Topic: Cryptocurrency regulation - pls explain (Read 649 times)

To add to the already excellent feedback provided, and to tie back to the core idea of decentralization - governments, particularly the U.S., want to be sure that their citizens financial (and even moreso "moral") interests are protected. They prefer not to have their citizens engaging in illegal activity, of which the most popular activity I can see wanting to regulate is the online crypto gambling industry. In order to do so, they have to be able to tell who is spending, and where they are spending it at.

We are not yet certain that it is uncertain, actually, I've read an article before that Australia is making a move to regulate bitcoin, and I think soon other cryptocurrencies. Though I don't know exactly what is already happening now, I think Australia is a strong country who really wants to prevent money laundering through use of bitcoin. And for me, it won't take too long before it happens in Australia and in some other counties as well.

Thank you all for your answers!

I have a bunch of follow-up questions:

5) Let's say I suspect SEC will see the token of an ICO as a security, and thus might go after people who invest in it (as well as the people behind the ico). How do I know if the ICO already comply with US regulations & thus can be legally safe to invest in?
6) Is there still value in launching a project as an ICO (& not as for example an IPO) if it means you have to comply with regulations?
7) Or are you maybe simply not allowed to launch a security as an ICO?
8 ) Is it likely that governments soon will try to regulate ICOs that does not fall under the security definition? (ie not just forbid them like China)
9) What dangers may I face as a non-US resident by investing in an ICO that falls under the security definition?
    a) Can & will they do anything to me?
    b) I don't pay taxes in the US, so do they really have that much interest in me then?
10) Under what circumstances may I be required to pay taxes on crypto investments in countries other than my own?
11) If a coin/token is seen as a security by my government, could that have positive effects for my taxation?

 12) What is a local exchange? How does it differ from others, and what are they called? Examples of local exchanges?


Wow that was more than I had planned on.. I kept on getting more questions while typing. Sorry about that

With a strong desire of the government can always prohibit the use of bitcoin. The assertion that bitcoin is an anonymous currency is not true. Any steps on the Internet leave their traces. On this trail you can always find the user. What we do not see effective action from the government suggests that the government does not want to do.

Regulatory treatment of cryptocurrencies continues to evolve, but because the technology transcends global boundaries, the influence of national regulators is limited. Since cryptocurrencies were conceived specifically to avoid governmental controls, it’s uncertain whether regulation efforts will be successful.

I would like to know as well

For some government regulation means to them is reaching to businesses especially cryptocurrency exchanges and requiring all its customers to be identifies. I also know some local Bitcoin wallet providers before you can withdraw or deposit a big amount you are required to verify your account and link your wallet address in your name.  And yes part of it is because of taxes with Bitcoin being a anonymous currency the government is finding a way to stop the abuse of it.

The answer to this question is also found above ^

Regulation is all about law and policy created by the government so that there is a rule to comply by their citizens in a certain situation and they can be apply to digital currencies including bitcoin to ensure that bitcoin is cannot be use in illegal activities such as money laundering, smuggling and ICO scam. If the regulation is in effect the government can now monitor every transactions during their local exchanges transactions and also they could now impose tax on every investors in which for me is one of the advantage of the government would get if they legalized bitcoin.

1) What does regulation mean in practice? Is it like they want to register people who invest or something? Is it all about taxes?
This is true,they would tend to regulate for them to monitor on the incoming and outgoing of transactions or simply they do have the power.
2) Why does governments want to regulate crypto?
They want to regulate because if people would tend to make investments it would really affect their financial state.
3) I see "securities" a lot when googling regulation. Are only coins/tokens that governments deem to be securities in danger of regulation?
I dont think so

4) What are the drawbacks (& advantages?) for an investor who discovers his/her crypto investment is to be regulated?
Advantage for this one is that we can somehow assure that we would able to avoid scams since they are already regulated not a decentralized stuff.

First of all, welcome to the forum.


Yep, Anti Money Laundering/ Know Your Customer(AML/KYC) is now being implemented. Most of exchanges now are regulated by the government. So we don't have much choice but to comply. You have to give your identity in able for you to use their platform. That's all.


Because it could be a way to do illegal practices like money laundering and evading your taxes. That's why it should be regulated by the government.


Regulated crypto means they are more safer from other crypto that are not regulated. There's a lot of scam ICOs out there. The only way to make sure that they are not going to scam you, is to check if the ICO is in compliance with the regulations.

1) Regulation just refers to a legal regime for dealing with cryptocurrencies. No legal frameworks until very recently were formed with Bitcoin in mind. Accordingly, governments need new legal frameworks and rules to deal specifically with cryptocurrencies. It's partly about taxes. It's also about cross-border commerce and sanctions, anonymity/pseudonymity and propensity for use in money laundering and other crimes, consumer protection from scams and fraudulent securities.

