Although crypto-currencies and blockchain have been around in the internet market for a long time, they have really come out and earned themselves high regards as well as recognition not only amongst independents but enterprises as well in the past decade. They have earned themselves the right to be called as alternative forms of payment.
However, the Global Finance gurus believe that the biggest hurdle for Blockchain would be the regulatory uncertainty, making it risky for the big time investors from taking a dip into the sea of blockchain or crypto-currency.
Some Preliminaries of Blockchain Regulation
With the launch of Bitcoin in 2009 as a decentralized crypto-currency, a new era of e-currency was brought into being. Pretty soon, the success of bitcoin caught the attention of many independent programmers creating Litecoin, Ethereum and many more, as well as tech giants such as Facebook who started developing their own crypto-currencies seeing it as highly in demand by users. As a result of this, till now (2020), nearly 2,500 crypto-currencies have been launched into the internet community with trades worth more than $252.5 Trillion.
The prices of crypto-currencies are also different, ranging from less than a dollar to thousands of dollars with Bitcoin being the highest valued crypto-currency till now but all of these crypto-currencies are extremely volatile so the price tags keep fluctuating on a daily basis.
Being the pioneer in the crypto-currency world and still being the highest valued crypto-currency in the market, bitcoin hit the peak value of $19,650 in December 2017, then taking a huge dip down to around $3,100 over the course of a year, then again making a comeback in 2019, rising up till $11865 and continuing to fluctuate till now. Due to this, bitcoin has notoriously been a volatile currency since its launch, leaving a large group of investors skeptical and doubtful about utilizing their money for bitcoin. However, the upward trend has re-validated its worth as a potentially high-growth asset for many investors.
Although, with the passage of time, crypto-currencies such as Bitcoin, Ethereum and other major crypto-currencies have been legitimized through representation on popular online trading brokers such as E-Trade, TD Ameritrade, Schwab and CoinBase, it is not the same case for many blockchain applications.
With the rapid growth and adaptation of crypto-currencies/blockchain into the financial institutions, corporate businesses and governments all around the world, the decentralized nature of these blockchains are raising many questions and concerns relating to regulation. One of the most prominent example is the proposal Facebook made in 2019 with plans to introduce their own crypto-currency (Libra) and the crypto-currency gathering wallet (Calibra), creating concerns and turmoil with public battling with lawmakers about the security and regulations of the crypto-currency.
Right after its inauguration, Libra (Facebook) was immediately summoned for questioning by the U.S. Senate as a result of dozens of letters and concerns from legislators, demanding a formal explanation against the risks it would pose onto its consumers, global financial system and regulated financial institutions. An alarming concern was not only expressed by these bodies but also by the major partners of Facebook such as Mastercard, eBay, Paypal, Visa, Strip completely backed down from this idea, showing no interest in investment even before the program could be put into motion.
Although, blockchain system has gained substantial worth and reputation in the internet community as well as financial markets, it still has a long journey ahead of it in order to have a completely organized regulation structure for its consumers and investors.
Global Blockchain regulations
Blockchain regulation has been a hot topic amongst the global economies and governments where some countries are neutral to the idea of decentralized programs, some have adapted a friendly stance for the blockchain, recognizing it as a financial as well as economical benefactor and providing guidance to their public in order to benefit from them, and others who are yet to come to a conclusion whether to legalize it or reject it.
While there are governments who feel threatened to welcome the blockchain into their systems fearing that it would result in the countries to suffer a loss in their economic power as well as a shift from centralized economics to decentralized economics round the globe. There are also those countries (such as Russia, Colombia and China have even banned blockchain (crypto-currencies) by outlawing their use and investments.
United States Regulations
With a few formal regulations introduced and in place, the U.S.A. has a rather positive intent towards the crypto-currencies. Moreover, these regulations are kept under strict observation and monitoring by Securities and Exchange Commission (SEC), Treasury Department, Internal Revenue Service (IRS), Federal Trade Commission (FTC), and Financial Crimes Enforcement Network (FinCEN) where all of these federal entities hold their own definitions of crypto-currencies as well as their own tactics for the blockchain regulations.
Similar to USA, European Union also holds positive intent towards blockchain system and welcomes it. However, they also put in place rules and regulations in order to keep the entire blockchain regulation organized. In order to achieve this, EU also went ahead and added its 5th Anti-Money Laundering Directive into law in the beginning of January 2020 with aims to hold the blockchain and crypto-currency providers liable for any regulatory proceedings. In order to achieve this, EU has somewhat of a proposal where it would create a centralized database holding the crypto-currency users’ as well as provider’s identities and custodian wallet addresses through which the Financial Intelligence Units (FIUs) can access such data.
Although, blockchain has now gained worldwide recognition and has now grown its network throughout the globe, there’s still no firm regulation against the blockchain programs and legislations defining exact action plans and corrective actions against attempts of theft or any terrorism activities being detected through these channels.
With time, blockchain seems to be becoming more and more dependable and if it keeps on growing this way, soon there will be policies, rules and regulations put in place in order to ensure complete transparency and security of the users’ critical information.