A popular question among hard-line cryptocurrency supporters and mainstream investors is how the government can regulate Bitcoin and its alternatives. To answer this question, we should first recognize that Bitcoin and most other ICO-issued tokens are decentralized. If you are into Cryptocurrency, you may also consider Qumas AI for a reliable trading platform.
What exactly does this mean? In essence, no central authority or government controls the supply of cryptocurrency tokens. It also has something to do with cryptocurrencies as a medium of exchange. Transactions on the blockchain can be conducted, authenticated, and recorded in the public ledger without the intervention of a third party.
China has taken the most strident stance, shutting down exchanges in their home country and escorting miners through land use regulations. Of course, this has had little impact on the price of cryptocurrencies or the speculative bubble.
The issue with regulating Bitcoin and other currencies is that they operate on a peer-to-peer network. And this compares to the inability of governments to successfully control venues like the Pirate Bay and Silk Road. And on top of that, there are an overwhelming number of cryptocurrencies. The cryptocurrency’s main distinction is that people can transact through crypto exchanges and wallets.
Methods for the Government to ‘Crack Down’ on Cryptos
The most obvious way for the government to regulate cryptocurrencies is to tax any fiat money used to withdraw a virtual token. The main caveat is that this would have to be limited to specific coins, and a cryptocurrency owner could switch to another coin to cash out. Aside from that, many early adopters and hardliners prefer cryptocurrencies to traditional fiat currencies as a p of exchange for essential goods and services.
Cryptocurrencies are subject to the SEC’s jurisdiction for investment, the CTFC’s jurisdiction for any crimes involving interstate commerce, and the IRS’s jurisdiction for income or capital gains taxation.
The SEC recently approved two Bitcoin futures ETFs, one through the CBOE and the other via the CME. At this time, no other Bitcoin futures ETFs exist, despite numerous applications. The SEC currently has the most regulatory kraut in the crypto space over ICOs. It recently halted an ICO after discovering fraudulent transactions.
On a similar note, the CTFC recently subpoenaed major cryptocurrency exchanges Bitfinex and Tether after Tether failed to verify over $2.3 billion in reserves. Bitcoin prices fell by 10% as a result of this.
Much of the proposed worldwide regulations concern a dangerous speculative bubble many fear will harm the country if cryptocurrency commodities fall.
Advantages of Decentralized Cryptocurrency
With no regulation, are cryptocurrencies a safe bet or a wildfire? So, what are the benefits of decentralized cryptocurrencies?
- Transactions cannot be reversed or falsified. You can make profits with investments in apps; nobody can alter a transaction once complete via such an application.
- Online users remain anonymous until they cash out or exchange their tokens.
- Bitcoin has a fixed supply, which will keep inflation at bay as mining more currency becomes more difficult.
- Investors can execute smart contracts without the involvement of third parties.
- Bitcoin’s transaction costs are lower than credit cards or most primary financial instruments.
- Unlike a company share, investing in a token requires no paperwork.
The most serious problem with current monetary policy is that the federal interest rates set are arbitrary, and creditors have no interest in controlling the money supply. Of course, Bitcoin and other cryptocurrencies are not the silver bullets we seek, at least not yet!
Whatever your feelings about the cryptocurrency craze, these coins can potentially disrupt global monetary policy altogether. Hundreds of new tokens emerge each month. Therefore, it appears that the effort to regulate cryptocurrencies will remain a cat-and-mouse game.
The increased competition allows for more consumer options. Developers can issue cryptocurrencies in exchange for unique benefits or merits within Dapps and other blockchain functions (not exclusively as a store of value).