expert.

Jesse Powell, CEO of San Francisco-based bitcoin exchange Kraken, told IB Times UK that New York's recent proposal to bring bitcoin businesses under regulation could harm consumers and businesses.

"If we're talking about decentralised digital currencies, like bitcoin, the most common approach I've seen is to attempt to fit it into an existing legal framework, ie, to regulate it equally alongside other existing similar financial instruments," Powell said.

"New York has recently proposed a legal framework that would greatly stifle innovation and harm businesses and consumers in its state."

He noted that the existing legal framework around financial services was made by incumbent players to stop novel instruments such as bitcoin from entering the market.

"I would expect a fresh take at a legal framework around decentralised digital currencies to be much more relaxed and pro consumer choice," Powell added.

People "ought to demand of their governments the ability to choose their currency" and "have to question the motives of any government prohibiting its people from what effectively is simple communication", he said.

"Commerce is a basic human right and too many people have been disadvantaged and ostracized in the name of consumer protection. It's time for states to act in the best interests of their people if they want to avoid conflicts."

"If governments see decentralised digital currencies as an existential threat, perhaps they really ought to re-evaluate the purpose of their existence."

Speaking about Ecuador's ban on bitcoin and other digital currencies, Powell said it is "a move toward becoming increasingly isolationist."

"If Bitcoin is banned, Ecuador is about to miss out on the largest transfer of wealth in history," Powell said.

He noted that the country's plan to introduce its own crypto currency is a positive thing, "if not for the accompanying ban on alternatives."