We discussed whether bitcoin might fail in the future in part 4 of our bitcoin basics series. The laws of bitcoin are discussed in this piece.
Bitcoin and the Blockchain are pioneering technologies that function independently of centralized government, law, or legislation. As a result, national and corporate opinions on Bitcoin and other cryptocurrencies vary widely. Several countries have only recently expressed their intention to adopt, regulate, or explicitly ban cryptocurrencies.
It is vital to stay informed about your country’s cryptocurrency policies and get acquainted with applicable tax laws as well as planned legislation in your native country.
Throughout 2017, cryptocurrency has been more prevalent in political debate, and this trend is expected to continue. Cryptocurrencies represent a new reality for many central banks and governments. They do not influence money transfers, and it is nearly hard to regulate or oversee cryptocurrencies through official channels.
Political Opinions on Bitcoin
In the current environment, it may be said that three political perspectives on Bitcoin have formed throughout 2017. These include harsh regulatory views (banning cryptocurrencies), a cautious (wait-and-see) approach, and widespread cryptocurrency usage.
Much of the legal framework around cryptocurrency affect Bitcoin and the Blockchain, mining, and what is known as Initial Coin Offerings (ICOs).
Are Initial Coin Offerings (ICOs) legal?
An Initial Coin Offering (ICO) is a pre-launch sale held by new cryptocurrencies, similar to how a corporation ready to go public and sell stock might hold an Initial Public Offering (IPO).
Increasingly harsh attitudes toward cryptocurrencies, particularly Bitcoin, have a terrible impact on the market. For example, China banned numerous Bitcoin exchanges (where Chinese nationals could buy Bitcoin in Yuan) and initial coin offerings (ICOs) within its borders in 2017, sending Bitcoin’s price per coin down by $1,000 or more.
Russia has similarly expressed a harsh stance on cryptocurrency under President Vladimir Putin. President Putin has proposed to regulate the operation of initial coin offerings (ICOs) and cryptocurrency mining in Russia, which might imply that Bitcoin investors in Russia would have to pay tax on their winnings in 2018.
Regulations for Cryptocurrencies
Some countries have stated that they intend to control cryptocurrencies and replace them with national cryptocurrencies. Russia and Kazakhstan have both expressed their intention to adopt a national cryptocurrency. Dubai and the United Arab Emirates have announced the launch of emCash, a new cryptocurrency that residents can use for private and governmental transactions.
Other countries have taken a cautious approach to cryptocurrencies, waiting to see what happens. South Africa, for example, is already experimenting with cryptocurrency regulation in ‘sandbox’ (research) contexts, whereas Namibia has yet to regulate cryptocurrency within its borders but has banned transactions involving cryptocurrencies such as Bitcoin.
Finally, several countries have welcomed cryptocurrencies such as Bitcoin and have pledged support for Bitcoin mining and the creation of entrepreneurial settings through initial coin offerings (ICOs). Taiwan and Japan are likely the most well-known for expressing interest in cryptocurrency in 2017.
In general, cryptocurrencies like Bitcoin provide a significant challenge to governments, central banks, and the current financial system. It is extremely difficult to control payments or enforce contracts (agreements), including bitcoin as the tender.
Bitcoin has brought trade back to a time before central banks existed to store gold or issue paper money. All exchanges are peer-to-peer and run anonymously, while Bitcoin’s ledger – the Blockchain – is publicly accessible on thousands of computers worldwide.
Many countries regard this as a risk to anti-money laundering operations. The fact that Bitcoin has previously been linked to rogue hacker groups or online black markets has made some governments suspicious of the technology that supports Bitcoin and Blockchain.
The Benefits of Bitcoin
Bitcoin has some advantages over how governments and central banks currently employ fiat currency; the Blockchain of Bitcoin cannot be tampered with or ‘hacked,’ and Bitcoins cannot be fraudulently produced or created. There will be just 21 million Bitcoins ever created, meaning that Bitcoin is a depreciating currency, meaning that its value will not decrease over time.
On the other hand, Bitcoin might be seen as disbanding some of the power that central banks have had over transacting parties for decades and returning that influence people worldwide. This position complicates any government’s authority and capacity to regulate trade successfully.
While Bitcoin is not intrinsically corrupt, governments throughout the world will likely continue to hold varying opinions on the cryptocurrency for years to come.
We’ll explain how Bitcoin works like money in part six of our Bitcoin Basics series.