Regulations on Cryptocurrency
By admin August 1, 2017

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Bitcoin and other electronic forms of currency like Ethereum have become the new popular investment. In this past year, the market that is known as initial coin offering (ICO), has been valued at $1.3 billion. These Cryptocurrencies have also garnered a considerable amount of attention of major companies like Microsoft. The popular investment has caught the attention of another player in the industry: financial regulators, like the Securities and Exchange Commission (SEC).

ICO use by startups has been compared to crowd funding, an unregulated form of receiving funds, by venture capitalists. Startups can use ICOs to raise money from investors, and then a percentage is sold back to initial investors. Unlike initial public offerings (IPO), ICOs are unregulated and are preferred for their ease of use.

Regulatory bodies have become concerned over Cryptocurrency use as an investment, that responds to market stimulus, rather than simply another form of currency to buy goods. The bump in value Bitcoin and Ethereum have attained has increased “get rich quick” seeking investors. Ultimately this has led to a speculative bubble.

Cryptocurrencies operate on an international network through the Internet. Investors use a digital wallet to store their profit and safeguard from possible hackers. Currencies like Bitcoin and Ethereum use blockchains as a function of a transaction. While Bitcoin relies on miners to release coins into the network, Ethereum uses “smart contracts” which are blocks of code that can be built on to the already existing technology to perform transactions.

Those who buy and trade Ether (the base currency that can be exchanged to dollars) for “tokens” maintain voting rights and stakes in enterprises. Moreover, this form of currency is not traceable, which more importantly means it isn’t taxed, unlike stocks.

As such, on July 25th, SEC announced a press release and published a report detailing the nature of Decentralized Autonomous Organization’s (DAO) with respect to the need for regulation. The report states that tokens are considered securities. SEC convicts DAO of violating Article 5 for not registering with the commission. The press release also cautioned market participants that, “offers and sales of digital assets by “virtual” organizations are subject to the requirements of the federal securities laws.”

However, the report does not state how regulations will be imposed on the currency in general, or even DAO. It has left the report as a warning, but is not charging “The DAO” (one specific organization under investigation). The think tank Coin Center outlines the Framework for Securities Regulation of Cryptocurrencies.

Other regulators like the Bank of England, the UK’s main finance organization, have sat idly by, claiming that Cryptocurrencies are not comparable to Sterling’s and Dollars. The bank issued a statement saying that these currencies “act as money only to a limited extent and only for relatively few people.”

Elvira Nabiullina, governor of the Russian central bank, has said that cryptocurrency should be regulated as a digital asset. In an interview with CNBC she stated, “We don’t consider that bitcoin can be considered as a virtual currency.” However, Alexey Moiseev, Russia’s deputy finance minister has more recently said that Cryptocurrencies should have tighter regulations to prevent money laundering.

The Financial Conduct Authority, a consumer watchdog organization, is conducting research on the impact of digital currencies, and plans to release a report later this year. For now, it is still unclear the legal standing of the currency and how it may be regulated in the future.

Read More:

The SEC is throwing a damper on ethereum madness

SEC brings dodgy digital-currency sales to earth

SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities

FinCEN Issues Guidance on Virtual Currencies and Regulatory Responsibilities

Why bitcoin and its digital cousins are under increasing scrutiny

Framework for Securities Regulation of Cryptocurrencies

Wall Street Regulator Sets Sights on Digital Coin Offerings


Thanks for sharing !

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