The vision that Satoshi Nakamoto, whoever is actually behind that pseudonym, had when creating Bitcoin was for a decentralised, egalitarian currency that levelled the playing field between first and third world countries.
As is so often the case, with Bitcoin and the many other altcoins that followed, its real-life application doesn’t quite live up to its Utopian ideal. Individuals have been able to mine and trade virtual coins successfully for years, and most have done so without any criminal intentions.
However, the legal ambiguity of cryptocurrencies in general makes them vulnerable to unlawful activities. The very anonymity and decentralisation that they are so celebrated for makes it more difficult to track them, and easier for cybercriminals to use them. Governments are becoming more aware of the power and danger of virtual coins, and are taking steps towards their regulation.
Serious Differences of Opinion
One of the main issues in the regulation of alternative currencies is what they actually are. Legislators in various countries and forums have suggested categorisation as diverse as commodities, securities, properties, loans, deposits, derivatives and forex contracts for Bitcoin and all its successors.
In addition, various nations are currently working on instituting their own regulatory measures and these differ quite radically from each other. Coming to a formal agreement, in a style that is similar to what might be seen in the arenas of the United Nations or the inter-governmental Financial Action Task Force on Money Laundering, seems essential for a properly regulated altcoin market.
More Regulation Increases Uses and Applications
In addition to cybercrime and security concerns, regulating altcoins is important for leveraging them to become more useful. Trading between organisations and individuals in different countries would be much simpler if they were governed by the same legislation, institutional capital would flow into virtual currency markets much more strongly, and corporate governance would increase in cryptocurrency companies.
The current decentralised nature of Bitcoin, Ripple, Ethereum and other crypto coins means that they are subject to incredible volatility. Since it is not reliant on the relationships between countries or on trade deals, it swings wildly depending on public sentiment. The price effects of how secure these currencies are perceived to be; political upheavals and how valuable they are thought to be based on the fact that everyone is buying them have been marked.
The Challenge of Striking a Balance
Unregulated alternative currency markets seem to be simply to dangerous and unmanageable, but to regulate them means to risk ruining the best parts about them. Expert insiders have referred to the task of lawmakers as walking a line between stabilising systems and protecting investors, while protecting innovation and capital formation with crypto coins in various nations’ legal frameworks.
This extremely balanced viewpoint is a great ideal to strive for, but it must be remembered that the stance countries take will depend on what they actually think Bitcoin and its ilk represent. China has described them as a “disruption to the financial order”, Vietnam has banned Bitcoin payments and India has ruled that cryptocurrency is not legal tender.
Japan, on the other hand, though very comprehensive in its checks, has a friendlier attitude to virtual coins. Switzerland openly welcomes alternative currency trading, and the United Kingdom, European Union and United States have adopted a wait-and-see approach.
In short, some countries appreciate the new possibilities that cryptocurrencies represent and are content to see where they go for the moment, others wish to steer their development and the rest are concerned enough to ban them completely.
While the way forward for regulation is murky, at this point its necessity seems certain. Virtual coins have taken hold and without controls in place the political and criminal risks posed by various groups are now too great.