Importance of Government Regulation
Cryptocurrencies such as bitcoin continue to gain global popularity prompting policymakers and investors to question whether it would be good to regulate them. Libertarian investors hold the opinion government regulation should be embraced because they believe that it will end the tendency of tax inflation and the monopoly of government's money. However, there are those who are inclined towards the anonymity of the cryptocurrency so that they can conduct illegal transactions. Specific factors such as exchange hack and blockchain glitch continue to increase the need for government oversight. One of the reasons why it has been difficult for the governments to control Cryptocurrencies is due to user confidentiality. Such a trend has caused problems for the government who worry that this form of currency could be used in illegal dealings such as money laundering, drug dealing, and tax evasion. Therefore it is critical to note that government regulation and intervention in cryptocurrency would enhance transparency and promote ethical business operations.
As stated earlier, the use of cryptocurrency is on a growing trend. It is threatening to be a factor that will soon affect both the national and the global economies. It is therefore vital that the government gauges the way in which the citizens are using it. If the government turns the Cryptocurrencies as legitimate financial instruments, the government will ensure that dark business that does not adhere to tax regulations comply. Tax evasion is an unethical business practice especially for the high earners using these platforms for money exchange ( Marian, 2015). Such a move will increase the revenue of the government hence expanding its capacity to serving the citizens. When the Cryptocurrencies continue staying in the dark where a few anarchists regulate it, the benefit will remain to them, and this could potentially lead to economic sabotage on the part of the government. Therefore, bring the likes of bitcoin currencies to light will likely impact both the government and its citizens positively. The idea will also limit the chances of autocrats to evade international sanctions that are partly installed through the global banking system.
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Secondly, the cryptocurrency industry such as the bitcoin is mainly surrounded by people who are inclined towards circumventing the government's influence in controlling the currency. Therefore, when a government on its part creates the digital currency, it might also benefit on similar terms because it might evade a global financial system that it does not like how it treats it. The cryptocurrency would also be important especially for governments that are under international sanctions, which, according to ethical relativism, would be right for the country’s welfare but unethical to others. The US, for instance, enforces sanctions on companies and banks that attempt to do business with the country that is targeted by the American financial system. Any country that attempts to violate these provisions is traced through the transactions they make via the international banking system. However, when a government owns its digital currency, the US authorities cannot detect its transactions thereby sparing them from any sanctions. Also, when a government begins to take control of their cryptocurrency, they will acquire different financial frameworks of operation hence escaping the influence of traditional global banks such as the European Central Bank and the Federal bank that have harsh terms.
Government regulation would be an important endeavor in ensuring the sanctification of the whole cryptocurrency conundrum. Over the past few years, the digital currency issue has been in the spotlight for various malpractices such as cyber attacks, losses, and scams among others unethical tendencies. Therefore, Marian, (2015) pointed out that this had put the position of cryptocurrencies at an increasing risk causing many potential investors to shy away from engaging in it. The regulation by the government will stamp its legitimacy and prevent the potential emergence of scammers and people intending to carry out malpractices for their self-benefit. Government regulation has been backed by various quarters who believe that this would the fraudulent and illegitimate digital currency platforms that are out there to make the most of other people’s gains. Some of the viable means that the government could use in punishing the people behind the malpractices include fines, lawsuits, and jail terms among others.
The government regulation of cryptocurrencies would enhance clear operational structures which would allow investors to invest billions in the digital currency. Such a move would increase the liquidity levels making the market more suitable for the traders. However, at the moment this is impossible because many investors would not risk the money by converting it to a form that is not certified as legitimate. Without regulation, many people are not only questioning its legitimacy but also legality making investors reluctant to invest their money for fear of the unknown. The market is heavily unregulated, and the potential for losing money without recourse is high. It could also land an individual in jail in the event that someone loses their money for negligence. Furthermore regulation would also accord the cryptocurrency market moral and ethical legitimacy. The bitcoin, for instance, has in the recent past had a reputation as a currency for criminals. Most people associate it with drugs and sex trafficking among other illegal endeavors. The negative image went down immediately the bitcoin price went up in the year 2017 ( Middlebrook & Hughes, 2013). However, the increased negativity with regards to the currency is still there as seen by countries such as the United States that are taking stern actions against the currencies. India or instance is among the countries that have embraced the idea of cryptocurrency. Government regulation would, therefore, remove the negative tag and increase its use.
How the Regulation Should Take Effect
The government must first be aware that cryptocurrency is a new financial technology that should be regulated without killing it. Therefore all initiatives should be directed towards correctly regulating it to increase its longevity in the future. The governments must, therefore, strike a balance between protecting the consumers and also stifling the innovation whose time seems to have come. One of the areas that the governments must critically assert its regulation is on the tax situation. It is vital to appreciate the fact that blockchains must operate with a specific token. Such tokens must be converted into conventional currencies like the US dollar ( Middlebrook & Hughes, 2013). Such a scenario would mean that the government would be in a position to reap out benefits and as such needs to address how they would set their profit margins to ensure that consumers are not harmed economically.
The second move that the government can take to ensure proper advantages of the cryptocurrencies are enjoyed is to regulate the changes. Most foreign exchanges majorly flow through either the banks or other currency houses. As such, the cryptocurrency should follow a similar fashion. The government must ensure that all exchange is regulated especially between crypto-fiat types of exchange. Regulated the crypto-fiat exchange would potentially prevent illegal behavior and ensure that users comply with the tax regulations. However, the success of this requires that all banks need to open accounts to enable exchanges. Thirdly, the governments must work hard to create a framework for these online digital platforms. The cryptocurrency issue has been in the public domain for a while, but many potential users have failed to discern if it is a legitimate business or not. Most people who are investing their money in this platform are mainly doing so because of the hype associated with it, but they do not have an idea of where their money is headed. The governments should perform an important exercise of educating the public on what it is and what it isn’t.
In enhancing the regulation, the government should allow the exchanges to manage the cryptocurrencies. As stated earlier, this would help in reducing the occurrence of the illicit behavior undertaken in the dark web. In furtherance of the regulation, the government can ensure that it a strong working relationship with blockchain experts, policymakers, and economists. India, in its bid to fully enhance the use of the cryptocurrency, has done the same by accumulating the best human resource that would assist it in the process of implementation. Other vital areas that a government needs to invest in include protocol designers, software engineers, and cyber experts. Such a move would potentially mitigate the influence of the scammers who would want to benefit illegally from the systems.
The cryptocurrency and the digital currency platform is an idea whose time has come and that which should be embraced. However, in its current situation, it still poses a major risk to potential investors because of its anonymity. Most quarters are therefore asking for governmental intervention to ensure that efficiency, reliability, and ethics are taken into consideration. Through intervention, the government will curb the illegal activities and create a space for investors to put their money without any fear of the unknown. However, the government must ensure that through its endeavors to regulate the platform; the benefits must be enjoyed by both itself and the users in equal measures.
References
Marian, O. (2015). A conceptual framework for the regulation of cryptocurrencies. U. Chi. L. Rev. Dialogue , 82 , 53.
Middlebrook, S. T., & Hughes, S. J. (2013). Regulating cryptocurrencies in the United States: current issues and future directions. Wm. Mitchell L. Rev. , 40 , 813.
