Cryptocurrencies Vs Governments – Can They Co-exist?
TheDigitalArtist (CC0), Pixabay
People argue about whether cryptocurrencies and governments can co-exist but, ultimately, governments influence the value of cryptocurrencies and governmental regulations aren’t going away any time soon. Regulations are hard to keep track of because each country has its own set and new regulations are developed and redeveloped all the time. Moreover, few individuals and organizations agree on the best way to regulate cryptocurrencies.
The latest governmental regulations
China has led the way in a government crackdown on cryptocurrencies. Last year, they banned ICOs flat out and more recently, they have issued a task force to crack down on the mining of digital coins. In response, many of the crypto-related companies that had their headquarters in China relocated to places like Japan, South Korea, and Singapore.
Japan, in turn, embraced cryptocurrencies to capitalize on the crackdown going on in China. The government issued licenses to almost a dozen cryptocurrency exchanges. Most of the regulations in Japan are meant to increase security since Japan has recently had some high profile hacks.
According to CNBC, in South Korea, most of the regulations are meant to combat money laundering and tax evasion. For example, cryptocurrency exchanges can only do business with people who use real, verifiable names on their bank accounts. South Korea has recently established a new organization called the Financial Innovation Bureau, to encourage the cryptocurrency industry.
Likewise, in the EU, regulatory frameworks aim to reduce the threat of money laundering. A law has been passed that will require cryptocurrency exchanges and wallets to verify the identity of customers, but it has not come into effect yet.
The US has tended to regulate cryptocurrency through existing laws and policies rather than by implementing new laws specifically intended to address the crypto market. Thus, many of the regulations are ambiguous and unclear.
Path to co-existence?
In some respects, co-existence between governments and cryptocurrency seems inevitable. Cryptocurrencies aren’t going away anytime soon and the more widespread they become, the harder it will be for governments to fight them.
Various cryptocurrency exchanges around the world have been formally recognized and legitimized by local governments. As this becomes the new norm, some of the stigma associated with the crypto market will subside and cryptocurrencies will go mainstream.
Taxation will also help governments and cryptocurrency to co-exist peacefully. Once the market reaches a certain size, governments will want to embrace it for the tax revenue if nothing else.
Another thing that will certainly help create more harmony is clearer definitions of what cryptocurrency actually is. People still can’t agree on how to categorize it, as a security or a commodity. Part of the problem is that some governmental bodies still do not know much about the subject. But with time, definitions will become more uniform as knowledge spreads, and this will help make regulatory variation from country to country less disparate.