Cryptocurrencies are a novel thing in our world. In the past couple of years, through the success of mining, many got familiarized with cryptocurrencies, them coming into the limelight. Whether their relatively short-lived popularity had any impact, is yet to be seen, especially with graphics card mining on a smaller scale dying out and Bitcoin losing its value. Many people would love to use cryptocurrencies, yet they wonder about safety and security and whether it would be legal to use them as currencies instead of going through more standard financial transaction mediators. To answer that, we should first take a look at what cryptocurrencies are.
Cryptocurrencies – A Short Recap
Cryptocurrencies started with Bitcoin, when Satoshi Nakamoto, a man whose origin is yet to be determined, created Bitcoin. The idea of cryptocurrencies is a decentralized network which grants complete anonymity to users yet also transparency about all the transactions. A cryptocurrency is an entry in a network which cannot be changed without going through a set of security checks. It is a peer to peer network, like file sharing, but not completely similar.
Cryptocurrencies are virtual money, yet one which does not use a central bank server, but rather the entire network. This not only enhances security (the entire network needs to agree on something for it to be written in the ledger), but it also provides anonymity and transparency, because every user has access to details about every transaction.
Regulating Cryptocurrencies – A Real Challenge
With so many tokens present today, regulating cryptocurrencies became a necessity, yet not something which is yet to actually take place. Regulating cryptocurrencies means defining them firstly. That is one of the challenges, as they might actually be a completely new asset and not just money. A new asset would mean a completely new set of laws and that takes time.
There are plenty of concerns regarding the legalization and regulation of cryptocurrencies, like money laundering and using cryptocurrencies for illegal transactions. Likewise, there are plenty of phony tokens and unfulfilled promises, as many ICOs turn out to be a dead end, sometimes deliberately, sometimes through a lack of luck or incompetence. All of these things have to be accounted for in order to have proper regulations of cryptocurrencies.
Diversity – Just Another Obstacle
There are plenty of obstacles on the road to regulating cryptocurrencies, but one of the most obvious ones is the diversity, and not just of the tokens, but also of the opinions of cryptocurrencies. In order to achieve universal regulations, the definitions and views of cryptocurrencies have to be somewhat similar, if not identical, between all governing authorities. If that does not happen, then the regulations in one country will differ from another, allowing for multiple problems to arise.
The Fear of Over-regulation
One of the bigger obstacles in regulating cryptocurrencies is over-regulating them. It is easily recognizable that cryptocurrencies allow new companies, startups, if you will, to have access to capital. Wonderful ideas may come to life if given the opportunity, and cryptocurrencies provide that opportunity.
On the other hand, fraud is possible, as well as lying to investors and scamming them. Putting a clamp on cryptocurrencies would technically limit them to the point of being unnecessary.
Cryptocurrencies can be regulated, but that is a challenge for the coming years, one that will hopefully be met.