Cryptocurrencies: regulatory complexity

The development of online trading has led to a frequent increase in the use of cryptocurrencies. Many investors opt for these virtual currencies because of their volatility in trading and the financial market.

Indeed, crypto-currencies do not have a precise legal system or code. This is why these trading assets present some risk. Moreover, it can be quite difficult to master these digital elements.

Is it possible to regulate trading virtual currencies? How to proceed ? Answers.

A need to establish an international legal framework for crypto-currencies

Currently, the financial market includes more than 2000 crypto-currencies. As these elements are among the least supervised financial flows, they simplify illicit transactions.

This is explained in particular by the absence of legal means in the field of crypto. An important reason that promotes the development of:

  • Money laundering;
  • Tax evasion ;
  • Data sales and illegal arms transactions;
  • Financing of terrorism.

To remedy this, discussions are taking place between officials to establish a code specific to cryptocurrency. However, for the moment, the elaboration of the legal provisions remains at the stage of discussion given the complexity of the subject. We must not forget that these assets have a global impact.

As a reminder, crypto-currencies owe their success to the absence of a legal banking system, code, financial market system, legal platform, etc.). This facilitates its use on the financial trading market and also makes illicit transactions more present in France and in the rest of the world.

Discussions on the regulation of cryptocurrencies have detected the benefits of this regulation. Indeed, the legal regulation of these assets makes it possible to:

Encourage the creation of new business sectors

Establishments of information and financial advisers on crypto currencies can emerge. This allows a crypto broker to work normally legally with a well-established legal system, which is not yet the case. In this circumstance, finding out more about cryptocurrency brokers would no longer be mandatory. It would thus suffice to choose cryptos adapted to its needs to carry out legal transactions on the financial market (Bitcoin, Ethereum, Litecoin, etc.).

Driving technological innovations

With a serious and effective legal means, controlling the course of crypto-currencies would be child’s play. Indeed, this kind of regulation usually induces governments to make provisions in order to manage the prices and the trading industry. To do this, the implementation of powerful and secure tools is essential. In other words, it would promote technological innovation and research of all kinds.

A difficulty in the regulation of crypto-currencies

Many countries are gradually embarking on the regulation of cryptos. This new trend is explained by the importance of these assets to investors. More than 130 countries have published legal provisions concerning these digital elements.

The diversity of cryptocurrency regulation globally manifests itself in several ways.

The use of proper legal terminology when it comes to cryptocurrencies

The denomination of the cryptocurrency changes depending on the country.

  • In Argentina, Thailand and Australia, for example, cryptocurrency is referred to as “virtual currency”.
  • In Canada, China and Taiwan, the term “virtual merchandise” is used instead.
  • In Germany, this digital element is better known as a “crypto-token”.
  • In Switzerland, it is a “payment token”.
  • In Italy and Lebanon, cryptocurrency is called “cybermoney”.
  • In Honduras and Mexico, it is called “virtual asset”.

The tendency of some States to opt for simple warnings

The majority of States are accustomed to publishing notices through the central bank. These notices most often contain warnings about the danger of cryptocurrencies. It is through these announcements that the government informs Blockchain trading platform users of the risks incurred by these digital assets.

This thus shows the non-involvement of the regimes in the regularization of these digital elements. Indeed, crypto-currencies are not guaranteed by the state like real money. This it simply warns citizens about the lack of regulation of the institutions in charge of virtual currencies.

Moreover, investing in cryptocurrency is done at the risk and peril of Blockchain users. Since there is no concrete legal system, the millions of trading platform users have no legal recourse in case of disputes.

The regulation of crypto-currencies via other legal provisions

Studies of the Blockchain network and the trading platform have determined that cryptocurrencies that promote illegal transactions. Several states are struggling to find an adequate legal means on cryptocurrencies.

Nevertheless, they tried to minimize the damage. They opted for a strengthening of the legal provisions on money laundering, the fight against terrorism and organized crime.

Now, regulations on these topics incorporate cryptocurrency. For example, cryptocurrency institutions must comply with money laundering and terrorist financing provisions. This is the case in Canada, Australia and the Isle of Man.

The Cryptocurrency Restriction

Aware of the dangers of the lack of legal means on the subject, some countries have restricted investments in cryptocurrency on their territory.

  • In Algeria, Bolivia, Morocco, Nepal or Vietnam, it is forbidden to invest in virtual assets.
  • On the other hand, in Qatar and Bahrain, blockchain users can invest in cryptocurrencies, but outside the border.
  • In China, Bangladesh, Iran and Lithuania, cryptocurrency activities are accepted, but strictly regulated.

The supervised use of crypto currencies

Some countries are in favor of using cryptocurrencies.

For example, France has strengthened the legal provisions on digital assets used in the context of money laundering and terrorist financing. Aware of the shortcomings on the subject, the government is proposing a strict framework. He wants to suggest a legal system ending anonymity on transactions in the crypto market.

In the United States, the federal trend is moving towards the creation of virtual currency. This project is slowed down by the fight against illicit activities and tax evasion. However, this does not prevent the Federated States from advancing legal provisions on these elements.

In Wyoming, the project concerns the constitution of a financial institution (bank, financial institution, market house, etc.) with the right to legally hold these digital assets.

The draft unified regulation for the European Union

The realization of a draft law on cryptocurrencies within the European Union is currently the subject of a study. The member states of the organization want to supervise the use of cryptocurrencies. The Brussels commission wants to create a specific supervision system for each form of digital currency (Bitcoin, Ethereum, Litecoin, etc.). In addition, the commission wishes to limit the number of cryptocurrencies valid on the territory of France and the European Union. If the MiCA directive is accepted, this should be possible.