The impact of cryptocurrencies on the world economy


Due to their dynamic rise in value and international popularity, cryptocurrencies have come under sharp scrutiny and increased pressure from global regimes and a host of regulatory bodies. International organisations and government bodies have taken quite severe approaches to cryptocurrencies. Considering themes of jurisdiction and fraud, these entities must ask if multinational policies are beneficial to world markets whilst carefully balancing national capital control issues. Moreover, the perceived downsides to cryptocurrency invite a thorough examination of money laundering as a mechanism for funding terrorism. We aim to address the phenomenon of regulation that cryptocurrencies must face and the complex manner in which governmental responses across the world are being played out. Central Bank Digital Currencies or CBDCs will incorporate the best features of blockchain tech, sans the freedom and decentralisation. The impact of cryptocurrencies on the world economy is undoubtedly far-reaching. 

Cryptocurrency regulation only in its nascent stages

With a few international regulations already in place, like the European Union General Data Protection Regulation ("GDPR"), blockchain technology must reaffirm its anonymity, besides adhering to data security regulations. Otherwise, blockchain tech will become a rogue instrument in the world economy, with every possibility of it being used as a tool of fraud and terrorism. 

With global markets and national security in tatters, countries and international actors require joint action to form a uniform virtual currency framework. In addition, regulatory bodies need to enforce sanctions, using criminal charges to bolster cybersecurity and combat illicit activities. 

Cryptocurrencies: Making inroads into Banking

Cryptocurrencies have been getting worldwide attention. As a result, many central banks have started implementing options to adopt these blockchain technologies as payment for retail and large-value purchases.

CBDCs the next challenge for regulators & users worldwide

Some complex factors have dictated China's response to the cryptocurrency conundrum. Primary has been the authoritarian proclivity to impose the state's will upon various domains. It is testimony to cryptocurrencies' spectacular influence on China's economy that the state has undertaken to restate its already explicit intentions. An important aspect is controlling energy resources since crypto mining within China has made Chinese electricity consumption undergo significant changes. 

This ecological challenge has to be faced, so, on this point, China likely has Greenpeace's approval. There's no outright ban in the world's second-largest economy. Buty the state will go on pressurising both mining and trading. The final nail in the cryptocurrencies' coffin inside China will be the 2022 launch of the Digital Yuan, the first in a long line of envisaged CBDCs. This will presumably make traditional cryptocurrencies (within PRC) irrelevant.  

International Authorities and Cryptocurrencies 

For a time, governmental authorities were feverishly trying to keep pace with the razor-sharp pace set by cryptocurrencies. Measures cropped up here and there across regions. Unfortunately, most are half measures at best, fighting shy of fully exposing themselves to the task of status resolution. Are cryptocurrencies to be regulated or not? 

The US has yet to lead: American federal confusion over crypto regulation

The US has varying perceptions of cryptocurrencies across their federal entities, and laws vary from state to state. The US has the second-largest volume of Bitcoin, nearly twenty-six per cent of the global count.

Nonetheless, in comparison to other major powers, the US government has retrospectively set up no regulatory guidelines. This absence of a uniform regulatory framework has rendered the nation ill-fit to welcome the global phenomenon of cryptocurrencies. Moreover, without a uniform system of rules, many blockchain startups sidestep the US due to the implications of future taxations. 

On looking at some regulatory bodies, we see that the Financial Crimes Enforcement Network ("FinCEN") does not deem cryptocurrencies to be legal tender. Nevertheless, FinCEN has considered exchanges as money transmitters because tokens are "other value that substitutes for currency". 

Conversely, the Intern Revenue Services ("IRS") regards cryptocurrencies as property. In March 2018, the IRS issued a formal statement to remind taxpayers to report virtual currency transactions. 

Furthermore, multiple federal bodies in the cryptocurrency exchange regulations sphere have claimed jurisdiction. For instance, the Securities and Exchange Commission ("SEC") reported that they consider cryptocurrencies to be securities.

The Commodities Futures Trading Commission ("CFTC") considers Bitcoin to be a commodity. 

Due to their very restricted uniform federal legal framework and confusion over what cryptocurrencies are, the US has put crypto users and their citizens at the tender mercies of crypto criminals. Sans sweeping federal laws, states are left to make their regulations on the usage and classification of cryptocurrencies. 

EU: first steps into crypto regulation

On December 15, 2017, the European Council and the European Parliament agreed to amend the 4th Anti-Money Laundering ("AML") Directive, and thus the 5th AML Directive was brought to being. This directive will bring virtual currency exchanges and custodian wallet providers under the aegis of European AML legislation. Once incorporated into national legislation of the EU member states, these exchanges and custodians will be obligated to register with the appropriate authority within their jurisdiction. They shall also comply with guidelines that will give national investigators greater access to information to fight against illicit activities. 

The European Court of Justice ("ECJ") has maintained that for tax purposes, VCs are to be treated as a currency rather than a commodity, having exemption from the Value Added Tax ("VAT") according to the current EU laws and regulations. Therefore, VCs will be exempt from taxation across all jurisdictions of the EU. 

MiCA provisions: precursor of regulatory control?

The EC has proposed a bespoke, mandatory regime under the aegis of MiCA. The ambitious framework will replace all national frameworks in the EU.legal harmonisation is a stated goal. 

Affected fields will be - transparency and disclosure, authorisation and supervision, governance measures, consumer protection. 

MiCA forges new ground in defining and classifying crypto assets. But, again, a pragmatic consolidation of divergence in regulations across Europe is sought.  

MiCA has identified three crypto-asset categories liable to be regulated. Besides, the proposed framework sets out a detailed requirement set aimed at crypto issuers, impacting topics such as licensing. Issuers outside of the EU will be drawn within the ambit of proposed regulations. The plus p[ointgg is that those with a record of issuance within the EU are in good standing with the Law. 

The EBA, or European Banking Authority, has been covered by the MiCA. The latter will be responsible for tougher capital, investor, and EBA supervisory requirements dealing with governance, conflicts of interest, reserve assets, custody and white paper obligations.

Conclusion

The volatility that characterises cryptocurrencies in the market has, not too absurdly, also becomes its reflection in the world of administration and economics. The regulatory scenario across regions is just short of chaotic. Leastways, one wishes a lot more were doable. The pace of development is fast, outstripping populations' ability to grasp change. By the time the world central banks launch respective digital currencies, the decentralised freedom that has given cryptocurrency its conceptual purity shall surely be a flag in tatters. Start your crypto trading journey with most trusted and regulated exchange.

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Legit Brokers
Legit Brokers

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Benefits of Investing in Cryptocurrency
Benefits of Investing in Cryptocurrency

Cryptocurrency is a decentralized currency, for example, as banks don't give this currency; consequently, it is likewise not regularized by any administering body. Furthermore, the data of coin holding, moving is obtained using an electronic medium.

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