[Dex, Cex, Popular Exchanges and Trading Cryptos] - Steemit Crypto Academy Season 4 - Homework Post for Task 7
Hello,
This is homework post for task 7 in crypto academy.
Question :
Can cryptocurrencies and exchanges be regulated? How do regulations affect the crypto world? Name some countries with regulations.
Answer :
The increasing list of fraudsters and hackers on exchanges of cryptocurrency is not new. These things are from the starting of the bitcoin blockchain. I think these hacks and scandals have garnered an infamous reputation for exchanges as well as for cryptocurrency. So, I think regulations might offer a way out for these exchanges to clean these bad things about them. But this thing will take time as governments need to understand cryptocurrency behavior within the existing legal framework.
To support my point that the cryptocurrency market and exchanges should be regulated, I want to make some points about why they needed to be regulated.
For investors protection
As we all know that how volatile the cryptocurrency markets are!! Like any other assets, the value of crypto asset is always prone to market manipulation and to price volatility. We have all seen wild fluctuations in cryptocurrency asset,s prices in past few months. So, there is a need for regulation to disclose the performance, future potential and risks involved with cryptocurrency assets.
Less knowledge
There is very less awareness about cryptocurrency market in people around the world. As there are some exchanges that will provide trading in around 300 crypto assets. But, globally there are about thousands of cryptocurrency assets. As of today, most of traders know about Bitcoin, Ethereum but nobody knows about the thousands of other crypto assets. So, a regulatory body is needed that will educated people about cryptocurrency market and about their risk. This will help people, in not making trades blindly and risk their money.
Technology Risk
There is a cyber security risk in the case of cryptocurrency markets and exchanges. Also, there are more chances of online frauds in cryptocurrency as all the transmission happens online. As we know, hacking is the main problem with cryptocurrency in today's time. A cyber security attack will cause great losses for investors who have their savings in cryptocurrency assets. So, I think regulations might help to fix these problems.
Money Laundering
This is another problem linked with cryptocurrency. All the governments around the world are worried about terrorism financing through cryptocurrency. As the cryptocurrency system is unregulated so it has abilities to fund illegal activities. So, today cryptocurrency needs a great investment in technology to find suspicious transactions and this can be done when we regulate the crypto world.
Effect of regulation
I think regulations of cryptocurrency will affect crypto assets in a positive way. The good things that I think will happen if cryptocurrency is regulated are :
It will make crypto-assets less susceptible to manipulation.
Regulations will also help to make crypto assets more stable which is better than today's wild fluctuations.
People find more trust in cryptocurrency assets after regulations as they are more stable and less manipulative now, this will increase the value of cryptocurrency assets.
Regulations has potential to make these markets much safer and people might look at these as safer investment option.
Regulations will also lower the number of frauds that happen in the cryptocurrency world.
Money Laundering can be stopped after regulating cryptocurrency assets.
These are some of the things that I think will happens to the cryptocurrency world after regulations.
Country with regulations
USA
In the USA, cryptocurrency follows the guidance given by Financial Crime Enforcement Network (FinCEN) since 2013. The Treasury has defined Bitcoin as money services business (MSB) but not as currency.
Canada
Bitcoin is viewed as a commodity by the Canada Revenue Agency (CRA) this means that Bitcoin(cryptocurrency) transactions are seen as barter transactions, and the income that is generated by these transactions is treated as business income. The taxation on these transactions also depends on whether the individual has a buying-selling business or is only concerned with investing purposes only.
Bitcoin exchanges in Canada are considered money service businesses. This will bring them under the sight of the anti-money laundering (AML) laws of Canada. Bitcoin exchanges need to register themselves with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), this helps to report any suspicious transactions, along with the compliance plans and also helps to keep certain records.
Australia
Australia considers Bitcoin(cryptocurrency) neither as money nor a foreign currency, with the Australian Taxation Office (ATO) ruling it an asset for capital gains tax purposes.
Similarly, many other countries have other kinds of regulations on crypto assets. Some of them are The European Union, Finland, Belgium, U.K., Bulgaria, .....etc.
Some countries with strict restrictions
China
China has had some strong restrictions on cryptocurrency since the start of digital currencies. It takes strong actions against cryptocurrency assets and these strict actions are getting more strict every year. To deal with cryptocurrency China has introduced its own digital currency named Digital Renminbi.
Bolivia
This country's government completely bans all currency that does not follow its regulations. They said that cryptocurrency assets are baned to lower down digital criminal activities.
Some other countries that has banned cryptocurrency are Columbia, Ecuador, Vietnam, Russia.
Conclusion
Cryptocurrencies are around 10 years old but still some countries found them risky so they banned them and some have put restrictions. The decentralised nature of cryptocurrencies is still a challenge for some governments. Many countries are still trying to figure out how to regulate crypto world, which I think needs to be done. As regulation has many benefits, it will stabilize crypto markets, lower frauds, lower criminal actions, ...etc. At last, I would say governments still need to find out ways to regulate crypto world.
Thank You !!!
For your attention : @dilchamo