Even though cryptocurrencies do not currently fall under any regulatory statute at the moment, bureaucrats across the globe are taking notice of China and South Korea’s recent regulatory policies for digital currencies and seem to be looking to follow suit. In fact, even the U.S. Senate has begun to discuss how best to tackle the issue of unregulated digital coins.
The reasons for such attention towards digital currency markets has arisen because of the incessant Initial Coin Offerings (ICOs), security issues, criminal activity related to trading and big-time investors getting curious about the potential of a regulated cryptocurrency market.
Problems With Security
As more and more money is being pumped into the digital currency world, the question of security continues to arise. Policy makers are not wholly convinced that the recent blockchain technology which is supposed to protect both ends of the trade is enough to secure all parties involved.
Without any legislation or legal entity to monitor such transactions, what is to stop those with the knowledge to disrupt blockchain transactions (a.k.a. hackers) from doing so time and time again?
The current cryptocurrency landscape is truly the Wild Wild West of all financial markets, especially when it comes to coin transactions and trades – the fastest and most technologically sound win the dual every time.
Countries Who Have Already Began To Regulate
The first countries so far to start implementing some form of regulatory policy towards Bitcoin and most other cryptocurrencies including ICOs are China, South Korea, and Japan.
China has already placed a ban on almost all cryptocurrency transactions including trading and Initial Coin Offerings and is even thinking about putting an end to coin mining well.
South Korea has not been as severe as it still allows trading but only from registered accounts. However, it has also banned ICOs just like China has.
Japan has been the most lenient of all the Asian countries with its balanced regulatory policies affecting cryptocurrency transactions within their borders. The country has created a licensing program for any exchange wishing to trade digital currencies. Digital coin trading and offerings can still go on but only within regulated exchanges.
Defining Digital Currency Is The Problem
Policy makers, especially in the U.S., are having a tough time identifying what financial category cryptocurrency falls under, as well as what authoritative body should regulate it.
As of now, cryptocurrency falls under the commodity category, however, the legal body regulating commodities in the U.S., Commodity Futures Trading Commission, does not have any authority to legislate or direct any cryptocurrency exchange within its jurisdiction.
So, either the U.S. Senate has to change the definition of what cryptocurrency means, create a new one, or give the current governing commodity agency the authority to oversee its exchanges. Either way, regulations of some sort within the U.S. seems to be on its way.