Using crypto: Regulation

Regulation

DO COUNTRIES HAVE CRYPTOCURRENCY REGULATIONS?

Few countries and governments drafted or enforced laws and regulations on cryptocurrency before Bitcoin’s heavy price crash during 2018.
This sharp and sudden decline in Bitcoin’s trading price affected all cryptocurrencies, putting the future of the concept at risk and seemingly confirming some governments’ suspicions regarding the longevity of the concept.

However, in most cases, cryptocurrency has recovered to surpass 2018 market caps, usage and investment levels, dispelling any suggestions it could be a financial bubble.
Regulators have been put into overdrive trying to take advantage of what is generally a growing consensus among world leaders, that cryptocurrency is a revolutionary concept and here to stay.

However, while many have established laws, others are yet to implement or even produce legislation, and others have outright banned the use or ownership of cryptocurrency altogether.
Ultimately, despite the lack of a clear way of regulating, monitoring and enforcing laws, the legality of cryptocurrency ownership and its use is a domestic issue, and differs from country to country.

WHY IS REGULATING CRYPTOCURRENCY SO DIFFICULT?

The difficulty governments face in attempting to regulate and monitor cryptocurrency use comes in identifying its users.
Bitcoin transactions, for instance, are public, traceable, and permanently stored in blockchain.
Anyone can see the balance and all transactions of any address, but they have no access to the owner of the address.

Much of the legislation put forward during cryptocurrency’s infancy was instigated on the back of fear, which remains in many cases today.

Governments long enjoying and relying on the benefits of being able to manipulate centralised currency worry that their grip on money is in the process of being weakened by the growing popularity of a viable decentralised alternative.
Others fully embrace the cryptocurrency revolution, leveraging its popularity to open new income streams and promote their credentials as tech and digital currency havens.
Many countries and regions are yet to approve or implement wide and detailed legislation enforcing laws surrounding cryptocurrency.
However, those that have are generally influenced by both the fear of change to established and profitable systems, and the fear of missing out on cryptocurrency’s potential.

HOW DOES POLICY DIFFER GLOBALLY?

Like many other countries, the United States treats cryptocurrency as property and monitors the ownership, sale and use of cryptocurrency through its Securities & Exchange Commission.
The US arguably both embraces and suppresses cryptocurrency.
The SEC subtly approves funds and features from established coins like Bitcoin, while introducing laws making the introduction of new cryptocurrencies using ICOs (initial coin offerings) very difficult.
Many other US departments play a hand in monitoring different aspects of cryptocurrency.
However, they all have roles enforcing different laws under the same strategy, with uniform guidelines suggesting cryptocurrency should function similarly to banking operations and comply with US financial service laws.

Some countries have a heavy focus on money laundering when implementing cryptocurrency-related laws.
While the European Union enjoys the benefits of taxing profits made on cryptocurrency transactions and use, it too is also attempting to undermine the concept’s anonymity credentials by giving investigative authorities the power to unmask cryptocurrency holders.
The UK is also implementing restrictions on anonymity by requiring cryptocurrency companies based there to register with national financial authorities.
While Canada’s attention towards cryptocurrency and money laundering focuses more on the movement of fiat currency within cryptocurrency exchanges.

China has changed its policy on cryptocurrencies regularly, banning and supporting blockchain-based technologies.
Though cryptocurrency has been made legal again in China, the government has enforced strict controls meaning use, ownership and anonymity coming with the concept of a decentralised currency used throughout the world are all but gone.
While China wants to promote cryptocurrency, it does so with an iron fist, enforcing policy heavily monitoring cryptocurrency companies and users and implementing an authoritarian control of trading allowing only the central bank to issue coins.

WHICH COUNTRIES ARE EMBRACING CRYPTOCURRENCY?

Japan takes a similar position to China in its commitment to embracing and supporting the growth of cryptocurrency, though its contrasting position on policy means the countries attempt to achieve this in very different ways.
Japan’s progressive policy is arguably the most aligned and respectful to the original concept of blockchain technology and cryptocurrency, leaving the industry relatively unregulated and unmonitored.

2017

It was the first country to officially monetise cryptocurrency, recognising it as an official form of payment in 2017.

While Japan presents a broadminded approach to cryptocurrency policy, fear is the underlying theme influencing laws and legislation enforced throughout the world.
It sees governments overstating risks and understating benefits, committing to heavy handed approaches.
But despite regulation challenging the nature of cryptocurrency purpose, there are aspects of global law enforcement on cryptocurrency with merit and perhaps even justification.

Using crypto: Regulation

There are large global financial monitoring institutions working actively with cryptocurrency outlets, such as Bitcoin, to counter money laundering, financing terrorist organisations and the funding of other illegal activities.
This involves pressuring cryptocurrencies to abandon their anonymity credentials, requiring users to divulge the identities of senders, receivers and their wallets’ details before a transaction request can be fulfilled.
Most cryptocurrency users are sceptical as to whether undermining cryptocurrency’s core functionality as a decentralised entity would actually be effective for these purposes, or simply a concept bred by financial institutions and governments to gain better control.

FAQ

Will cryptocurrency recover?
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Bitcoin’s heavy price crash during 2018 impacted all cryptocurrencies, putting the future of the concept at risk and seemingly confirming some government’s suspicions regarding the longevity of the concept. However, in most cases, cryptocurrency has recovered to surpass 2018 market cap, usage and investment levels, dispelling any suggestions it could be a financial bubble.

Is cryptocurrency legal?
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Many countries have established laws, while others are yet to implement or even produce legislation, and a few have outright banned the use or ownership of cryptocurrency altogether. Ultimately, despite the lack of a clear way of regulating, monitoring and enforcing laws, the legality of cryptocurrency ownership and its use is a domestic issue, and differs from country to country.

Can cryptocurrency be traced?
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There is no clear way to determine ownership of cryptocurrency.

Why is cryptocurrency legal in some places and not others?
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Governments long enjoying and relying on the benefits of being able to manipulate centralised currency worry their grip on money is in the process of being weakened by the growing popularity of a viable decentralised alternative. Others fully embrace the cryptocurrency revolution, leveraging its popularity to open new income streams and promote their credentials as tech and digital currency havens. Many countries and regions are yet to approve or implement wide and detail legislation enforcing laws surrounding cryptocurrency.

Who controls cryptocurrency?
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Cryptocurrency was designed to be a decentralised concept, meaning no one controls it. However, as cryptocurrency has evolved and new coins have entered the market, new concepts have questionable decentralisation credentials. Outside blockchain users, there are very few capable of influencing cryptocurrency outside majority network ownership or significant holders.

Should cryptocurrency be regulated?
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There are arguments for the large global financial monitoring institutions working actively with cryptocurrency outlets, such as Bitcoin, to counter money laundering and funding terrorism. However, most cryptocurrency users are sceptical as to whether undermining cryptocurrency’s core functionality as a decentralised entity would actually be effective for these purposes, or simply a concept bred by financial institutions and governments to gain better control.

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