Regulation of Cryptocurrency around the world
Authored By : Anjali Chaudhary
Cryptocurrency; World; Blockchain; Regulation; Bitcoin; E-money
In the modern age today of digital technology the fastest development around the world is under the field of electronic currency also known as crypto currency. This type of currency is basically a cryptographically designed and protected means of decentralized currency which is widely used as a medium of exchange which happens through blockchains and such cryptocurrency is replacing the traditional means of monetary exchange like cash payments, bank transfers etc. Currently the most common name under crypto currency is Bitcoin and there is a rapid increase in of use of E-money around the world which calls for the need of the hour that is to correctly regulate transactions and usage of these mediums of E-money. This article analysis the concept of Cryptocurrency and its regulations around the globe in brief.
Over the years crypto currency has been defined in many ways but, the standard definition of this word basically is that these are digital assets which are dependent upon encryption for their generation and transfer. Crypto currency can be used through a decentralized network which basically means that it is not possessed by one single or central authority. Further the transactions involving crypto currency are handled by a public ledger known as the blockchain wherein the owners of crypto currency deal with each other directly which is also known as peer to peer transaction. Currently the number of people using crypto currency around the world is estimated to be close to around 2.8 million-5.8 million active users with almost 1900 people working in this industry. As this is a growing industry around the globe and no central regulatory body exists as of now to guide and facilitate these users and thus, users do not have proper knowledge about the advantages and disadvantages of crypto currency which are mentioned hereafter.
Crypto currency is a much more safer modes of making monetary transaction as it involves the owners of such digital assets to deal with each other directly with the help of the block chain where in each user has its own unique identity and the transactions once completed cannot be undone which makes it easier for users to trust each other
Secondly, as we know that there is no third-party involvement in transactions related to crypto currency which makes it cost effective for the parties to enter into transactions. It is also less complicated and anyone can perform transactions related to crypto currency.
Lastly, the most important advantage of crypto currency would be moving towards a digital era and evolving ourselves from the traditional methods of doing things which will help every individual in their growth and making them technologically sounder.
As there is absence of a central regulatory body for crypto currency, the value of such asset is not universally determined, and they differ from user to user which are very volatile in nature and could result in losses because of their constant changing value. The absence of central authority also makes it difficult to regulate and overlook to the amount involved in transactions.
Another major drawback of using crypto currency is the anonymity of the users, which makes it difficult to actually trace back the origin of the transaction and makes it easier for the people who misuse crypto currency for various illegal activities.
Also, one of the disadvantages of crypto currency would be the possibilities of the security breach under the blockchain mechanism for transactions. Although it has been designed to make crypto currency transactions full proof but there is still a minor loophole because human error that sometimes the block chain fails to provide complete security and there is misuse of information and people have suffered losses.
Regulations Governing Crypto Currency
As discussed above there is an absence of one central authority that globally governs the transactions and the use of crypto currency. And because if such absence the authority to govern crypto currency vests in the governments of each country individually. We would be looking at some of the major countries are their regulations regarding crypto currency:
1. United States of America
The Financial Crimes Enforcement Network (FinCEN) in USA does not consider Crypto currency as a legal form of tender but accepts it as to be property of an individual. But in 2018 The Securities and Exchange Commission (SEC) categorized it as securities and they have stated that they consider E-money as a form of traditional money and all laws applicable to traditional money transactions shall also be applied to E-money transactions. Also, the power to introduce and control crypto currencies differ from state to state in the US
In January 2018 the then finance minister of our country Mr. Arun Jaitely declared crypto currency as an illegal tender and stated that any form of currency having no physical attributes shall be deemed illegal tender. And the transactions of such E-money is also considered illegal as stated by the Reserve Bank of India (RBI) in April 2018. But such transactions are now being considered to be made legal as people are extracting gains out of such transactions and the Income Tax Authority has put forward a proposal to tax such gains.
3. European Union
In January 2019 the EU released a set of guidelines looking at the disagreement between all the European countries regarding crypto currencies. The guidelines provided for crypto currencies being a legal tender and all the member states were obligated to follow the uniform guidelines provided without having arbitrary power on control of such transactions. But to register as licensed crypto currency transmitter the person shall apply to respective financial regulators in their country.
4. United Kingdom
Similar to India, The United Kingdom also considers crypto currency as an illegal tender but unlike India the exchanges and transactions involving crypto currency need to be registered with the Financial Conduct Authority (FCA) which states that activities involving crypto assets must comply with the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017.
The People’s Bank of China (POB) has completely disregarded the presence of Crypto currency and termed it as an illegal tender along with banning the transactions and exchanges of E-money. The reason for banning such use of crypto currency in the country as given by the above-mentioned authority is that it intends to strengthen investor protection and prevent financial risks which such form of transactions offer as discussed above.
The authorities always face an issue while bringing the regulatory measures in place and the vehemence to which these measures are to be enforced. There are issues which could be faced while implementing the norms and statutes like failing of the whole machinery because of ponderous arrangement or poor implementation of laws leading to the breaking down of entire skeleton and system. Therefore, a proper evaluation is required at the elementary degree and then the potential complications should be addressed.
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