Essay: What New Cryptocurrency Regulations Mean for the Average User (US Edition)

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Regulations can be good or bad depending on the extent to which they’re implemented. This article examines what that means for the cryptocurrency.

Blockchain technology is a proven system of a transaction at this point.

With over 1,000 different types of coins all deriving from the original code that still exists in Bitcoin today, digital currency will persist as long as there is an internet to house it.

Yet existence alone does not equate to thriving. Like anything brought to market, there is always the chance of failure. Competition, bad luck, and other obstacles can quickly end a promising capital venture.

One obstacle that the business sector endlessly complains about is state regulation. Rules can be difficult to understand and hard to follow, especially when something like the federal tax code is thicker than the combined blockchain itself.

Yet such rules are the pillar which holds up civilized society and at least make a pass at keeping things fair—at least in theory.

Weaknesses as a Currency

Just as an aside, I personally support cryptocurrency and believe that it should be made available to everyone around the world and universally supported. I will show that the strengths outweigh the weaknesses further down the article. But I don’t want to be blind to some of the key potentials for risk and abuse that cryptocurrencies posses.

Your TOR usage is being watched

Perhaps the biggest drawback in making use of cryptocurrencies is the fact that they are a highly volatile investment. For certain speculators, this is a boon because one day the price of a single coin can be lower than a single cent and within a week can climb to over $20.

The flip side to this is that a coin valued at, say, $1,000 can be cut in half in the same amount of time. Look how fast Bitcoin went from $20,000 all the way back down to $8,000.

Investors have to constantly be aware of market trends, and many dislike the association with large risks.

Obviously hedging bets is a popular option to mitigate risks but that still takes work to get more than a marginal profit. It should also be noted that when a major coin takes a hit, many smaller coins will suffer as well.

An unstable currency is not one that inspires confidence. There is also the risk of fraud and entire brands of a coin that are fraudulent because of how anonymous things are when dealing with cryptocurrency.

Also because of how transactions are irreversible and accountability is limited, the potential for scams is greatly increased. A ransomware attack, which locks a computer down until a payment is made using the untraceable Bitcoin, is one scary example of this in action.

Just because a transaction is authentic does not mean it was not made under duress. Since no central authority controls the flow of coin and since the blockchain by design does not fall under any country’s jurisdiction, when wrongdoing occurs a victim has little recourse.

Money laundering is also a concern of multiple state agencies.

On one hand, a mostly law-abiding citizen making use of an untraceable currency to acquire an illicit object for recreation purposes is generally harmless. On the other hand, when terrorists start making purchases of weaponry and chemicals commonly used In explosives, things get a little more dangerous.

Of course, some believe that drumming up the threat of terrorism in the United States is something of a red herring only used to frighten the populace into supporting an ever-increasing chopping away at liberty. I’ll let the readers make up their own mind on this part, however, the prior two points are worth seriously considering.

The U.S. Does Not Exist in a Vacuum

One of cryptocurrency’s biggest strength lies in its transnational nature. A person from Venezuela can receive payment for a service or good from someone in Taiwan with the only middleman being the open-source blockchain itself, perhaps with a little extra help from sites which manage coin wallets.

Had they gone through the traditional channels, each would have had to go through one or more companies that were licensed by their governments to operate abroad. Regulations in one region may not have matched regulations in another. Tariffs may have been involved. Transforming one currency into another would have certainly cost a fee through a bank.

With cryptocurrency, all of that nonsense is left in the dust. Transactions between two individuals, even living across the world from one another, have been simplified for the better.

As the largest economy in the world, the U.S. is keenly interested in maintaining its place as number one. The more hoops one has to go through, the less profit will exist due to time expenditure and servicing fees.

Large sections of U.S. leadership have promoted free trade and a more interconnected global economy in the past and still do to today. Cryptocurrency can be a means to that end.

The Legislative Process Rolls Out

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The U.S. Commodity Futures Trading Commission has already made some decisions regarding cryptocurrency.

In a recent Senate hearing, U.S. Securities and Exchange Commission Chairman Jay Clayton gave a promising outlook as to what lies ahead.

A key takeaway from the meeting is a statement from Commodities Futures Trading Commission Chair J. Christopher Giancarlo, saying that the commission will respect the new generation’s interest in cryptocurrency technology with a regulatory approach.

It seems at least these regulators are aware that future technology will be handled by younger generations and they don’t want to get in the way of economic progress. A lighter touch by the hand of government may help cryptocurrency grow in the long term.

The U.S. Commodity Futures Trading Commission has already made some decisions regarding cryptocurrency.

In 2015, they settled charges against Coinflip Inc. by showing that the company violated the Commodity Exchange Act by operating a facility which traded or processed commodity options without registering as a swap execution facility. (A complete summary of what took place can be found here.)

The Internal Revenue Service has also weighed in and has classified cryptocurrency as property separate from a true legal tender, giving it the same status as stocks and securities.

However, it must be kept in mind that both the U.S. Commodity Futures Trading Commission and the Internal Revenue Service are beholden to the executive branch of government and do not really have the authority to make laws.

This is why there is an upcoming discussion in the Senate to sort things out and try to draft up some bills that will hopefully benefit everyone, or at least not ruin everything.

What the Coin Experts Recommend

David Drake, the founder of LDJ, has been reported as saying that by the end of this year Bitcoin may be as high as $30,000 a coin.

Well, since his company is founded on investment and getting people to invest and the well-being of his company is tied to the success of Bitcoin, and the success of Bitcoin is based on how much confidence investors have in the currency, I guess he’s some kind of source on this.

I’d try to make this part a little longer but all I have found is people with conflicts of interest.

The fact is that people heavily invested in anything want that thing to succeed. When that thing is wholly dependent on other people buying into it, so-called “experts” who all say “ya it will take off soon, give them your money and you will be rich like me” and they are a prime beneficiary of that person giving that money, it’s a little suspect.

Personally, I’d invest in a multitude of smaller coins after doing research on them, but I’m no expert so take what I say with a heavy grain of salt.

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