Governments’ view on cryptocurrency economy
RegulationBit News Today2 min read
Authorities in the UK and European Union are preparing a clampdown on bitcoin due to rising worries that the digital currency is being utilized for tax evasion and money laundering.
UK and EU Regulatory Actions
Under the proposed EU framework, digital currency exchanges must conduct customer due diligence and report suspicious activity, while the UK seeks changes to the anti-money-laundering directive so that domestic regulators oversee corporate activities.
The UK Treasury stated that it is negotiating to place virtual currency exchanges and particular wallet providers under rules for anti-money laundering and counter-terrorist financing to address concerns over cryptocurrency use. “We expect these negotiations to conclude at EU level in late 2017 or early 2018,” it said. The Treasury also cautioned that virtual currencies could be utilized to facilitate and carry out cybercrime.
Securities Oversight and ICO Regulation
Regulators have issued warnings regarding the hazards of investing in cryptocurrencies, particularly initial coin offerings (ICOs), which have seen rapid growth.
The European Securities and Markets Authority (ESMA) released two statements warning that investors might not understand the substantial dangers of ICOs and raising concern that participating businesses might fail to follow applicable EU laws.
In the United States, the Securities and Exchange Commission outlined ways in which it would police digital token sales. An SEC Enforcement Division investigation examined whether The DAO along with affiliated individuals and entities broke federal securities regulations by offering and selling unregistered DAO Tokens for the virtual currency Ether.
Varying Policies in Asia
According to Menon, Singapore's central bank is working to establish official rules for digital currency intermediaries such as exchanges to counter money laundering and other illegal operations. Following the rapid expansion of ICOs, the Monetary Authority of Singapore clarified in August that digital token sales would be regulated in the country if the offerings meet its definition of a security.
In India, the central bank expressed caution to users, holders and traders of cryptocurrencies, naming bitcoin in particular.
In China, officials ordered cryptocurrency exchanges to cease trading and shut down in mid-September, effectively ending the “Big Three” ecosystem and pushing trading activities to over-the-counter markets. Word of the approaching exchange closures followed days after China prohibited domestic ICOs, stating that they operated by "illegally selling and distributing tokens."
Central Bank Perspectives
The Federal Reserve's review of cryptocurrencies remains in an early phase, and the US central bank has shown little enthusiasm for creating its own digital currency to compete with bitcoin. Jerome Powell, a Federal Reserve board member and nominee for chairman, stated that technical hurdles remain with the technology and that "governance and risk management will be critical."
The European Central Bank has repeatedly cautioned the public about the risks associated with digital currency investments. In September, ECB Vice President Vitor Constancio remarked that bitcoin is not a real currency but a "tulip," referencing the 17th-century bubble in the Netherlands.
