The economy of most countries is improving and developing every day. People are in eternal search of something better and more convenient. This led to the emergence of cryptocurrency on the market. It is a kind of analog of traditional currencies.
Crypto is popular only in a narrow circle. Despite this, digital money is gaining weight in the economic environment. It is becoming one of the main assets of the future and an attractive investment object. The issue of its legal regulation is becoming increasingly relevant today.
Cryptocurrency and Its Main Features
Cryptocurrency is a special type of digital currency. Its transactions are encrypted using various cryptographic protection methods. A special feature of cryptocurrencies is their decentralization. It allows you to securely exchange ETH to BTC or any other coin. No governments or central banks can change the value. Two factors affect the exchange rate: supply and demand. Only the market determines the value of crypto assets. The emission of cryptocurrencies is limited by software.
Cryptocurrency investors have a significant advantage. They can quickly withdraw investments from the asset. It is enough just to exchange crypto for fiat money on any available exchange.
Advantages and Disadvantages of Cryptocurrency Legalization
Cryptocurrency is an alternative expression of ordinary currency. It has some pros and cons. The advantages of cryptocurrency legalization include the following:
- The anonymity of transactions;
- The absence of a single digital bank;
- The absence of control over transactions and payments;
- Money is stored decentralized.
The disadvantages of digital coins are as follows:
- There is no guarantee of the safety of electronic wallets;
- High volatility of coins;
- Possible bans from national regulators;
- The inability to renew money in the wallet in case of seed phrase loss;
- Over time, mining ceases to be profitable for individual users.
Approaches to the Regulation of Cryptocurrency Transactions: World Experience
Crypto.com coin price prediction indicates that the crypto market will continue to develop in the future. As for legalization, there are already several common approaches to regulating cryptocurrency transactions:
- Absolute prohibition (Algeria, Morocco, Pakistan, etc.). Any activities and transactions with cryptocurrencies are prohibited;
- Partial ban (China, Colombia, Indonesia, Iran, Lithuania, etc.). Prohibition of operations with cryptocurrencies on the domestic market. The presence of various restrictions;
- Neutral (Spain, Luxembourg, Mexico, etc.). Non-recognition of cryptocurrencies as legal means of payment. The introduction of a favorable regulatory regime to attract investments in technology companies;
- Stimulating (Venezuela, etc.). Development of own cryptocurrency systems. Use of cryptocurrencies as means of payment alongside national currencies;
- Waiting (Great Britain, Belgium, South Africa, etc.). Trade volumes are taken into account. The crypto market does not require separate regulations or the establishment of restrictions.
Countries with a strong economy and a stable currency introduce the use of crypto as a means of payment. It can also be a financial asset. Countries with weak economies and unstable currencies protect their national currency. They restrict cryptocurrencies as a means of payment, but exchange is allowed.
As for the US, crypto transactions are regulated at both the federal and state levels. Regulation varies from state to state. In some states, a special license is required to carry out crypto transactions. US law determines the cases in which you must pay tax on transactions with cryptocurrencies. Any violations are fined in accordance with the legislation.
In practice, it is difficult to regulate the market of digital coins. Cross-border data exchange does not allow tying crypto transactions to a specific jurisdiction. The regulation of cryptocurrencies and blockchain takes place in several directions. It refers to the currency, financial legislation, and regulation of the securities market.