Part 7 of our series on bitcoin basics. This post will examine the legalities surrounding bitcoin.
The Blockchain and Bitcoin are fundamentally new technologies. They operate independently of regulation or central government. These differences in national and corporate positions on Bitcoin and other cryptocurrency are common among nations. Many countries have just recently announced their intention to regulate or ban cryptocurrencies.
It is important to keep up-to-date with the latest policies in your country regarding cryptocurrency. Also, familiarize yourself and your tax laws.
In 2017, cryptocurrency was a topic of increasing interest in the political arena. It is expected that this trend will continue. Many central banks and governments see cryptocurrencies as a new reality. They have very little control over money transfers and are unable to regulate or govern them through official channels.
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The Political Views on Bitcoin
It could be said that three views have emerged on Bitcoin in the current climate. These include strict regulatory views (banning cryptocurrency), a pensive (wait and see) approach, as well as general adoption of cryptocurrencies.
The legal environment surrounding cryptocurrency is not only relevant to Bitcoin but also impacts the operation of the Blockchain, mining and what are called Initial Coin Offerings (ICOs).
Are ICOs Legal?
An Initial Coin Offering refers to a start-up sale in which new cryptocurrencies are held upon launch. It is similar to how a company about to go public might hold shares and an Initial Public Offering (IPO).
Markets tend to be affected by more restrictive stances regarding cryptocurrencies and Bitcoin in particular. China, for example, banned many Bitcoin exchanges where Chinese citizens could buy Bitcoin for Yuan. This sent Bitcoin’s price per unit of currency reeling by a factor of around $1,000 USD.
Russia’s President Vladimir Putin has also indicated a hard line on cryptocurrency. Putin offered to regulate cryptocurrency mining and ICOs within Russia. This could mean that Bitcoin investors in Russia may be subject to tax in 2018.
Cryptocurrency Regulations
Some countries have announced their intention to regulate cryptocurrency and instead create a national cryptocurrency. Russia and Kazakhstan both have announced that they intend to use a nation-wide cryptocurrency. Dubai, United Arab Emirates, has also announced emCash, a new cryptocurrency citizens can use for both private and governmental purposes.
Others have chosen to wait and see how cryptocurrencies will fare in other countries. South Africa, for example, is currently testing cryptocurrency regulation in “sandbox” (research environments), while Namibia, however, has not yet regulated cryptocurrency within its borders, but has already banned the use of cryptocurrencies as tender.
Bitcoin adoption
Lastly, some countries have embraced cryptocurrencies like Bitcoin and offered their support not only for Bitcoin mining but also for further entrepreneurial environments created by ICOs. Perhaps the most well-known countries for their signaling interest in cryptocurrency during 2017 are Japan and Taiwan.
Bitcoin and other cryptocurrencies pose a huge challenge to central banks, governments, and the current monetary systems. It is extremely difficult to regulate payments, enforce agreements (agreements), or regulate transactions made using cryptocurrency as the tender.
Bitcoin trades back to a time when central banks did not exist and offered paper money or housed gold. Trades are conducted peer-to-peer, operate in anonymity and all trades are anonymous. The Blockchain, Bitcoin’s ledger, is publically accessible on thousands of computers worldwide.
This is a concern to many countries. The fact that Bitcoin has been linked with hacker groups or online black market operators in the past has led some governments to be especially cautious about the technology that underpins Bitcoin and Blockchain.
Bitcoin’s Advantages
Bitcoin has some advantages over fiat currencies. The Blockchain of Bitcoin cannot be altered or “hacked” and Bitcoins can’t be fraudulently created or issued. Bitcoin is a deflationary currency because its value will not decline over time, due to the fact that only 21 million Bitcoins will ever be created.
Bitcoin, however, can be seen to remove some of the control central bank have over transacting parties for many decades and return that control to people all around the globe; this position complicates any government’s authority and ability to regulate trade effectively.
There is nothing inherently malicious about Bitcoin. However, countries around the world will continue to have different views on cryptocurrency for many years.
This is part 7 of our Bitcoin Basics Series. We’ll explain how Bitcoin works as money.