Discuss About The Considerations Regulation Of Cryptocurrency.
The use of crypto currency in a large amount has enabled the concern about the regulation of the transaction of currencies. However, there is no such fixed regulatory rule for the crypto currency. The decentralized nature of this type of currency has made it hard for the regulatory authorities to gain control over it (Pittman 2016). Various regulatory frameworks can be applied to control the transaction of crypto currency; on the other hand, the decentralized nature of the crypto currency can make many authorities to worry about the effectiveness of the regulations (Chohan 2017). In the context of the regulation of the crypto currency, there are different regulation polices that varies from region to region (Chohan 2018). The regulations and changes have been taken into accountingfrom November 2016 to September 2017. In case of further changes in the regulations has not been discussed in this journal.
North America: The transaction through the bit coin is legal in Canada, United States and Mexico.In United States, different regulation authorities has described the bit coin in various ways. The Treasury has regarded the bit coin as the convertible centralized currency. The Commodity Feature Trading Commission has regarded the bit coin as the commodity. The IRS has regarded the bit coin as property. Under ‘Personal property and the security act’ the bit coin is referred as intangible in Canada. The regulation of the bit coin is done under the La Ley Fintech in Mexico.
South America: In several countries including Bolivia and Ecuador the use of bit coin is legal. In Argentina the status of bit coin does not come under the illegal act but it is treated as an entity. In Brazil, Chile and Colombia the use of bit coin is legal.
South Asia and Middle East: The use of bit coin is not banned but is not encourage at Middle East countries including Jordan and Saudi Arabia. The use of bit coin is banned at Bangladesh. The bit coin is neither banned nor discouraged in India. However, Reserve Bank has not planning to regulate the bit coin in India.
East Asia: In China the bit coin is legal. However, individual person can use the bit coin but financial companies cannot use the bit coin. In Japan the use and the transaction of the bit coin is legal, however, at the South Korea the bit coin is not regulated and illegal activities are committed through it. In Taiwan the use of bit coin is permitted however, there is a warning proved about the uncertain acceptability of the bit coin and the other risks associate with it. There is no regulation of the bit coin transaction at Vietnam, Philippines.
Europe: The use of bit coin is legal in Europe. However, the taxation process is not convertible between the conventional currency and the bit coin. The vehicle tax is payable through bit coin. However, there are no formal regulations about bit coin in Europe. The European Union has been instructed to the central bank not to encourage the transaction through virtual money until any regulation is made.
Africa: In South Africa and Nigeria, the use of bit coin is not illegal. The Nigerian Central Bank has issued a notification to ban the use of bit coin at January 2017. However, the notification was revisited stating that the bank has no power to control the virtual currency. In South Africa, the use of the bit coin is banned.
Oceania: In New Zealand and Australia, the use of the bit coin is not penalized at both the countries. In New Zealand the bit coin is regarded same as the money and has its store value.
It can be said that the desirable regulation about the crypto currency can be made in next 2-3 years and the progress of the bit coin can be forwarded in future.
Crypto currencies have a great impact on the banking and the finance system. It has become the new trend in the financial market. In this situation, it can be expected from the banks and the financial institutions that they will generate and regulate the laws regarding the use and transaction of the crypto currencies. However, it has been seen that the banks and the financial institutions have taken an approach where they are waiting to see the scenario of the use of the crypto currency. There is no expected regulations are generating form the banks (McLeod 2017). The main objective is to develop the concept about the creation of virtual money in the crypto currency eco system and its impact on the financial market. The difference between the crypto currency and that fiat money has also been discussed. It has been found that the bit coin is trumping both the money of central bank and the private and quasi private bank money and this is created by the banking and the shadow banking system. The main question regarding this discussion is that if the bit coin can be termed as currency. The classic definition of the money has three factors- store value, medium of transaction and the accountability (Marian 2015). Based on this definition crypto currency cannot be regarded as currency. However, some experts argue the classical definition and regarded the crypto currency as the currency. It can be said that the status of the virtual currency is a subject of confusion and this can cause the creation of the various regulation regarding the use of the virtual crypto currency. The policy makers are not aware of the full working principals and the impacts of the crypto currency. The main difference between the crypto currency and the fiat money is that the, fiat money maintains the hierarchy of the money structure. In the framework gold is the top of the hierarchy (Gainsbury and Blaszczynski 2017). The framework is based on the ‘safety’ and the ‘information insensitivity ’(Chohan 2017). The information insensitivity’ of the asset is highest for the gold. The main difference between the fiat money and the crypto currency is that the fiat money is someone’s liability on the other hand the crypto currencies like bit coin are not a liability of anybody. In order for the transaction of any kind of commodity, the safety is the main important issue (Scott 2016). The decentralized property of the bit coin does not assure the safety of transaction through bit coin. Bit coin is regarded as the first digital assets in the financial market, for this the comparison between the safety enhancement mechanism in the shadow banking system is compared with the safety of the block chain mechanism of crypto currencies (Drozd, Lazur and Serbin 2018.). The money is create by the four sources- money market funds, central bank , dealer bank and banks. The main thing that has been maintained in a currency system is the safety. In case of the fiat money there is security and safety about the transaction and the validity of the money as it has physical presence and is approved by the government. The bit coin or other crypto currencies are the commodity based assets that has decentralized property. There are no certain rules and regulations regarding the bit coin (Nabilou and Prüm 2018). In this case, the monitory disasters like bankruptcy may occur. It can be said that bit coin and other crypto currency has the ability to become the medium of exchange in future. However, there is a need for providing the rules and regulations on the use and transaction of bit coin. The potential insensitivity of the bit coin is opposing the use of bit coin instead the use of fiat currency. The important discussion about the banking, shadow banking and the creation of money along with the impact of the crypto currency n the current economic system ha s a significant role in making the regulations and the monitory policy regarding the crypto currency.
