The world of cryptocurrencies has seen a roller coaster in recent years. The price drop of the various digital currencies in 2018 drove its growing popularity among the masses. It has been in the limelight and has caught the regulators’ attention. It is never too late to start investing in bitcoin. You can use Bitqs app official website to begin safe investment opportunities.
Regulation is one of the essential aspects of dealing with such digital currencies. The truth of the matter is, no government centrally controls the working of cryptocurrencies. It is why now the government is taking steps to bring it within the purview of regulation. The government policies are effective in curtailing the widespread influence and growth of cryptocurrencies. The governments of South Korea and China have played a role in affecting its price drop.
There are various ways of regulating cryptocurrencies, and some of them have an immediate effect. Reporting for tax purposes and controlling initial coin offerings will be two of the various security measures in this prospect. Even though people involved in it say that the buying and selling of cryptocurrency make it secure, we cannot forget that humans are into this trade. Fraud can happen through exchanges and initial offerings.
Experts believe that the new regulatory measures can work towards the benefit of the cryptocurrency market. It will make things sound and safe. Let us throw some light on the critical aspects related to this.
Who should regulate cryptocurrencies?
Don’t you think that when it comes to classifying cryptocurrencies, the U.S. regulatory organizations create confusion? Yes, it does! Numerous classifications make it very difficult for investors to decipher what falls where and how. On the one hand, Bitcoin is a commodity for CFTC, and on the other, it is a property for the IRS.
The differences in cryptocurrencies’ classification failed to solve the underlying issues since it is a technical problem. One needs efficient software to calculate the tax liability of digital currencies, and proper tracking is necessary. Just storing their data about transactions and movements on spreadsheets won’t suffice. There is also a disparity of responses among the states of the globalizing world.
Impact of bitcoin regulations on the market:
Regulations of cryptocurrencies can have short-term and long-term impacts on the market, depending on the prevailing circumstances. As talking about short-term effects, effective regulations can mitigate the trading values of cryptocurrencies. The longer-term will add security to the market by stabilizing it and making it a more secure investment for people since we all know the impact of the hovering cloud of cybercrime. It depends on whether the regulations see a proper execution.
Will the regulation of bitcoins make the market safer than the earlier times?
If bitcoins see a proper regulation of checks and balances, it will lead to a more sound and safer market for dealing. Though it will remain a risky investment, with adequate protection for the investors and others related, it is comparatively less likely that the market will be subject to outside influences and manipulation.
Taking everything into account, this is a piece of good news for people who want to put their investments at stake on cryptocurrencies. The more the security, the more will be the confidence among individuals. It will ensure that the value of cryptocurrency always sees a rise.
Areas of bitcoin and cryptocurrency that should be under the banner of regulation:
In the current scenario, two specific areas have the attention of regulators, namely- taxation reporting and initial coin offerings (ICO).
Statistics prove that the capital gains from cryptocurrencies h reported in various countries. Fifty-nine percent of the people living in the United States of America do not report their cryptocurrencies’ earnings.
It is a prolific area of concern for the IRS for apparent reasons. They already have the reports of activity logs of 14,000 account users of Coinbase as it is the most popular crypto wallet. It proves that the IRS keeps a close watch on people’s earnings via cryptocurrencies, enabling them to catch any individual causing a discrepancy.
So it is a better alternative to declare your earnings in crypto markets before the IRS unmasks as it can be a source of humiliation, shame, and disrespect you would want to avoid.
ICOs happen to be the other area of concern for regulators of cryptocurrencies. It occurs when a new digital currency gets the treatment of security and is immune to the various restraints on the way to unfaithful business. As a result, the SEC feels that it should come under security regulations. These are happening because the regulators are trying to catch up to the digital market economy’s drawbacks and put it on the right track.
Ways of regulating cryptocurrencies:
The unique characteristics of bitcoins and their portable nature in the world market create another set of difficulties. For example, there are two types of tokens used in exchanges- utility tokens and security tokens. Utility tokens have an underlying purpose on a platform. These are not subject to the scrutiny of SEC’s disclosure rules. But, security tokens represent a fair share in a company and are subject to SEC’s scrutiny.
Several tokens find a way around these checks and balances by identifying themselves as utility tokens. The regulatory agencies criticize such activities but do nothing to hinder their functioning outside their native countries. In response to this unethical activity, international agencies such as the International Monetary Fund ( IMF) call for discussions among regulatory agencies to take stringent steps in this matter. The EU finds itself in an advantageous position compared to other territories since it controls a 28-member bloc.
Key things investors should be paying attention to before investing in cryptocurrencies:
Cryptocurrency is a very enthralling and suspicious arena to handle. It gives a reminiscence of the earlier days when people used to pour their money in the markets, without having a comprehensive idea about anything. It required extraordinary courage to shoot an arrow without a direction. As cryptocurrencies are volatile, it is crucial to understand the risks attached to them.
It is a good idea to invest in bitcoin and cryptocurrency if you are a brave soul without any fear of losing money. Sounds harsh, but this is the truth! There are many progressive aspects of bitcoins that appeal to investors, like efficient functioning and quick profits. All it can go null and void in the blink of an eye as cybercrime can steal your money and a devaluation can harm your prospects. The working of cryptocurrencies is like a roller coaster. It has no reliable consistency. If you are tolerant enough to go through its topsy-turvy then, this is for you. One needs high resilience and patience to sustain this forum.
Aspects of dealing with bitcoin regulatory:
Marco Santori, the former head of blockchain practices at law firm Cooley, referred to bitcoin as a “regulatory platypus.” It is because it does not fit into the category of established assets. However, the platypus might not be a massive problem for regulatory purposes and will not hinder any checks and balances on the way.
Multiple regulatory agencies manage publicly listed stocks. It should rather be the government agencies that should apply the regulations to cryptocurrencies. They can do it nevertheless, and it averts the need for specific code. South Korea is revising its stance on tax-free trading of cryptocurrencies. Japan has given the cryptocurrencies a legal touch and brought it under their watchful eye by exclaiming them as legal tenders in 2017. They are providing the path to the future with their initiatives. They define and describe the cryptocurrency under their virtual currency act. In their country, cryptocurrencies resemble assets for accounting purposes. It is the government’s authority to decide which digital currency will be legal and facilitate a transaction.
Start-ups planning an ICO also have to obtain the license with detailed objectives and meet all the requirements before letting their ship sail. Exchanges are also subject to capital requirements, stringent IT compliance checks, and KYC issues (Know Your Customer). Japan brought in these changes through the amendment of the Payment services act. It has only one agency- the financial services agency, which makes the working of cryptocurrency regulations very smooth. It exhibits its dynamic approach.
Impacts of introducing regulation on the bitcoin share price:
To the astonishment of experts, the introduction of regulations has not affected bitcoin and other cryptocurrencies’ share prices. Besides the few downward trends when a new regulatory item comes out, it reaches back its position of progress.
The main thing that one needs to remember is that bitcoin and cryptocurrency is a risky venture. Even though the regulatory bodies perform the task of consumer protection, its functioning is unpredictable. The speculative nature of cryptocurrencies is something one should be severe.
We hope that we can throw light on the regulatory processes’ various intricacies with the above article. On reading this carefully, you will understand the necessity of regulations on the functioning of cryptocurrencies and the pros and cons of this aspect.