Bitcoin, government intervention and micro-payments

The recent government intervention and investigation of Mt. Gox at the end of May created a stir with the digital currency, Bitcoin.

While there is some concern that Government intervention will hurt Bitcoin, some feel that government regulations could actually benefit the decentralized currency.During a recent discussion with Cameron Winklevoss (investor in BitInstant) at the NEXT conference in New York, Winklevoss felt that regulations would help Bitcoin’s reputation and in fact remove the negative association of criminal activity linked to the currency.

Andrew Chang, a founding partner of Liberty City Investors also believes that as more money is invested into Bitcoin start-ups, more people with legitimate reasons to use the system will be attracted to it. Over time, this will cause Bitcoin's negative image will go away.

Whether or not these predictions will turn out for the better, Bitcoin’s open-sourced architecture could make it difficult for government regulatory actions to take place (pointed out by Gavin Andresen, leader of the Bitcoin Foundation. Read More: Can Bitcoin Make Peace With Washington?).

Another interesting point that Winklevoss mentioned was Bitcoin can make a large impact in micro-payments, “using Bitcoins to pay small fees online for access to content”. Micro-payments have been a pain for the payments industry as the costs associated with payment processing are too high to facilitate such small transactions.If Bitcoin could be used for as a cost-effective way to provide micro-payments, it could help Bitcoin become a mainstream form of payment. For example the media could charge per article fees in addition to offering full subscriptions to their publications.Do you agree with Winklevoss’ predictions? Will government intervention actually hurt Bitcoin? Is there a future here with micro-payments?