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Bitcoin regulatory bodies are essential in crypto adoption

Bitcoin regulatory bodies are essential in crypto adoption

Bitcoin is by far the most popular cryptocurrency in the world. In a world that is becoming more digitalized and techier every day, it is without no doubt that bitcoin might become fully mainstream soon enough. The pseudo-anonymous nature of the network has been preserved for over a decade. There is no built-in protocol in place that can automatically capture the real-world identities behind the alphanumeric strings that constitute a public address.

Before the emergence of bitcoin, which started Jan 3, 2009, there is a 20-year history behind it, called "The Cyber Punks." These are developers, programmers, hackers who were always trying to figure out a term called digital scarcity. Digital scarcity is the idea that can you create assets digitally that are scarce in a world of the internet where everything is easy to replicate. The difficulty of this idea was to develop a decentralized digital scarcity, which is what bitcoin accomplishes.

The bitcoin network runs at 120 quintillion calculations per second. It is the biggest distributed computer network in history, and the cost of taking it over is beyond the reach of any government. It is also beyond the reach of any group of government. There is no entity or group of entities with computing power or the money to attack bitcoin in any meaningful way. However, the government can regulate the players, take out the miners, and control the exchanges. But in terms of regulating the use of bitcoin is almost impossible because it is happening all the time. They do not have the resources to stop people.

Regulatory controls in different countries

Japan has taken a proactive lead among the world's major economies by becoming the first nation to enact legislation that recognizes cryptocurrency like bitcoin as a legal payment method. They have also taken concrete steps to while cryptocurrency exchanges under a national licensing program.

In the United States, two federal agencies are involved in a debate over whether and how to regulate crypto. First of the agencies would be the Financial Crime Enforcement Network (FinCEN), which many people might never have heard of. It is under the Department of Treasury. It derives its authority from one law passed by the US congress called the Bank Secrecy Act (BSA). The BSA is concerned with instances where there might be too much secrecy around people's transactions. It is aimed to help stamp out money laundering. One of the classic ways of laundering money is to exchange it for another kind of money or through another person or agent who is not a criminal. In Bitcoin, there is not much the Bank Secrecy Act can do to regulate anything going on within the bitcoin system. FinCEN has done in that regard because, as long as people are entirely within a Bitcoin universe, they can do whatever they want. But as soon as they try to port out of that world and into another form of money, whether it is US dollars or another cryptocurrency, they are bound to be regulated as a Money Service Business (MSB) or Money Transmitter Business (MTB).

Another interesting thing to note is that the MSB and MTB are regulated by the federal government and regulated on a state-by-state basis. For example, if you want to be a money transmitter and operate in California, you need a license to operate in California. This places a high barrier to entry into the exchange market if you want to be a money launderer. Effectively, what that is doing right now is squeezing out the smaller exchanges and services and favoring the big ones that can operate at a national scale and have the budget to get licensed as a money transmitter in every single state. The whole point of FinCEN is to try to keep some control over where the money originates and how it moves from person to person because it is primarily concerned with money laundering.

The other federal agency that has weighed into the discussion of regulation bitcoin is the Internal Revenue Service (IRS). This is the tax agency in the United States that collects income taxes and taxes on other property forms. The IRS is interested in Bitcoin because if it is being used as a form of payment, it is used to generate income payment or increase in value over time; hence, it is subject to the United States' tax law. The IRS has said that in its guidance on Bitcoin, it will treat Bitcoin as a form of property. As a result, if a person is paid in Bitcoin, he has to convert it into a dollar equivalent and report it using the category barter.

Over 150 countries use bitcoin in one way or another; certainly, regulations and regulatory bodies will help decriminalize the perception of cryptocurrencies and take it to the next level.

 

 

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