What are the Laws for Cryptocurrency?
What is Cryptocurrency?
Cryptocurrency is a mode of online payment which uses blockchain technology. Such currency can be exchanged for various goods and services worldwide. Unlike paper notes and coins, cryptocurrency is not available in physical form. Usually, it is not controlled by any centralized body.
Current and Proposed Cryptocurrency Regulations
In recent years, cryptocurrency regulations have grown to be very strict in India. The Reserve Bank of India decided in 2018, that no financial institutions or banks shall deal with such virtual currencies. In the same year, it was confirmed by RBI, that no authority had been given to any entity to issue any license or give permission for the use of virtual currency. Instead, it had given a warning against such illegal use. However, in 2020, the Supreme Court ruled down this ban on cryptocurrency trading, giving birth to a new era of digital currency use in India.
The future of cryptocurrency lies in great uncertainty. Rumors state that the center plans to introduce a bill that shall hold the provisions for a ban on a cryptocurrency exchange.
In the United Nations, several fraud cases have been reported in the past few years. Almost $119 billion of transactions were considered suspicious in 2019 according to Suspicious activity goes undetected as banks struggle to keep up. The FinCen had proposed new rules in December 2020, which were aimed at reducing such fraud and suspicious instances. However, the Biden administration has put a pause on the rules until further notice.
Legal Concerns Around Cryptocurrency Use
Three major concerns have been listed by the U.S Attorney General’s cyber-digital task force –
· Investment fraud and cryptocurrency theft.
· Evading taxes and laundering money using cryptocurrency.
· Committing financial terrorism and crimes by cryptocurrency use.
Anonymity serves as the biggest threat in the world of cryptocurrency. Due to anonymous identities performing the transactions, it becomes difficult to track criminal activities. Various enhanced crypto coins like Monero, Zcash, etc., have been released for making tracking difficult.
Silk Road is one of the most well-known examples of cryptocurrency crimes. It was a site operating between 2011-13, dealing with various criminal activities. For example, the exchange of forged documents, illegal goods, services, etc. The clients used bitcoins to pay for the services so that nobody could trace them. The founder of the site was tried in 2015 for the crime.
Cause for Caution with Crypto Investing
The cryptocurrency exchange is not considered legal in the United States. No government or central bank supports such trading. Although the returns on crypto investing can be immensely high, there are numerous risks associated with it. Due to the anonymity of the transactions, hackers get an opportunity to sabotage the process. Once lost, bitcoins cannot be retrieved again. Being highly volatile, cryptocurrency isn’t likely to become a stable currency anytime soon. If the FinCen regulations are passed, the level of consumer protection and safety shall improve to some extent.
The example of the Mount Gox cryptocurrency exchange serves the purpose of caution against crypto investing. The exchange was hacked in 2014 which led to a loss of hundreds of million dollars of bitcoins. Thus, one should choose the best cryptocurrency brokers for a safe bet.
Undoubtedly cryptocurrency has the potential to gain massive profits. But with the benefit comes various risks, which are equally huge. There are not many safety nets for the customers in this context, which makes it more problematic to deal with. Hence, before trading or investing in cryptocurrencies, always check the risks associated with them. Making an informed decision shall minimize the chances of any loss.