The concept of the electronic currency has been started since 1980. The first successful digital crypto currency is bit coin, developed by Satashi Nakamoto. It is the first digital crypto currency which is decentralized in nature. The decentralization of the bit coin frees the currency system from the hierarchy of the currency system. Transact of the bit coin is done through peer to peer network. The sending the receiving f the bit coin is logged in the public ledger. Like the fiat currency, the value of the bit coin cannot be derived by or created by the government. The advantage of the bit coin is that is resolves the double spending problem. An asset can be duplicated and can be used for multiple times; this situation is regarded as double spending problem. Therefore this requires security is needed to safe gird against the security threats and the double spending in the bit coin transaction. There are several techniques of maintaining safety in the crypto currency transaction. The bit coin is a technological advancement but there are some problems regarding the use of bit coin (Marion 2015). It depends largely on the cryptographic security rather than the trust. The decentralized nature of the bit coin does not allow any fixed regulation over the bit coin.
There are certain terns associated with the transaction of the bit coin such as block, bit coin mining (Farell 2015). All the information regarding the transaction is placed under the block and the whole process of transaction of the bit coin is called the bit coin mining. The network security mechanism maintained in the bit coin transaction security is done through the hashing algorithm (Peters, Panayi and Chapelle 2015). The main disadvantage of the transaction of the bit coin is that due to its decentralized nature, the security of the bit coin is distributed among the users. One of the alternative mechanisms is the Proof –of –Stake. The main feature of this mechanism is that it relays on the ownership of the coin instead of the computational security mechanism. In hybrid proof –of-stake the news coins are distributed to the miners. There are some factors that which affects the growth of bit coin. These factors include the government policy. The use of crypto currency or the bit coin is not approved by many governmental organizations (Liew and Hewlett 2017). Use of crypto currency for the transaction is not approved in many regions. The knowledge of the crypto currency is not very clear for the common people. The people get to know about the crypto currency after the huge media coverage on this matter. In the recent survey it has been found out that only 4.5% of users are familiar with the use and concept of crypto currency (Evans-Pughe, Novikov and Vitaliev 2014). It can be assumed from the discussion that the crypto currency industry will face a certain growth in future (D’Alfonso, Langer and Vandelis 2016). In order to improve and encourage the use of bit coin regulations are needed to be created. There are various types of crypto currencies are available in the industry and it can be said that the bit coin is not going to rule the crypto currency industry
References
Chohan, U., 2018. Oversight and Regulation of Cryptocurrencies: management.
Chohan, U.W., 2017. A History of Bitcoin.
Chohan, U.W., 2017. Assessing the Differences in Bitcoin & Other Cryptocurrency Legality Across National Jurisdictions.
D’Alfonso, A., Langer, P. and Vandelis, Z., 2016. The Future of Cryptocurrency. Ryerson University.
Drozd, O., Lazur, Y. and Serbin, R., 2018. THEORETICAL AND LEGAL PERSPECTIVE ON CERTAIN TYPES OF LEGAL LIABILITY IN CRYPTOCURRENCY RELATIONS. Baltic Journal of Economic Studies, 3(5), pp.221-228.
Evans-Pughe, C., Novikov, A. and Vitaliev, V., 2014. To bit or not to bit?[Bitcoin cryptocurrency]. Engineering & Technology, 9(4), pp.82-5.
Farell, R., 2015. An analysis of the cryptocurrency industry.
Gainsbury, S.M. and Blaszczynski, A., 2017. How blockchain and cryptocurrency technology could revolutionize online gambling. Gaming Law Review, 21(7), pp.482-492.
Liew, J. and Hewlett, L., 2017. The Case for Bitcoin for Institutional Investors: Bubble Investing or Fundamentally Sound?.
Marian, O., 2015. A conceptual framework for the regulation of cryptocurrencies. U. Chi. L. Rev. Dialogue, 82, p.53.
Marion, O.Y., 2015. Article Review: Conceptual Framework for the Regulation of Cryptocurrencies. University of Chicago Law Review, 81.
McLeod, S., 2017. Bitcoin: The Utopia or Nightmare of Regulation. Elon L. Rev., 9, p.553.
Nabilou, H. and Prüm, A., 2018. Ignorance, debt and cryptocurrencies: The old and the new in the law and economics of concurrent currencies.
Peters, G., Panayi, E. and Chapelle, A., 2015. Trends in cryptocurrencies and blockchain technologies: a monetary theory and regulation perspective.
Pittman, A., 2016. The Evolution of Giving: Considerations for Regulation of Cryptocurrency Donation Deducations. Duke L. & Tech. Rev., 14, p.48.
Scott, B., 2016. How can cryptocurrency and blockchain technology play a role in building social and solidarity finance?(No. 2016-1). UNRISD Working Paper.
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