Bitcoin was invented around the principle of decentralization and its peer-to-peer network allows it not to be regulated by authorities or governments. Since Bitcoin was released, many countries are trying to figure out a way to keep it under control. So do we need Bitcoin Regulation? In this article, we will explain the role governments play in the cryptocurrency world and current government regulations on Bitcoin to help you have a better understanding of the situation and whether or not to invest in it. Despite that, Bitcoin is a virtual currency, we live in a real world that’s under governments’ control.
What’s government regulation for?
First of all, let’s understand what role does the government play in fiat currency. Fiat money is the money provided by governments and their value is granted by the governments’ reserves. Fiat currencies can be used to buy goods or services.
Governments use central banks to issue or destroy fiat and dictate how the money can and should be transferred. By tracking the money movements the government will know who profits from that movement, collect taxes, and trace criminal activities. Their control not only impacts a nation’s fiscal policy, business environment, and crime rate. With Bitcoin comes many fears and one of the most important ones is the potential for crime that comes with it. It is true that drug dealing, prostitution, terrorism, and other illegal activities can fund themselves thanks to the untraceable or uncontrollable movements of money.
Moreover, governments intentionally increase or restrict the amount of money circulating in an economy to stimulate investments, generate jobs, and most importantly, avoid inflation or recession.
From the information above, you might believe that government regulations for Bitcoin are necessary. But remember, every coin has two sides. Anonymity and decentralization are the main reasons why Bitcoin has value. With the interference of government, we don’t know how the price of Bitcoin will be affected. Based on the previous news and past examples, further regulations could have a negative impact on the price.
Bitcoin Regulation in Different Countries
As Bitcoin is rather new to this world, the current Bitcoin regulations are not universal yet. Bitcoin regulations differ in various countries now and some countries don’t even have related regulations.
The decentralized nature of Bitcoin has made it difficult to enforce restrictions on it. Now let’s take a look at some examples.
In the USA the federal authority does not have a policy towards Bitcoin, but they stated that they will consider it at some point in the future. In 2013 an agency within the US Treasury Department published guidelines, stating that using cryptocurrency for purchasing legal goods and services was not illegal, but the mining or trading of Bitcoin and the operation of exchanges where Bitcoins are traded will be subject to the same Anti-Money Laundering and Know Your Client measures just as other money businesses.
The US Securities and Exchange Commission has issued some warnings about the volatility of Bitcoin and the risk of fraud. Some states like New York have made an attempt to make licensing regimes to cryptocurrency exchanges. But these measures are challenged by the Bitcoin Foundation, an American non-profit corporation, arguing that with the increasing Bitcoin regulations the government is trying to control the adoption and use of Bitcoin and other cryptocurrencies.
In 2017 China announced a shut down of Bitcoin exchanges and officials of People’s Bank of China have noted that Bitcoin exchanges needed strict supervision and a form of licensing to operate in China. This move caused much greater volatility in the Bitcoin price going from 64% to 88% in 6 days.
So do we need Bitcoin regulations? The answer is yes. But what we need are regulations that can protect our rights and interests and reduce criminal activities at the same time. Knowing Bitcoin governmental regulations is crucial because these regulations will not only affect the attitude of Bitcoin investors, but also the general image the public holds towards Bitcoin trading. The supply and demand behind it also have a close connection to the price of Bitcoin.
This concludes today’s article on ‘Do we need Bitcoin regulations’ and the current regulations in some countries. We hope you learned a lot, enjoyed the read, and stay tuned for more great content.