Regulatory authorities around the world feel that is incredibly difficult to control the explosive growth of the currency unrelated to any country.
Russian President Vladimir Putin has become one of the last in a series of politicians calling for the regulation of crypto-currencies. He stated that there are “real risks” to the fact that crypto-currencies can be used for money laundering or tax evasion. Finance Minister Anton Siluanov called for the entering of the same regulation for digital currencies as for securities, and the Bank of Russia promises to block together with the prosecutor’s office sites that allow retail investors to trade in bitcoins.
“We consider that this is a pyramid” – said Sergey Shvetsov, first deputy chairman of the Central Bank.
Officials around the world took up the issue of bitcoin regulation in September after China imposed a ban on ICO and ordered the closure of large crypto-exchanges, before spending six months to audit more than 1,000 sites.
At least 13 countries have introduced new rules for handling cryptocurrency or announced plans to tighten the existing rules. In particular, South Korea also banned the ICO. Last week, member of the Board of Governors of the European Central Bank Ewald Novotny said that the bank is discussing “specific legislative restrictions” on the sale of crypto currency.
The creators of bitcoin, the most popular digital currency, foresaw this development and prepared for it.
Since bitcoin works in a peer-to-peer network, users can buy and sell coins, and also protect and conserve the system without the involvement of governments and central banks. Try to control it is like “catch the water”, – said Alex Tapscott, CEO NextBlock Global, a venture capital firm that invests in blokcheyn start-ups .
Nine years after the mysterious programmer, who called himself Satoshi Nakamoto, opened the world to bitcoin, some see crypto-currencies as a revolutionary technology that will deprive the government of power and give it to citizens; a similar effect is given by pocket video cameras in the hands of civil activists or social networks during the “Arab Spring”.
“As crypto-currencies become more popular, their ability to resist politicians is also growing. Bitcoin is one of the most important liberation technologies in the history of mankind, along with the printing press or the Internet, “said bitcoin-investor Roger Ver, who received the nickname” Bitcoin-Jesus “for his efforts to promote crypto currency in the early years of its existence.
Digital currencies exist in computers and can be stored by millions of people around the world. They can be bought and sold online or in person. Even if there is no ATM or currency exchange nearby, anyone who has access to the Internet can buy bitcoins. They can be spending on literally everything from a sandwich to a dwelling or use them as an investment tool.
The thousand dollars invested in bitcoin in 2012, now would have turned into 4.9 million dollars. At the same time, the number of transactions involving bitcoin continues to grow. According to CoinDesk, it has grown from 60 thousand per day in 2013 and to 291 thousand units per day in the second quarter of 2017 and now twice exceeds the number of transactions with other major crypto-currencies.
Of course, the crypto-currency market has a dark side. Bitcoin became famous thanks to Silk Road, an online site where weapons, drugs and other illegal things were sold. It is still used for criminal transactions in the Darkweave even after the closure of Silk Road. This currency is also chosen by hackers, hacking computers around the world, from hospitals to police departments. Even the North Korean government stores the bitcoins, hoping to use them to circumvent international sanctions.
That’s why James Daimon, chief executive officer of JPMorgan Chase & Co., considers bitcoin to be a “fraud”, which is destined to collapse, as his use of extortionists, drug dealers and gun barons will sooner or later convince the authorities that crypto currency must be stopped. “Someone will surely be killed, and only then the authorities will turn to this problem. You just saw what is happening in China, governments want to control the money supply, “said Dimon.
A currency that doesn’t belong to any state and at the same time is competing with the national currency obviously should disturb the head of any central bank. However, China’s experience shows that it is more difficult to deal with crypto-currencies than it seems. Although after the tough measures of the Chinese government, the price of the bitcoin collapsed by almost 30%, despite the measures taken by the authorities of other countries, it won back all the losses by mid-October and set a new historic record.
According to CryptoCompare, China, erstwhile the largest crypto-currency market, now accounts for only 1.5% of the world’s turnover of bitcoin, and 60% for Japan, whose authorities are more open to digital currencies.
Mining of bitcoin
China remains the leader in the field of capacities for mining bitcoin. Until now, regulators have refrained from any action in this area. According to Wu Jihan, general manager of the world’s largest mining company Bitmain Technologies, local authorities can legally create mining farms, as they do not pollute the environment and are considered part of the high-tech industry.
Crypto-currencies attract people in those regions where there are restrictions on the withdrawal of money abroad or the local currency is weakened due to inflation. In Venezuela, suffering from both of these problems, the weekly trading volume of the bitcoins set a record in early April, when violent clashes began between protesters and the police. Then the authorities conducted raids against the miners, accusing them of “Internet fraud and theft of electricity.”
The same combination of control over the withdrawal of capital, high inflation and a weak national currency has caused the popularity of bitcoin in other Latin American countries. Demand for bitcoin in Argentina rose in 2013 after former country president Cristina Fernandez de Kirchner banned buying dollars, also Ecuador and Bolivia are among the few countries in which foreign currency is expressly banned.
Vice versa, Great Britain released bitcoin from the value-added tax and in corporate taxation issues equated it to foreign currency. This country was one of the first to issue clear instructions, stating in 2014 that “bitcoin can be considered an investment or used to pay for goods or services in those outlets where it is accepted.”
Japan in April of this year recognized bitcoin as legal circulating medium, and later engaged in the regulation of crypto-currency exchanges, giving local entrepreneurs clarity and support in this matter. Vietnam can do something similar.
The Commodity Futures Trading Commission of the United States in September 2015 classified bitcoin as a commodity, and this year gave permission for the work of the first company specializing in trading and clearing of crypto-exchange options.
The US Securities and Exchange Commission announced in July that the tokens issued on the ICO will be considered securities and regulated accordingly with “individual exceptions”.
Although the government’s efforts to fight against digital currencies were fraught, there may be more important trend of the growing number of fund managers who view crypto currency as an investment asset.
“What is more interesting is the growing sophistication of institutional investors in the purchase of crypto-currencies. This new type of buyer believes that this is just a short-term change in the market situation. In the short term, significant amounts can be invested in the crypto currency, “said Nolan Bauerl, research director at CoinDesk.
Now in the world there are at least 68 hedge funds, focused on crypto-currencies, many of them run by people from Wall Street.