The need for and direction control of cryptocurrencies

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The need for and direction control of cryptocurrencies

After the market capitalization of cryptocurrencies began to approach $1 trillion dollars, the state institutions started to take serious efforts to develop its governing laws and regulations. The response was a protest against such attempts and the desire of protesters to justify its position, the nature of cryptocurrency, designed to avoid government and Bank control. State regulation is incompatible with libertarian beliefs of investors, attracted by promises of ending tyranny of inflation and the monopoly of state banks. However, with each new issue of the blockchain, hacking of wallets and exchange services, or speculative price fluctuations the number of applicants to reduce the risks increases.

The current situation

The cryptocurrency emerged as an alternative to traditional Vietnam currencies means of payment. Over time it has evolved into highly risky speculative investment asset. Later appeared using the same technology as a mechanism for the collection of initial capital of ICO, which became an additional source of instability. The modern situation in the sphere of regulation of cryptocurrency is characterized by two contradictory trends. On the one hand, there is a growing need for clear rules by which transactions. The development and widespread adoption of them would have attracted in this area a greater number of institutional investors that would serve as an additional impetus to development. On the other hand, there are fears that a rigid, restrictive regulations, not taking into account the specifics of cryptocurrency, may instead slow or stop the development of cryptocurrency technology.

The main vulnerability of cryptocurrencies

Many of the hopes associated with cryptocurrencies and bloccano did not materialize. So, the promised security and reliability of payments was significantly lower than expected.

The potential monopoly pressure

Collusion between miners may jeopardize the safety and timeliness of receipt of the crypto units. The formation of large mynarski pools gives them the advantage of speed and the ability to extract monopoly profits from mining.

Vulnerability to hacking

Because crypto currencies are not a universal means of payment, it is to exchange them for goods, services or Fiat currency required communication between buyer and seller. It provides exchange services that act as intermediaries. Facilitating the task of finding counterparties, they, at the same time increase the risks of the owners of cryptocurrencies, as they become targets of hacking and theft.

Money laundering and financial crimes

The absence of common international rules allows you to maneuver jurisdictions in search of the most safe conditions of criminal activities.

The main directions of regulation of cryptocurrency

1.
International efforts

The decentralised nature of cryptocurrency reduces the effectiveness of local attempts at regulation. Attitude towards cryptocurrency varies from a complete ban (Algeria) to the promotion (Japan, Estonia). In these circumstances, users always have the possibility of manipulating jurisdiction. The development of uniform international rules should facilitate the solution of the problem.

2.
The development of a common legal definition of cryptocurrency

For all time of existence of the cryptocurrency were not given their legal definition applicable in all countries. The same can be said about ICO. They are not uniform in nature and can be considered as a currency, commodity, share of ownership, securities, loan, Deposit, financial derivatives or forex contract. The establishment of an internationally agreed taxonomy is an important task facing regulators.

3.
Develop clear tax rules

The appeal of crypto-currencies (exchange for Fiat and mutual exchange) can generate a profit, which should become the object of taxation. This year in the United States adopted a law, clearly explaining in which cases with this profit to pay taxes on capital gains. In other Western countries the same definition does not exist yet, especially when talking about crypto dividends.

4.
Development of unified rules of exchange services

Users of exchange services must have a Bank account. This facilitates the identification and collection of taxes. However, for most services this rule works not always. A few of their units have a Bank account. For example, the account opened Bitstamp in Slovenia, and Coinbase in Estonia. The banks ‘ position is clear. They fear the misuse of stored money. If the activities of exchange services will have to obey certain rules, those fears will diminish, and large banks will be able to open accounts to such companies.

5.
Creating a legal infrastructure for ICO

The regulations in the first place should be marked with the limits of the ICO and the legal definition of this activity. Existing regulatory document does not stipulate responsibility for fundraising, a redress mechanism in case of failure of the project on the government’s efforts to track illegal transactions and fraud.

Public authorities do not yet have effective tools of control over ICO. It would therefore be logical to extend that function of the exchange services, hosting released as part of the ICO tokens. On the other hand, investors would be mandatory verification schemes KYC and АМL. Integrated control, obviously, will reduce the number of scammers on both sides.

Regulation is an important condition for social survival

Despite the growing interest in cryptocurrencies, but this economic sector is still relatively narrow. But it is expanding at a speed that allows you to assume that soon it will have accumulated large financial resources. So cryptocurrency transactions must be safe, clear and convenient to users. Regulation does not mean prohibition or total control. In the 17th century John Locke said that “where there is no law there is no freedom.” In order to be free a society must live by the rules guarding this freedom. If to speak about cryptocurrency, the main objectives of regulation should be:

1.
The transformation of the crypto sphere in a full space part of the financial

Crypto economy should not function separately from the traditional and be independent from her. Fiat and crypto money will coexist for a long time and so should operate in order to give people a convenient choice. Without regulation it’s impossible.

2.
The trust

Many investors refuse to participate in cryptocurrency transactions because this area is not regulated by the state and is illegitimate from their perspective.

3.
Fraud protection

The lack of rules allows us to consider the cryptocurrency sphere place of fulfilment of illegal operations and tax evasion.

4.
Protection from market manipulation

The presence of large mining pools, and owners of large parcels main cryptowall provides opportunities for market manipulation. Regulation will help to protect small users from sudden changes in market conditions.

Like it or not, but all that is not regulated in the modern world it seems suspicious and not credible. This view evolved over the centuries and is under a good reason. Chaos is not conducive to development, he stops him. Therefore, if we want crypto-currencies develop, we must accept the fact that an important condition for this development is the regulation.

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