Global Regulators Play Bitcoin Whack-a-Mole as Demand, Institutional Cachet Explodes

Once the largest global market for trading, China now accounts for 1.5 percent of bitcoin transactions, while Japan -- where regulators have been more open to digital currencies -- accounts for more than 60 percent, according to CryptoCompare.com.

... the U.K. has exempted bitcoin from value-added taxes, and says it should be considered a foreign currency for corporate tax purposes. The U.K. was early in publishing clear directives, ruling in 2014 that "bitcoin may be held as an investment or used to pay for goods or services at merchants where it is accepted."

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Japan this year began enforcing a law that recognizes bitcoin as a legal method of payment, and overseeing cryptocurrency exchanges -- effectively providing clarity and support to local entrepreneurs. That's something Vietnam may do as well.

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While government efforts to come to grips with digital money have been fraught, the more important trend may be the growing number of money managers who are looking at cryptocurrencies as an asset class for investment.

"What's more interesting is the increased sophistication of the institutional buy side for cryptocurrencies," said Nolan Bauerle, director of research at CoinDesk. "This new type of buyer means this is only a hiccup. There are important sums of fiat ready to cross into crypto in the short term." There are more than 68 hedge funds focused on cryptocurrencies today, many of them run by people from Wall Street.