Understanding Crypto - Regulations
Whenever you are starting to get interested in cryptocurrencies, you should always see what the local rules are. Does your country even allow you to take part in this market? What are the rules and regulations? Why exactly do some exchanges refuse to operate in your country, even if crypto is not strictly forbidden there?
There are as many different rules and regulations as there are countries in the world. It is impossible to divide them into two parts - those who allow and those who don’t. The ones who allow each has their own rules and regulations that differ it from other countries, while the ones that ban crypto have various reasons to do so. In this article we will look into many of the reasons the countries claim to have and look into some of the reasons that are evident, but not said out loud.
Many countries claim that it is done to protect the user. As there is no central governing body, the world of cryptocurrencies is like the old Wild West. Various scams are born every minute and even the old ponzi scheme is brought back in virtual form once in a while. Because of that, various countries like Bolivia, Nepal, Ecuador and others have outright banned cryptocurrencies as such.
The opponents of this idea claim that the government should not just outright ban everything that is inconvenient and hard to regulate. When cars first appeared, they were also more dangerous than walking, but countries had to work hard to implement regulations and safety measures. Accidents still happen, but imagine if a country somewhere had just decided that it doesn’t want to deal with it and banned all cars? The same strange situation could arise now when most countries are developing and introducing this technology everywhere.
Some of the more conservative countries understand this issue and have proven that they are not against cryptocurrencies themselves. Countries like Ecuador and China, while skeptical against the ungovernable cryptos, are said to be working on government controlled cryptos. It could mean that they will slowly adopt the rest of the market, while it could also mean that they are willing to create a state controlled monopoly, only time will show.
For the longest of times the idea of a virtual currency has been tied to the idea of a hacker, sitting in a dark room, transferring untraceable money to buy drugs and weapons. It has been portrayed so in media and it is not entirely a baseless stereotype. Many illegal activities are committed through cryptocurrencies, like the infamous Silk Road or Al-Qaeda sponsoring their activities. While this is not all that cryptocurrencies are used for, it is something governments should deal with.
And that is the exact response crypto enthusiasts give when faced with these reasons for bans - deal with it, government! If we are using the same analogy as with the car, it is clear that some people will commit crimes with a car. Even then you should make the crime illegal, not the car itself.
Some opponents even claim that this rhetoric of cryptocurrencies being used for crimes is deliberately pushed by the governments to scare people who do not know better. They are deliberately trying to portray this technology to be evil so that they would gain public support. One does have to admit though - sometimes it is hard to know when politicians have decided to lie and when they are honestly just out of touch.
While it might be surprising to see this topic pop up in an article about financial regulations, it really shouldn’t be. Islam has very strict rules when dealing with financial instruments and the fleeting nature of virtual coins has gotten many scholars worried - are cryptocurrencies allowed in Islam? Due to the high volatility, it could be deemed to be speculation, which is frowned upon by many in the religion.
There are many opinions, just like in the rest of the world, if cryptos should be legal or not. The difference here is that this could be even a harder battle in some parts of the world, because not everyone would want to participate. It is one thing to be against the government and politicians, but something absolutely else if you want to stand up for something that is proclaimed to be forbidden on a religious basis.
That is why there are actual companies making lists and taking their time to examine each crypto and decide if it can be considered to be permissible. If the project has introduced some sort of a lending mechanism, then there is no question about it, it is forbidden. If the coin is known to be involved in criminal activities? Then it is complicated. This is sure to be a discussion that will not be solved soon.
“It is complicated”
Allowed, but with so many rules, that even an accountant would have a hard time. Exchanges know what to do when a country comes out with an outright ban of cryptocurrencies. They stop trading there and that is all. It is much more complicated when the currency is allowed de jure, but it has so much red tape around it that it is impossible to maneuver.
Very many exchanges have left the USA or particular states of US because they have found it impossible to navigate the regulations. While they have not outright stated that to be the issue, many experts consider that to be self-evident. No company wants to stay in a field where the rules are uncertain, can change any minute and they can be punished for not complying with it.
So many people have closely followed their crypto ticker only to miss that the government has made a change that either forbids them to or places such regulations that are not fit with their investment style. And, just like that, they can get their accounts closed by the exchange without any news of reopening.
One thing is clear in most of these cases. The whole legality or illegality issue revolves around one simple question - should the government allow people to own their own money and do what they want with it? No government wants to see money leave the ecosystem and disappear in the void. Each dollar sent out is a dollar not used for the local produce, hairdresser and mechanic. It leaves the country poorer.
It is understandable why the governments want to limit, or, at least regulate such a cash flow to a complicated and unregulated entity that are cryptocurrencies. So it is no surprise that the countries most worried about people being able to own their own money are ones that have internal uncertainty. It is a never-ending cycle. The weaker and more unpredictable the economy is, the more people will want to safeguard their assets somewhere that can not be reached by a devaluation of local currency or hyperinflation.
And the dilemma is crystal clear. The ancient battle of governmental taxation and individual freedom. Many want to enjoy the communal things bought by taxes, while not wanting to pay that tax and most people will agree that it is unfair. But what about instances where a person feels that the taxes he pays are unfair? Used for oppression by a tyrannical government? It is a sad truth - many governments will oppress their citizens or neighbours. So it is a moral question - are you supporting their actions by paying them money they require for atrocities?
So this is one of the rare cases where the citizens can squirrel away their money if they feel like it. It used to be that only big companies with many lawyers and accountants could place their assets in offshore accounts. But now the “little guy” can do it too. No government will outright say that they dislike cryptocurrencies because they lose control. But there is no way around it.
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