Why Crypto Regulation Should Not Mean Prohibition
Blockchains and cryptocurrencies are here to stay, and banks and governments are concerned. With the momentum that the budding markets have built in recent months, digital assets like Bitcoin, Ethereum, Litecoin, and Ripple have become household names. However, crypto regulation does not necessarily have to mean prevention if it can be approached in the right way.
In recent weeks, news has emerged of steps concerning crypto regulation taking place across the world, most significantly in Asia where the lion’s share of crypto trading occurs. Fake news and fearmongering of a complete crackdown in South Korea washed across the internet last week, causing a mass selloff and slumping markets.
This should be the first step towards legitimizing the entire industry since most of us need to use them to buy and sell crypto. A report by Wired magazine suggests that UK-based crypto exchanges are being turned away by British banks who want to prevent people wiring money to them. To use Coinbase in that particular country, you would need to do so via their bank in Estonia. Banks and governments fear money laundering and tax evasion, so the only way to prevent this would be to regulate and encourage crypto exchanges, not push them away.
Taxation is another key issue since crypto tokens need to be traded in and out of fiat. When there is the chance for a profit, governments are going to want their slice of the action. In the US, crypto-to-crypto trades are now taxable, according to a new law to be passed this year. The land of the free is the first to hound its citizens over taxes, whether they are operating within the country or not. A little tax collected could be a way to prevent all-out prohibition of crypto trading, which would be the greater of the two evils.
Currently, ICOs are the Wild West, totally unregulated and open to abuse, scams, fraud, and outright theft. Most are genuine efforts to innovate by using the blockchain or making an improvement upon it. However, it is a challenge for the investor to sort the digital wheat from the chaff. A clear set of rules, regulations, and more transparency from ICOs would help to legitimize this part of the industry and bring some clarity to a clouded and crowded environment.
Exchange-managed ICOs could be one step forward since, in their efforts to reduce illegitimate and illegal activities, they would only be listing the officially recognized players in the world of ICOs. Open consultation on ICOs and cryptocurrencies should also be encouraged, using a working group of blockchain experts and economists.
These are just some of the things that governments and banks should be looking towards implementing instead of using the iron fist to stifle innovation and control the technology and their citizens.
Is more crypto regulation required or should crypto space remain the Wild West? Add your comments below.
Images courtesy of Pixabay and Bitcoinist archives.