Bitcoin Regulations And Laws
Bitcoin and Its Regulations
Bitcoin was founded with the basic concept of decentralization and it simply means that cryptocurrency was not regulated by the central authority in the same way that a fiat currency would be. Bitcoin has the blockchain technology behind it and it is almost in the early stages, while the authoritites are still trying to get their hands on what exactly this technology is before even trying to come up with a new plan about how to deal with it, especially when it comes to issues like money laundering and taxation.
Currently, there is no standardized international approach for Bitcoin and its validity will be dependent on where in the world you are living. However, it is expected that a specific minimum levels of rules and regulations will be established once the authorities will gain more knowledge and experience about Bitcoin. Well, cryptocurrency has gained huge benefits in year 2017 which means that authorities are looking forward about regulating the sector.
Concern of Law Around The World
Bitcoin had gained the attention of regulators soon after its inception. However, it gained the attention of authorities as a result of its fame among customers and vendors of the Dark Web. Dark Web is an area of the internet which is common for illegal trade in items that are ranging from illegal drugs to weaponry. For example the most common Silk Road marketplace which only accepted Bitcoin on its site in order to make sure that customers remain anonymous.
The fame of Bitcoin and the later closing down of the marketplace by the FBI and the US Senator Charles Schumer clearly refers that Bitcoin is an alternative currency which enabled criminal activities.
In addition, the decentralized and semi-anonymous nature of Bitcoin meant that authorities were afraid that it would be used for money laundering. For example in April 2012, the FBI indicated that the lack of regulation could mean that Bitcoin will be used for criminal and illegal activities, especially when offshore exchanges are available.
Other issues that are arising are the fact that Bitcoin has risen in its value rapidly, its usefulness while making transactions has fallen and it is also being used more and more for storing value which leads to the possibility of a bubble. It is said that the wide number of Bitcoin transactions over the last few months have been for speculation purposes as well as with the volatility of the demands and asset that the rapid surge of interest has been placed on the currency which makes it unsuitable for regular transactions.
However, a small number of countries have restricted the cryptocurrency as well as there are few countries that have completed banned Bitcoin. Well, there are most of the countries that allow Bitcoin to be used but a mix of regulations has been put in place. The decentralized nature of this coin makes it very hard to implement restrictions on cryptocurrency even in the countries that have banned the Bitcoin.
How Regulations Work In USA
The United States of America doesn’t have any standardized approach for the regulation of Bitcoin at a State or Federal level. However, there is no policay towards the regulation of cryptocurrency from the Federal Reserve. Well, there are chances that they will surely consider about regulations at some point in the near future. In 2013, guidelines about cryptocurrency was published by the FinCEN (Financial Crimes Enforcement Network) which is an agency within the Treasury department of US. According to the guidelines, making use of cryptocurrency for buying legal services and goods was not illegal. It also suggested that the trading or mining of cyrptocurrencies as well as the operation of various exchanges on which coins are traded will also fall under the label of money transmitters and they will be subjected to the same Know Your Client (KYC) and Anti-Money Laundering (AML) measures as other businesses regarding money service work. They were also involved in an action against the Russian-domiciled BTC-e exchange for the violation of US AML laws. However, it was the first action which was taken against any non-US based exchange.
The US Securities and Exchange Commission have not released any rules about cyrptocurrencies but they have issued a large number of warnings against the instability and risk of fraud in this sector. However, the chairman of SEC also issues a warning in November 2017 which was related to the risks that are surrounding ICO’s.
However, various actions are taken by different States at a State level specifically when it comes to the regulations of exchanges or other money exchangers. Some States like New York have made efforts to make particular licensing rules that are applicable to the cryptocurrency exchanges like Texas. These rules are applied to cryptocurrencies around various States.
Rules in European Union
The EU has taken more clear steps for the Bitcoin than the United States. However, they are offering less uncertainty. Undoubtedly, the European Union has already designed a framework to rule the use of electronic money even before the Bitcoin was introduced which was flexible to fit the needs cryptocurrencies.
The Bitcoin has been categorized as convertible decentralized virtual currency by the European Central Bank. However, the EBA (European Banking Authority) has advised the banks not to trade in any kind of cryptocurrency until a regulatory rule was put in place. However, the European Parliament agreed in 2016 to set up a taskforce for monitoring cryptocurrencies with a point to battle against terrorism and money laundering. The commission also proposed that digital wallets and exchanges would be subjected to regulation for preventing tax dodging.
The current report on the first Blockchain Resolution of the European Parliament has advised that the benefits of a structure rules for the blockchain industry will allow the customers and companies to operate in the area to act on a level playing field. However, the commission further proposed that ICOs should be defined within their own framework.
