The most likely crypto regulations

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Where is the cryptocurrency now?

Governments started by regulating buying and selling, but moved on to regulating other aspects. For example, China has banned industrial-scale mining of cryptocurrencies and introduced its own digital yuan. The EU introduces its own digital wallet. So while some countries implement this type of policy, you cannot do it, while others implement this type of policy. Regardless of the location, cryptocurrency regulation is starting to take shape.

Much of the discussion revolves around preventing the funding of illegal activities. One case is Iran, where cryptocurrencies are actively prohibited from management by financial institutions that are not the central bank. The United States has also aimed to prevent tax evasion and money laundering by debating regulations surrounding cryptocurrency, with no major conclusions yet to be drawn. On the other hand, El Salvador has fully embraced Bitcoin as legal tender. So there is clearly a wide range of regulatory opinions around the world. How could this change?

Possible regulations

Already under consideration in the United States, a future regulatory measure could be the declaration of large sums. Transfers above a certain value (eg USD 10,000) should be reported to a central authority during tax season; for example in the United States, that authority is the IRS. This measure keeps the government’s eye on large sums of money in motion and would make it criminal not to report it, which would be visible during an audit anyway. Many cryptocurrencies like Bitcoin have open ledgers that are also traceable, so it’s not like people are going to be able to get away with nothing reporting. It’s a fairly straightforward thing to follow and has been implemented in previous banking regulations. It will therefore not be surprising to see this new regulation appearing everywhere.

Another potential regulation could be akin to accredited investors. When an individual or institution must have specific equity or meet other requirements in order to obtain a license to trade in assets with the authorization of a government body such as the SEC. This would give trusted people exclusive business rights to bypass other certifications that uncredited investors must acquire, but only when certain conditions are met.

Overall, a system like this would create a lower friction environment for whales and other major players in the regulated cryptocurrency arena. On the other hand, people with low net worth may be excluded from selling tokens or other regulated cryptocurrencies, much like they are now when it comes to securities such as stocks.

Sanctions and adoption

International regulations are also of concern. U.S. regulators have expressed concern over the use of cryptocurrencies by sanctioned states like Iran and Venezuela to dodge said sanctions. These transactions cannot be blocked by bodies like central banks, the IMF, etc. It would not be excluded to see the creation of international regulatory bodies or branches of current ones exclusively manage cryptocurrency transactions in order to enforce these sanctions.

In addition to the above, it is also possible for governments to adopt sanctioned currencies. That is, only certain currencies will be allowed to be exchanged, held, etc. With all altcoins created on a regular basis, it’s fair to say that governments and private institutions couldn’t regulate and require that they all be on a ledger. Therefore, sanctioned currencies would be a way to reduce the pressure of regulatory management at home and abroad. While it may not be possible to reasonably stop the creation of altcoins, you also cannot reasonably stop the entire counterfeiting industry. But there are certainly attempts made.

The regulation doesn’t have to be all bad though. Countries like El Salvador are adopting Bitcoin as legal tender, and this is a regulation that has many benefits for both Bitcoin and the entire cryptocurrency community. While this is only recent news at the moment, it presents some interesting opportunities for cryptocurrencies to be seen as a legitimate form of currency.

Regulatory trends

The general trend in cryptocurrency regulation so far is as follows. Countries with strong currencies compared to other countries support the regulation of cryptocurrency with the aim of preventing tax evasion and fraud. Nations that depend heavily on a working class like Algeria are in favor of banning cryptocurrencies. Countries subject to US sanctions are also in favor of cryptocurrency, but only on their terms.

Iran is a place of particular interest for cryptocurrency, as it has invested a decent amount in the field of mining. Jiang Zhuoer, CEO of B.TOP, speculated on Twitter that China’s old mining equipment could be sold overseas. Perhaps Iran, which has been increasingly favorable to the yuan in favor of the US dollar.

21% of El Salvador’s GDP is made up of remittances according to 2019 data. With this amount of money coming from foreign workers, Bitcoin as legal tender is spectacular for Salvadorans and anyone else working abroad. One could save on bank charges by converting cash to Bitcoin and then transferring it to another wallet rather than across a border. Other countries that have high remittance contributions to their economies may want to follow in El Salvador’s footsteps, if their adoption of Bitcoin as legal tender works.

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