Cryptocurrencies are a form of currency that exists solely in the digital realm which makes use of encryption to verify transactions and generate them. The transactions made with cryptocurrencies are recorded in a ledger called a Transaction Block Chain. Cryptocurrencies do not correlate with any centralized system of currencies which the everyday fiat currencies comprise of. This essentially makes cryptocurrencies free of regulation.
2009 was the year when the first form of cryptocurrency was introduced to the world with Bitcoin. Its creation is credited to Satoshi Nakamoto, which is believed to be a group rather than an individual. The value of the initial Bitcoin transactions were negotiated on bitcointalk forums by individuals where a notable transaction of 10,000 Bitcoins was used indirectly to purchase two pizza’s by Papa John’s.
Jumping forward a few years, we see cryptocurrencies rising to become a major factor in the global economy. Bitcoin is valued in the range of $4,000 per coin. The meteoric rise in the value of cryptocurrencies adding to the fact that they are unregulated has raised many eyebrows. The legality of unregulated currencies is in question, and as a result the legality of cryptocurrencies has become a point of speculation.
To legitimize cryptocurrencies from a legal standpoint, the one thing that has to be done is to form a sort of regulatory system that governs them. That goes against one of the core values that the creator, Satoshi Nakamoto, based the whole system on, i.e. a peer-to-peer decentralized payment system. Such a system enables customers to operate with more autonomy than a centralized system could ever allow.
Initially, all the cryptocurrencies were not willing to budge on their stance about being able to operate without regulatory system but that was not going to go well with the major financial regulatory bodies.
China has taken drastic action against cryptocurrencies by imposing a blanket ban on all Initial Coin Offerings and stringent regulations on cryptocurrency transactions. Any company, organization or individual who partakes in any form of crowd funding with the use of cryptocurrencies will be investigated by the Chinese government.
Japan has taken a more cryptocurrency-friendly stance in its regulatory actions, having granted eleven Japanese bitcoin exchanges to operate under the country’s new financial services regulations according to Japan’s Financial Services Agency. It has also stated that registration with the FSA is a requirement for them to be allowed to operate in the country. This will allow them to put in place better systems and policies that will prevent cyber attacks. Due to the fact that bitcoin exchanges will also be subjected to full surveillance, better security guidelines will be put into place such as verifying customer identities. That will help with combating the crime of money laundering.
Regulation in cryptocurrencies is something that is a question mark and a point of major dispute considering the different courses of action being taken by regulators across the world. That being said, it can’t really be said that cryptocurrencies can ever truly be completely regulated like the US Dollar or any other currency in the world.