Of Regulations and Crypto Gold
We have been talking about the spate of regulations that has erupted in the past few months against cryptocurrencies. However, are not sure if ‘against’ is the correct preposition here for reasons beyond grammar. Regulations are supposed to keep us in check and that is quite understandable. Paying your taxes and stating where your money is coming from is what we all have agreed to, inadvertently or otherwise, when we have decided to stay and make a living in the country of our birth. Everything else is illegal, and not only that – but deeply flawed.
Cryptonewest thinks it is time for regulators to tighten the screw. Cryptocurrencies have been used, for months now, for illicit activities. The French newspaper Le Figaro has published an article entitled ‘Sex, Drugs, and Bitcoin.’
It was a thorough account of illegal trade with bitcoin and the use of these digital chunks of gold to launder money, fund drug trade and human trafficking. It has been reason enough for people and mostly governments to shift slowly into action.
The Good Cops
Take the Internal Revenue Service (IRS) in the United States. The IRS has been recently acting on a number of matters pertaining to the advance of cryptocurrencies. First, taxation. No one state has established a way to tax those goods. The governments of Austria and France have decided to qualify them as precious metal assets, which in turn would levy them with a heavy tax.
The IRS will try to identify the bank accounts of crypto owners, and will in fact demand from companies that facilitate and carry out the trade of cryptocurrencies to assist authorities. An important injunction by a New York Justice has intensified the feeling that the government is now reaching into the dealings of crypto world.
If the injunction holds, legislators will have teeth to fight through the thick law of anonymity the crypto world has neatly built around itself. The IRS is naturally not the only institution that has been worried over the unregulated trade surrounding cryptocurrencies.
Bank of England Governor Mark Carney has recently given a firm speech in which he outlined the pitfalls that lie ahead of all cryptocurrencies. Mr Carney delivered a well-thought-out speech, explaining that while he was not against the idea of a crypto currency, he was against it facilitating illegal trade. Mr Carney analysed the situation with heart-felt accuracy and he is our favorite for establishing a workable and fair framework for everyone.
The Bad Government – Venezuela
The Venezuelan government has recently introduced its El Petro cryptocurrency. It is an example of a rogue state trying to use the craze about cryptocurrencies and prop its ailing finances.
President Nicolás Maduro may have actually succeeded. In recent statement, Mr Maduro claimed that EL Petro managed to raise $735 million in ready money just within hours of going live. If true, this is a substantial amount, but it also raises an interesting question.
Rogue states have been gaining a lot from irregularities with regulation. North Korea is linked to several heists at major crypto exchanges all across Asia, for instance. It is bad for everyone if a country that has been slapped with reams of sanctions is still able to obtain money through multiple channels.
The warnings of Mr Carney now seem reasonable. While sacrificing the complete anonymity that cryptocurrencies confers onto them, users will ensure that the world order is upheld. Certainly, libertarians would argue that this goes against the grain of all such initiatives, and they are right. Also, they should be upset. However, we live in a world where we ought to track down what is happening and if honest people are not suffering so that a handful may gain.
When should we fear sanctions when it comes to cryptocurrencies?
We will now try to outline a short list of cases where you could be exposed to coming under legal fire for mishandling cryptocurrencies.
- Failing to declare and pay taxes – It is quite understandable that with the IRS now looking into cryptocurrencies, it is possible for individuals who have not been paying taxes to either be forced to pay on the amount they own now or on past ownership, which will generate a whopping amount of money.
- Anonymous cryptocurrency exchanges – These companies will certainly come under fire. No one individual will be allowed to trade in the denomination of cryptocurrencies without linking a real name bank account to his name.
- Law Firms – Surprisingly, law firms have also been accepting payments in cryptocurrency which completely undermines their professionalism. If your clients are capable to pay you with money that has not been declared, what then?
A final thought on the current regulatory climate would be that it is sorely needed. However, it should not be as harsh as to stifle innovation. A final solution should be found so that people may enjoy anonymity and that the law could reign supreme, as it should.