With the surging demand for cryptocurrencies and blockchain, it’s no surprise as an increasing number of countries begin to look at enacting bitcoin and cryptocurrency regulations, countries like China, Brazil, and India have also started to take concrete steps in setting up frameworks for regulation. Visit tesler.software to get access to potential trading tools and strategies for bitcoin trading.
It has tremendous implications for organizations that rely heavily on regulatory compliance, such as NASDAQ, Visa, and Mastercard. Therefore, the blockchain industry’s potential to bring efficiencies to the international supply chain is undeniable.
And it’s also not surprising, then, that the recent burst of regulatory efforts is on consumer protection. The Federation of American Securities Dealers has begun to issue guidance on consumer protection and will enforce a “know your customer” strategy at banks and dealers that handle digital assets. A subsidiary of the European Banking Authority has also published a statement warning its member banks against fraud associated with virtual currencies, including initial coin offerings (ICOs). Let’s discuss the concerns about regulations of bitcoin and blockchain.
Governments with a positive stance toward bitcoin:
Turkey’s central bank has issued guidelines for cryptocurrencies, and the Turkish government is taking a positive stance toward bitcoin. There are other examples as well – the Bank of Israel has indicated that they have no immediate plans to regulate bitcoin, and Switzerland has also become a cheerful voice in cryptocurrency regulation, saying it may regulate ICOs if necessary. Recently the United States has classified bitcoin as a commodity similar to Canada and Australia.
Governments with a hostile stance toward bitcoin:
The United States Securities and Exchange Commission (SEC) has been issuing warnings about initial coin offerings (ICOs), stating that most offerings constitute securities offerings and subject them to federal securities laws such as the Securities Act of 1933. The SEC recently sent cease-and-desist letters to companies offering digital tokens on blockchain platforms like Ethereum. However, these regulations are aimed at mitigating any prospect of financial fraud or economic instability. China correspondingly announced a complete ban on the entire cryptocurrency market, including the mining of digital currencies. The government was addressing challenges regarding financial instability by the decentralized ecosystem of digital currencies.
Classification of bitcoin in different countries:
Official recognition of bitcoin as a virtual currency and bitcoin as a payment method has been granted in Japan. The Japanese government recognizes that bitcoin is not treated as legal tender. However, they adopt a slow approach to digital currency by allowing bitcoin exchanges to operate.
Russia has taken an even more clear stance on cryptocurrency regulation banning all forms of initial coin offerings (ICO), the use of digital currencies for money laundering or terrorist financing, and any other economic activity banned by laws such as the Bankruptcy Law, Money Laundering Prevention Law or Financial Monitoring Service Law if carried out with cryptocurrencies.
Russia was also wary about international transactions involving cryptocurrencies, especially bitcoins at a foreign exchange market or Russian bank accounts. However, Amid Russia Ukraine conflict, the country is looking to use cryptocurrencies, as they have prohibited using USD for global exchange, and the value of rubble in the international market is constantly falling.
In South Korea, it is legal for individuals or companies to engage in initial coin offerings (ICO) and to trade bitcoin on exchanges registered with the Korean Financial Intelligence Unit (FIU). Furthermore, ICOs in South Korea are centralized, which means that no part of the cryptocurrency is out of the control of South Koreans.
Other countries like India, Brazil, and China:
There have been few cases of regulations in other countries like India, Brazil, and China. However, there have been several cases where local governments have acted against cryptocurrency exchanges, such as China’s central bank banning ICOs in all cities nationwide. On the other hand, India has legalized the use of digital currencies but with a strict taxation scheme of 30% on every capital gain made from digital currencies.
Why should cryptocurrency be regulated?
With the growing demand for cryptocurrency in the global market, the issue of regulation in this field has become a significant concern. For example, according to some experts and consultants on cryptocurrency regulation and protection, lack of regulation encourages fraud and criminal activities in cryptocurrencies, potentially threatening individuals and investors who need transparency.
Previously, there were also many cases where hackers cheated investors by promising huge returns on their investments in virtual currencies. Furthermore, with the emergence of bitcoin and other cryptocurrencies as ‘Digital gold’, they have risen to high value due to their limited supply, which can be dangerous as it can create a bubble situation.