Industry leaders would have been foolish to not take notice of cryptocurrency as it continues to disrupt industries across the world. In the same light, governments have smelt the blood in the water as a financial technology industry materialized, by the time on their watches, overnight. It’s a $500B USD monster (today, anyway). One without boarders, without control, and without their fingers in the pie. It’s designed on principles of no-trust. Principles that are in direct contradiction to the way a government functions: governments demand we trust them. Trust them to appropriate our taxes, protect us, and provide services.
Yet time and time again governments as well as the private sector have tested our trust. They’ve failed us over and over. Companies work to actively take from us. Governments operate in a relatively bloated capacity. It’s from this – from the way we have been tested and the way we’ve been failed – we have turned to a no-trust system.
It’s working well. Markets are responding. Tides are turning. With so much value placed on this new system by the people who use it, it is inevitable that government look to regulate. Cryptocurrency threatens their systems. It demands they rethink their approach. Government hates change. Orders come from a corrupt top, focused on keeping things the same – keeping the same people in profit, the same systems in place, the same quarterly result.
Stories emerge daily regarding the inept dealings of the traditional financial industry. Credit card charge back fees, statement fees, application fees. Fees fees fees. On rudimentary review, it is of little wonder why cryptocurrency is burning like a forest fire.
Traditional financial structures are being challenged for the first time in any of the current VP’s lives. On their back is not a position to which they are accustomed. With the above said, cryptocurrency is barely singing through the noise: banks are as profitable as ever and no more than a percent or two of people on earth with internet access hold any amount Bitcoin. But it’s the idea that makes the banks so afraid. It’s what cryptocurrency could mean.
Yet daily, they dig their own grave. They treat customers like ants. They are the reason many of us are here. The reason we are so invested in cryptocurrency. The idea of a world without needlessness.
A summary of the state of legacy financial institutions according to one Bitcoin advocate
$500B USD. It’s a staggering amount of value and worth. It’s more staggering if you’re aware of the inner workings and the lack of control, which ironically gives users the most amount of control. Government will not stop until cryptocurrency is ‘regulated’ in some capacity. Outlawed? Unlikely, but I wouldn’t put it past any government with the state of the globe today. So what does a regulated Bitcoin even look like?
First generations of Bitcoin regulation were, frankly, bizarre. The state of New York attempted to implement something called a ‘Bitlicence’ in 2014 - a license issued to a compliant exchange or trader of Bitcoin. You can guessed what happened next: the cryptocurrency companies with headquarters in New York, who were denied this license, simply relocated. It’s not the only instance of cat and mouse: in 2014 Melbourne based exchange ‘CoinJar’ relocated from Australia to the United Kingdom to avoid a rigged taxation system in Australia which charged a goods and service tax twice for each cryptocurrency sale – once on purchase, and once on sale. Every other seller for every other good in Australia is charged once, but in a loose effort to keep a lid on cryptocurrency, this was a government’s response.
Then the legislation amendments began. Canada was first by legally defining ‘digital currency’. This definition came under ‘Anti-Money Laundering and Counter Terrorism Financing’ (AML/CTF) laws. Immediately the connotations were apparent: governments were afraid, and they wished to push that fear on citizens. Australia and the United Kingdom amended their AML/CTF laws similarly. Terror terror terror. This was the wooden horse. Yet this agenda was without balanced research and without truth. Terrorism is barely funded with cryptocurrency. All reports are grossly exaggerated. Regardless, bills in the name of terror pass into law faster than you can get your mouth around ‘AML/CTF’.
Fast-forward to 2018. Slight understanding is creeping to into the system. The first generation of laws, fundamentally flawed to begin with, are producing little to no results. This year will be a pivoting year. The rhetoric of terror will end, and the new focus will be on taxation (which has already begun).
With tax as a new focus for government, what exactly would their system of regulation look like? Firstly, they’ll leverage the first generation terrorism laws leaning on the strict ‘Know Your Customer’ (KYC) regulations attached to the purchase point: the exchanges. The exchanges have extensive customer information, as well as buy in prices, sell prices, and everything else in between.
Second, they will impose strict reporting obligations on these exchanges. Reporting taxation departments can use in any investigations.
This all seems logical. What isn’t so apparent is the new wave of Taxation Information Exchange Agreements (TIEAs) across the world. These agreements – which most major countries are a party to – allow taxation branches of government to freely and quickly request and receive information from their international counterparts. Comment on this starts to leave the crypto sphere, but for this piece’s sake all we need in mind is this: just because you’re using an overseas exchange, don’t think you’re free. You’re not.
Governments won’t stop trying to keep us in its play pen. Cryptocurrency is trying to set us free. Regulation attempts will continue, and don’t kid yourself: they are improving. All we can do is continue using cryptocurrency and keep one foot in each direction. Best to keep one on the starting block, too. Never know when you’ll need to run.
Featured image from Shutterstock
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Con’s a writer. His education background is law, where he’s published in law journals on the legal issues of crypto-currency. His opinion editorials tend to focus the relationship between people and technology, as well as the societal challenges technology can present. He’s consulted for non-profit privacy and digital rights groups, aiding governmental submissions. His passion is for information security, technology and the intertwining legal issues.