Rules In India
As of now, Bitcoin in India has still a long way to go in terms of its regulations under the current laws of India. However, the broad opportunity and spectrum which it holds for the people as well as the economy as a whole, while taking into consideration the shortfalls it may pose in terms of its value within the course of time and security issues that any virtual currency may encounter, it is totally up to the Indian Government to impose regulatory structures for the easy functioning of Bitcoin which does not contain and limit its transactions and movement.
Rules And Regulations In the U.K
The lack of rules and regulations in the United Kingdom has caused more problems for the bitcoin businesses than the opportunities. However, it is not sure that what regulation is on the horizon and eager to avoid future liability. Well, bitcoin businesses often find themselves to take more regulatory measures than regulated businesses.
While, the biggest problem above all that bitcoin is facing in the UK is the access to the banking services in the UK. In short, there is no way. As the regulatory picture is unclear, so banks find it way too risky to offer bank account to bitcoin businesses.
The regulators and law makers in authorities around the world are finding a way to bring digital currencies under their regulatory structures. In the meantime, the entrepreneurs are also thinking that how this new regulation will affect their particular business. Therefore, the digital currency businesses will be unable to reach their actual potential until this predictable question about regulation is settled.
Rules And Regulations In Canada
According to Wikipeida, it is legal to buy and transact Bitcoin in Canada. However, the worth noting point is that it is ruled by counter terrorist financing laws and anti money laundering legislation in Canada.
Given its fame, it is not surprising that it go under the radars of Canada Revenue Agency. In Canada, if you buy or sell virtual currency as well as you make a profit during the process, you will have to claim that profit as a capital gains. It doesn’t report that this income is illegal. The most interesting part is that if you make use of cryptocurrency as part of your personal business transactions, your deduction for the transaction will be according to the Canadian Dollar which will be equivalent to the amount based on the exchange rate at the time of a transaction.
Well, it is not only that Bitcoin is legal to hold and trade in Canada but the government and central bank are also taking important step for understanding the benefits of blockchain. The blockchain is the technology which empowers cryptocurrency. There are around 800+ digital currencies. Recently, it was reported Ottawa was considering the feasibility of Canada to become a global hub for the revolution of blockchain. The senior officials of government have discussed the opportunity during a meeting with corporate executives, regulators, bankers and experts in the Tech industry. However, the idea is to position Canada at the front of blockchain technology and form a foundation for the economy of country to grow as industries follow structural shifts. It can be thought that the government of Canada is taking the important steps to study this new technology at its early years and use it as a medium for growing economy and the payment system.
Tax is another area in which the authorities around the world are increasingly looking that how rules will be implemented with respect of Bitcoin. However, due to the semi-anonymity of this coin, it can be highly used for hiding assets and assisting tax evasions. Well, there are no standardized international rules on how profits are made by trading in cryptocurrcies and Bitcoin can be charged a tax. For example the European Union has announced that the cryptocurrencies trading will not be subjected to VAT on the basis that the exchange transactions were a supply of services instead of being supply of goods. It is an approach that was also taken by the United Kingdom before the EU. However, the United States in 2014 confirmed that cryptocurrencies will be treated as property instead of a currency. It meant that any profits made by investing in Bitcoin will be charged at capital gains rate of each investor as opposed to their normal income rate.
What Future Holds For It?
The regulation of Bitcoin is expected according to the Steve Keen, the head of the School of Economics at Kingston University in London. He observed that the price of Bitcoin will drop in future due to the variety of positions that will be taken by the coin. He also suggested that there are chances that hard forks will be forced upon users instead of regulations. He has also suggested that the futures market in the cryptocurrency means that owners of this asset are largely linked to the financial market which means that what happens in the other markets will also influence the price of Bitcoin.
However, there are several opinions and drivers across the industry for the regulation. For some people, the regulation will add legitimacy to the cryptocurrency. While for other it is low on the priority list as it isn’t really a pressing issue. Consequently, this industry itself is opposed to large scale regulation that will negatively affect the decentralized nature of this digital currency.
In 2017, it has been observed that cryptocurrencies break away from being a niche industry which is used by the tech industry to become something far better than mainstream. However, this breakout resulted as the Bitcoin to become a buzzword in the home and in the office. As a result, it has become almost expected that regulations will be imposed in some form or any other form. While, the big questions still remain unanswered that what in what form thee regulations will take place and what effect will they have on the industry. It has been observed that many countries are looking forward to implement proper regulations on digital currencies while other countries have banned the operations of cryptocurrencies completely.