For a long time, regulators treated cryptocurrencies as the birthplace of users of the darknet and criminal structures. However, after a crypto boom in 2017, when the industry began to grow exponentially (by the number of blockchain projects, miners, crypto exchanges, investment funds, and ICO) and a wide range of investors got access to tokens, it became obvious that the crypto industry will very soon be regulated.
At the same time, state structures often do not have a clear position on this issue. The regulatory framework of different countries is constantly changing from a complete ban on any activity related to the crypto industry to the provision of special economic zones and benefits.
U.S.Treasury publishes a new report on fintech, cryptocurrency, and blockchain
Regulators see cryptocurrency as a threat to the economy, an uncontrolled source of funding for criminal activity and undermining its authority as a controlling actor.
Trying to control the cryptoindustry, regulators have the following goals:
- not to allow citizens’ money to leave the cryptocurrency world out of their control;
obtain personal data of citizens using cryptocurrencies;
- get tax deductions from operations with cryptocurrencies;
- cut off the sources of financing of criminal structures;
- to prevent violations of the current legislation in the field of circulation of funds;
- protect citizens from illegal activities: from the actions of fraudsters and criminals;
- create a “national” cryptocurrency, control over which (including emissions) will be completely in the hands of the state, and, perhaps, to ensure the transition of citizens to this currency instead of the fiat option;
- to ensure the universal use of this currency to pay for goods and services in the country and to create opportunities for using coins outside its borders;
- get out of financial crisis or circumvent sanctions;
Create a blockchain-innovation promotion system to organize the flow of investment into the country, provide new jobs, reduce bureaucracy and various costs.
Of course, some bullet points from this list can be questioned. However, the movement towards regulation is underway, and we already see an example of the first national cryptocurrency – El Petro. Yes, the coin is subjected to various kinds of criticism, but it is already a step forward.
At the same time, the US Securities and Exchange Commission (SEC) is a permanent source of information about updates to the regulatory framework and identifying fraudulent ICOs. The commission has even created a special site to give an example of a fraudulent ICOs.
Meanwhile, regulators in countries such as Singapore, Switzerland and Japan openly support innovations in the blockchain and fintech industry and sponsor competitions in the development of projects in the field of blockchain technologies.
Developers and ICO
For developers, a crypto-oriented regulatory framework and obtaining licenses that endorse their activities are confidence in the future in the territory of a given country and obtaining a legitimate status that only adds confidence to the project and attracts investors.
However, last year because of the hype around the cryptocurrency industry a lot of fraudulent blockchain projects appeared on the market, collecting money through ICO and disappearing with them. Clearing the market of such negative elements that harm the reputation of the entire industry will benefit all participants in the cryptocurrency sphere, including lawmakers who form the regulatory framework.
For example, the approval of the Blockcoin project by the US Securities and Exchange Commission (SEC) isolated it from a heap of fraudulent ICOs and also allowed investors from the United States to take part in the crowdsale, making the project able to collect a record $ 257 million at that time.
Perhaps, with a certain approach to the regulation and development of the “national cryptocurrency” direction, we will come to the conclusion that crypto enthusiasts will be allowed to participate only in local primary coin offers (including through ICO-pools) and only with the help of state-regulated coins.
Cryptocurrency exchanges and traders
Centralized crypto exchanges are required to comply with the client identification and anti-money laundering policy (KYC / AML). Otherwise, they will face the risk of transferring the business to another jurisdiction. From here follows strict adherence to the instructions of the regulators on the delisting of anonymous cryptocurrencies, the prohibition of trade for users from certain countries, etc.
Traders expectedly this situation does not suit, because many came into the world of cryptocurrency precisely because of their decentralized nature and the possibility of an anonymous increase of financial resources. On the other hand, obtaining a license by the exchange, even if it gives it a legitimate status, does not guarantee security (and, after all, money and personal data of users are at stake).
With further cooperation of exchanges and tax services, some users will switch from centralized trading platforms to decentralized counterparts and OTC platforms, while some will remain “play white”. However, if the “tax nuts” are too tight, the exchanges themselves can begin to consider the possibility of moving to another jurisdiction.