As Bitcoin and many other virtual currencies gain popularity and momentum, a common topic of debate is whether the US government or any government, in general, can exert control over their use.
Two basic issues support the Bitcoin regulatory debate:
Digital assets are a source of macroeconomic risk. Cryptocurrencies are capable of functioning as stand-ins for international currencies, and that would destroy the entire global economy. Countries such as Russia, China, Venezuela, and Iran, for instance, have all probed the use of digital currency to avoid US sanctions, putting the US government at risk of losing global authority.
China had taken the greatest step, closing down trades in their nation and driving miners out via land-use laws. Naturally, this has had little effect on the prices of cryptocurrency or the market bubble.
The difficulty in governing Bitcoin as well as other currencies is that they operate on a peer-to-peer network. While countries have been successful in banning online marketplaces such as The Pirate Bay and Silk Road, there are a large number of online marketplaces still operating. The major difference between cryptocurrencies and traditional currency is that transfers can be made through exchanges or directly through your bitcoin wallet. If you are also looking forward to trading in cryptocurrencies, click here.
As a result, the micro hazards enabled by cryptocurrencies are huge. One of the most enjoyable parts of possessing Bitcoin and other virtual assets is that their value may range in between anything from a few pennies to billions of dollars. These digital coins are highly volatile and their price can change at any time.
This may, however, be extremely harmful in the hands of evil people. Terrorist funding, auctioning illicit substances, ordering assassinations, avoiding taxes, laundering money, and other illegal acts can be easily carried out using bitcoins.
Is Bitcoin even possible to regulate?
Before going any further, it’s wise to consider whether Bitcoins can be regulated in the long run.
The cryptocurrency was created with the main goal of being decentralized and distributed–two critical traits that might make or destroy Bitcoin’s regulatory position.
Bitcoin does not have a single controlling body because it is decentralized. It is governed by a set of different entities throughout the world, making it nearly hard for a single entity to gain complete control over the network and control it as they see fit.
Currently, cryptocurrencies are subject to the SEC’s purview for investing, the CTFC’s authority for any offenses involving commercial activity, and the IRS’s jurisdiction for income or capital gains taxes.
The SEC just accepted one CBOE Bitcoin futures ETF and one CME Futures trading ETF. Although several applications have been received, no other trading ETFs have been issued.
The SEC now has the most regulatory clout in the crypto field when it comes to initial coin offerings (ICOs). It recently put an end to an ICO after fraudulent purchases were found.
Bitcoin exists in so many different places at the same time because it is distributed. It makes it very hard for a single regulatory right to impose its laws across country borders. This means that a state or any other related parties cannot raid a workplace and cease operations.
However, many hurdles could limit Bitcoin’s growth and use.
1. Going After Centralized Businesses: Exchanges And Wallets
The regulation of fiat onramps (exchanges), which the US government has now accepted is a natural first step. Cryptocurrency exchanges didn’t need much input or clearance from regulatory bodies in the early days of the cryptocurrency. However, when cryptocurrency became more popular, the government began to interfere.
Know Your Customer (KYC) standards and Anti-Money Laundering (AML) rules have been pushed by the SEC, FinCEN (Financial Crimes Enforcement Network), and the CFTC throughout all exchange trading within US borders.
Cryptocurrency exchanges have little choice but to deal with the demands of the US government. Because the great majority of bitcoin users use trade to access their funds, they will instantly comply with exchange-imposed rules.
Regulators may not be able to disrupt the core technology that supports Bitcoin, but they can utterly destroy the customer experience for the vast majority of crypto users, which is much of a barrier to deter most people from using cryptocurrencies.
2. User Analysis
Single cryptocurrency users can also be targeted by the law. Bitcoin (and even other privacy coins) are not private, contrary to popular belief. Because of its open, transparent record, Bitcoin might be said to be even easier to trace than fiat currency.
A judicial task force could simply track funds sent and received from specific addresses and know the real individual holding it if every bitcoin exchange agreed to a deal with US officials. Various companies have already formed strong collaborations with law enforcement in many countries to hunt down and identify the people behind illegal bitcoin transactions.
In the end, it will take a lot to impose any form of meaningful global control on Bitcoin, with power and uniformity of view being the most major elements. The bulk of the regulating alphabet agencies in the United States share the same idea of “protect the good men, stop the bad ones,” but there isn’t a single piece of wisdom to follow. Presently, the CFTC, SEC, and IRS govern cryptocurrencies in the United States, making it impossible to set overarching regulatory norms.
To answer your question in a nutshell; Yes– Bitcoin can be regulated. It has already begun to be regulated, with fiat onramps and severe KYC and AML rules.
While owning Bitcoin is banned in nations like Ecuador, Bolivia, Egypt, and Morocco, it’d take a major breaking of the moral fabric of the Law to impact crypto ownership rights in the United States.
It cannot, though, be completely shut off. Without a central exchange, there still are options to buy, trade, and transfer Bitcoin P2P. Any authority would have to put up a lot of work to entirely control something like Bitcoin, but that scenario is difficult but not impossible.