Do the rules apply? Setting the crypto regulatory record straight
Cryptocurrencies represent new frontiers for finance and technology -- offering exciting opportunities for trade and investment. An industry still in infancy, its potential is yet to be realised.
And while these 'unknowns' are a source of great excitement, for some they also induce anxiety. Cryptocurrencies are often touted as a 'law unto themselves'; their users feared unprotected and vulnerable to misconduct.
However, these new frontiers are less of a 'wild west' than some might think. Those stepping into this new world should take heart from some regulatory realities.
1. Regulation is a reality
Contrary to popular opinion, the cryptocurrency industry is not a law unto itself, but is in fact subject to laws and regulations.
Just as the laws and regulations that govern traditional financial systems vary from place to place, so too do the regulatory frameworks that apply to cryptocurrencies. This has resulted in the development of regulatory patchwork quilt of sorts across the sector, however regulation remains the reality.
Common regulations include:
- Cryptocurrencies considered taxable income;
- Licensing requirements for cryptocurrency exchanges;
- Requirements that cryptocurrency exchanges comply with anti-money laundering and counter-terrorism financing regulations -- including 'Know Your Customer' practices;
- Standards for the issuance of cryptocurrencies;
- Protections in general law for deceptive and misleading conduct.
2. Regulation is on the upward trend
Whether to increase tax revenue or quash criminal activities; to protect consumers or provide clarity for business operations, governments, institutions and the cryptocurrency sector alike are calling for greater industry regulation.
And although decentralisation is core to cryptocurrencies, even most of its strongest philosophical supporters recognise the benefits of improved regulation.
Greater regulation of the cryptocurrency sector stands to build consumer confidence; it gives digital currencies legitimacy as trade and investment options. A buoyant sector with clear operational frameworks is ripe for investment and development. And an upward trending sector bears good tax fruit for governments.
Many stand to benefit from the improved regulation of the cryptocurrency sector. Discussions and efforts are currently underway at many levels of government and society to explore just what appropriate regulatory frameworks might look like.
Where to from here?
When it comes to cryptocurrencies and their possible applications, we have only seen the tip of the iceberg. There are so many frontiers yet to be explored.
Those preparing to journey into this new world can go confidently knowing that this is no 'wild west' scenario. Rules and regulations do apply -- and will only apply more so as cryptocurrencies and their applications develop.
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