Bitcoin transactions between individual users shouldn't be regulated but businesses offering services based on Bitcoin and other digital currencies should be regulated in a similar manner to other payment services, PayPal has argued.

In a submission (PDF) to the Senate inquiry examining the regulation of digital currencies, including Bitcoin, in Australia, the company argued that it is "important to draw a distinction between digital currencies, versus the companies that trade or facilitate transactions in digital currencies".

The submission states: "While the currency itself should not be regulated, and transactions by individual users without the assistance of intermediaries should not be regulated, companies that provide a financial service for digital currency transmission, for issuance or sale of digital currency, or for exchange with other currencies such as the Australian Dollar, should be regulated in a manner similar to the existing regulations that apply to other payment services.

"Those regulations, however, should be adapted to recognise the specific details of how different digital currencies work, particularly 'decentralised' digital currencies that are not controlled by a specific issuer."

The company added that regulators should clarify that the use of Blockchain-style technology for non-financial applications shouldn't be regulated in the same fashion as digital currencies and providers of digital currency services.

PayPal argued that as a provider of a digital wallet that accepts multiple types of currency it was already adequately regulated by existing laws and should not be caught up in legislation focussed on digital currencies.

"One of the factors that has discouraged PayPal from adding Bitcoin as an additional type of currency in the PayPal wallet is the lack of clarity related to regulation of digital currencies (as with other jurisdictions PayPal is regulated in Australia and is a significantly different business model to digital currencies)," the submission states.

PayPal is yet to include support for the cryptocurrency in its digital wallet or directly support processing of bitcoin-based transactions on its payments platform.

"At this stage, consumers will not be able to store Bitcoins in their PayPal digital wallets," the submission states.

"The rationale for this is that PayPal wants to ensure that while embracing innovation we remain committed to making payments safer and more reliable for customers all users of PayPal are linked to a specific named PayPal account, with consumer protection for buyers, but identity and consumer protection are not built into Bitcoin today. Therefore, we are proceeding gradually, with some support for merchants in the U.S. who want to accept Bitcoin, while holding off on other aspects."

See the article here:

Bitcoin inquiry: PayPal calls for clarity on digital currencies