2) For the reasons listed above. If cryptocurrencies continue to grow at this rate, they will become economically relevant, with real repercussions on government tax revenue and commerce.

3) No, it's pretty clear that governments intend to regulate both cryptocurrencies and related tokens that are deemed securities. The distinction is just about jurisdiction. Eg. the SEC regulates securities.

4) From the casual investor/end user side, regulation means you need to be wary of projects that aren't in compliance. If an ICO is offering tokens to US investors which are clearly unregistered securities, that is a red flag. The SEC could take action against these ICO operators.

An exchange must be registered so that it can give assurance to it's users that the company is legit and the team behind those are transparent. Under regulation, a company must comply on all legal terms under one country's Central Banks. Same with banks and local payment processor and establishment. In case of scam exchanges, users can take a counter against the exchanges.

While at the same time we are experiencing advantages using cryptos, it's no different with the use of fiat wherein fraud and scammed can happened. Regulation of crypto might be not good for others but it has advantages in terms of protecting users. Remember that crypto transaction is irreversible.

On how the government will regulate cryptos, that's only we can see if it's advantage or disadvantage to us.


That's why you can see such horrible selling rates especially at local exchanges. Because government can taxed directly the investors, the one who is facing it is the exchange itself. In return, investors must deal with the current sell rate of the exchange they are using including all fees at any transactions.

In practice it means that regulation compliant cryptocurrency exchanges need to implement AML (anti money laundering) and KYC (know your customer) policies. For ICOs it means that companies and individuals that happen to issue tokens that get classified as security may face criminal charges.

Regulation is mostly about 1) controlling cash flows to avoid money laundering and tax evasion and 2) protecting consumers from investing in scams.



1) As far as capital gains from holding Bitcoin -- and other cryptocurrencies / tokens -- are concerned, those only become taxable after exchanging back to fiat, as from a government perspective you don't realize any losses / gains until you actually sell the respective coin or token.

2) While you can expect most exchanges to cooperate with governments in case of criminal investigations, transferring applicable taxes is not the exchanges' responsibility. It is up to every individual user themselves to correctly report their income according to their local governance. If you fail to correctly report your income and your local government happens to be in touch with one of your exchanges, you might get into trouble.

OK thanks. But regarding taxes.. doesn't most exchanges already comply with government demands of insight?

And because of that, shouldn't governments be able to tax investors on their gains already? At the very least at the moment an investor exchanges back to fiat?

1. Regulation means that government want to controll exchange platforms and their users, as I understand. Also government want to get tax from bitcoin holders (it is different in all contries).
2. Because market is full of scamers. Look at the count of ICO project, amd 90% of it is scam. Their founders only collect money and do  nothing else.
3. Yes, it is about ICO and tokens politics. For example, in US all each projects are analysing by SEC and they dicede its mature (shares, bonds, ets)
4. Investors work on regulated marked, so they have more security and freedom. regulators also help investor to deposit only in real projects (if we are talking about ICO).

Thanks for your answers, but maybe I wasnt clear on the first question.

I meant: What does the very concept of regulation mean?

They can't really regulate it, they can tho track transactions and assume which wallets are you using (by looking at where you put your IP address, many exchanges are mapping where they are sending your coins to and from exchange so by knowing people on exchanges they can assume who are you but it's not 100% sure... Even if they can regulate it we can all move to some more anonymous cryptocurrency like xmr where for instance its really hard if not impossible to track transactions. So all in all they can try to take a cut from taxes.

No government can regulate the cryptocurrency at this moment. Because the very nature of decentralized crypto market it is not possible for a country to regulate the prices of crypto. They could curb on ICO.

Looks like you are  googling  with less correct phrases. If you are interested in the crypto then decide which crypto you find promising. Almost all investor find bitcoin as ideal investment. Most of countries in this world allow purchase of bitcoin. You pay taxes depending on your country.
One thing is sure, each country is treating bitcoin and crypto differently. Thus you need to find the laws in your country. Check which local (countrywise) exchanges allow purchase and sell of crypto.
Depending what kind of regulation being proposed by government decides advantages or disadvantages.

Hi!
I'm a cryptocurrency newbie and have very basic/dumb questions about regulation. Here goes..

1) What does regulation mean in practice? Is it like they want to register people who invest or something? Is it all about taxes?
2) Why does governments want to regulate crypto?
3) I see "securities" a lot when googling regulation. Are only coins/tokens that governments deem to be securities in danger of regulation?
4) What are the drawbacks (& advantages?) for an investor who discovers his/her crypto investment is to be regulated?

Thank you for your time & patience