Maricor Bunal
Cryptocurrencies are becoming a very popular topic in many circles, and even people who completely don’t have any involvement with technology seem to be showing an interest in this area. There is indeed a huge potential in the way cryptocurrencies work and what they could offer us in the future, but they also seem to be changing our society in some unexpected ways. The very presence of cryptocurrencies on the market seems to be having an impact on the laws of some places, and various jurisdictions appear to be tightening the grip on the use of tools like that. How serious could the long-term impact be?
Cybersecurity
Many people seem to be joining the cryptocurrency market without having enough experience on the technological side, leading to various problems in the long run. This is especially bad when one looks around less popular cryptocurrencies that may be based on insecure standards, or at least ones that have not been tested and proven yet.
Many jurisdictions are starting to recognize the need for a better layer of protection for the people who invest in online currencies, as there is currently very little legislation that covers this aspect of the financial market. That is, however, part of the intended design of Bitcoin and other similar currencies in the first place, which has created a tricky situation.
Exchange of Information
Cryptocurrencies are also being seen as a suspicious entity by some governments, particularly when it comes to taxation issues. It’s true that some people are using them as a tool to evade taxes, but this seems to be drawing an unusually strong level of attention to the issue, resulting in responses that some have deemed extreme. On the other hand, some governments were already in the process of developing systems for the exchange of tax-related information in hopes of catching evaders, and it’s hard to tell how much of what we’re seeing recently has been motivated by cryptocurrencies specifically.
For example, OECD’s CRS will require banks to identify foreign customers and report their accounts to tax authorities, but cryptocurrencies and the accounts that tie them to the physical market seem to still be in a grey area. There has been a lot of discussion on the topic of regulating cryptocurrency exchanges like banks, but little in the way of a general consensus so far.
Investment
Another major aspect of cryptocurrencies is their potential for investment, but this is an even more complex issue when it comes to legislation. There doesn’t seem to be a clear stance among governments right now with regards to how strongly cryptocurrency trading should be regulated, and how to include it in the general trading system. This was a major takeaway I got from a recent interview with Matthew, partner at Steinpag law firm, and it looks like it’s a view shared by many at the moment. It will be interesting to see where the situation ends up, as this could be a period where new precedents get set, and many people could potentially be affected by any laws that get drafted in the near future.
Some maintain the opinion that the only regulation should happen at the point where cryptocurrencies are exchanged for “real” money, as that’s where the regular financial market gets impacted in the first place. But others fear that this could lead to the gradual separation of the two markets, as more people would prefer to keep their assets “in the dark”.
Complete Ban
And in the end, some countries have outright banned cryptocurrencies, using specific legislation. While this may seem like an extreme measure, governments have usually given various arguments in favour of going that far. The only problem this poses is if we eventually get to a situation where cryptocurrencies are a regular part of the global financial market. In that case, those countries would have to undo their current bans, and would probably lag behind the general market in terms of adopting new currencies and technology. Hopefully, this isn’t going to have a negative impact on any specific market around the world, but it’s difficult to make any adequate prediction in this regard at the moment.
One thing is clear – cryptocurrencies are definitely having an impact on our laws and regulations, and even if those effects aren’t obvious right now, they are going to gradually reveal themselves over the next few years. The faster cryptocurrencies get integrated into our society as a whole, the more pronounced this is going to be, so those who have an active interest in seeing cryptocurrencies evolve into something global should also be careful to take an active role in shaping the legislation around them.
Otherwise, we might find ourselves in a situation where cryptocurrencies are only making things more difficult for the average person while benefitting those above us quite well.
