The most significant risk involved with cryptocurrency, because of which people find it a risky investment, is its lack of regulation. Compared to the regular fiat currency, no central authority regulates it. This is why, if something goes wrong in your investment process, you can’t blame anyone or ask for help from any central authority. Follow the link if you want to start day trading.
With the augmentation of the popularity of crypto all across the globe, governments have started taking the matter of its regularization seriously. Financial leaders worldwide have started to ponder how they can regulate digital currency and make it a more reliable and acceptable form of investment.
It is also true that once crypto gets regulated, it will become easier for investors to trust it as a reliable investment method. It will bring a revolution in the world of digital currency and investment.
Issues Associated With the Regularization Of Cryptocurrency
The biggest issue associated with regularizing cryptocurrency, especially bitcoin, is that the traders conduct them through a unique network called P2P. As many cryptocurrencies are currently working in the market, regulating them all at once becomes a hindrance for the government.
Extensive Platforms Using Cryptocurrency
Though the government can manage the commonly used routes like the silk road and pirate bay, the vast number of cryptocurrencies to be regulated becomes harder for them. As investors can make transactions through direct connections and exchanges, controlling every step of the users is a tough job.
This is especially difficult for governments managing many states. For instance, in the United States of America, it might be difficult for the government to develop a legal approach that is consistent for all states.
Different Financial Sectors Having Different Opinions
Though the US government has come up with our federal cryptocurrency legislature, there are lots of issues in the way. According to the financial crimes enforcement work, cryptocurrency is not legal tender.
However, a cryptocurrency exchange can be used as a route for money transmission as cryptocurrency is a proper substitute for currency. However, the internal revenue service considers cryptocurrency to be an illegal tender. As the major financial companies of the government are not on the same page, cryptocurrency gets difficult.
Legit Ways To Regulate Cryptocurrency
The ways to regulate cryptocurrency are as follows:
- Taxing Its Usage
The best way the government can regulate digital currency is simply by placing a tax on the fiat currency that someone uses to take out the virtual currency. This way, the cryptocurrency owner will have to pay at least some money as tax when he wants to buy a crypto token. Alongside this, anyone selling it and getting his hands on the fiat currency would also have to pay some tax. This way, the regularization of cryptocurrency and its activity might become possible.
Many new-age crypto users consider it a possible way of exchange. They like to use them to buy and sell commodities. The government can tax it as a medium of exchange. Anyone who uses crypto over fiat currency to buy or sell a commodity will have to pay some tax.
- Regulating The Exchanges
Exchanges help the movement of crypto within the market. In the crypto-verse, exchanges are of significant importance. Governments can regulate crypto by regulating these exchanges first. As all the crypto transactions run through the exchanges, regulating them would mean regulating the crypto automatically.
This way, tackling all the illegal and illicit activities that may affect crypto’s credibility becomes possible. Banks will open special accounts for the exchanges and then regulate their activities properly.
- Get Aid From Crypto Experts
Developers know the ins and outs of cryptocurrency properly. Keeping them in the loop and having their trust in the process will help governments easily regulate the working of crypto. Hence, governments need to create a think tank of crypto experts and developers that can advise the financial set-up better on how it can manage the regulation of cryptos.
Final Thoughts
Regulating crypto will help remove the risks associated with digital investment. Governments can surely achieve this goal by planning it properly and bringing all the stakeholders on one page.