Goldma.io an ICO backed by a fully functional Gold Mine May 21 The (attempted?) regulation of cryptocurrency By Reuben Machinga Crypto-regulation: Can it be done? Cryptocurrencies are here and we are most definitely excited! For regulatory authorities, on the other hand, the arrival of crypto has been somewhat less exciting. For them, it’s more a pain in their side rather than a cause for jubilation. Why, you may ask? It very well may have to do with their nature. Cryptocurrencies may be hard to define, hard to tie down to a single place, and, we cannot deny this, have been a vehicle used by people with malicious intent. Why regulate? Before we dig into all of that, perhaps we ought to understand regulators’ raison d’être.
In classical economics, perfect markets have agents armed with perfect information. They know everything there is to know about all their transactions. Call them omniscient. Coming back to our world, we’re far from Godlike. Imperfect information (imperfect people?) characterises our markets. Regulatory authorities, then, have to step in, ostensibly to safeguard vulnerable agents.
To illustrate my point, just think of this. Do you know your bank’s financial health? Really? I mean having an intimate knowledge of not only their reserves at the central bank, but also where they invested or how risky those investments are. I don’t, and I suspect you don’t either. For this reason, so we’re told, central banks and governments step in to regulate the activities of banks.
They prescribe what class of assets and investments they are allowed to own and take part in. Why is crypto so hard to crack? Coming to our world of cryptocurrency, it’s easy to see how things are, altogether, very different. Even that may be putting it too lightly.In the eyes of regulatory authorities, cryptocurrencies exist in a semi-anarchic state.
At the truly global level that they operate, there is no central government. This, in turn, makes regulation extremely challenging. Part of the Bank of Namibia’s reasoning in not permitting the use of cryptocurrency within their jurisdiction is that they, cryptocurrencies, are “…neither issued nor guaranteed by a central bank…” Cryptocurrencies may also be hard to define. Calling them currency suggests they’re purely a medium of exchange.
While that may have been Satoshi Nakamoto’s intention, Bitcoin has attracted a great deal more attention from people who wish to speculate than those who wish to transact with it. How then do regulators treat cryptocurrencies? Do they levy ad valorem taxes (like VAT) on transactions? If they decide to do that, how do they do it? Remember, cryptocurrencies do not flow through the traditional financial system. If not an ad valorem tax, perhaps regulatory authorities should levy capital gains tax? The Australian Taxation Office seems inclined to the latter. For them, “…Bitcoin is, however, an asset for Capital Gains Tax (CGT)…” Beyond speculators, the nature of cryptocurrencies makes definition difficult. Some tokens are utility tokens. They may be used as a means of payment or for some other purposes on the platform that their creators built.
Other tokens, such as the GMA token, are security tokens. Some sort of promise accompanies them from the issuer. In the case of the GMA token , holders are entitled to a 5% royalty from the profits generated by a functional gold mine . For tokens like these, regulatory authorities may treat them in the same manner they’ve treated traditional securities. Companies running ICOs may also voluntarily comply with securities laws and procedures.
At Goldma, we’ve not only taken it upon ourselves to be compliant with the law but we also honour our fiduciary responsibilities to token holders. Not everyone means well It cannot be denied that people with malicious intent have used cryptocurrencies both to steal from others (by running scam ICOs) and also by moving proceeds of criminal enterprise in the form of cryptocurrency. On the first point, we encourage prospective investors to do their due diligence . With respect to criminal enterprise, there may be a cause for concern. UK and EU financial authorities have claimed that cryptocurrency has been used as a means to evade tax and channel proceeds from crime.
As a result, they’ve moved to try and end the anonymity that cryptocurrency holders had hitherto enjoyed. China’s objection to and clampdown on cryptocurrencies appears to be consistent with their fight against capital outflows and corruption. Where to? Perhaps the technology that underlies cryptocurrency will, in the end, address some of the reasons why we have regulatory authorities in the first place. Smart contracts allow for automated execution of pre-set standards.
Can we not program them to make sure cryptocurrencies are used for non-malicious activities? Can we not build smart contracts that automate the remunerations, payments, or other promises that businesses make to their customers and investors? I wouldn’t want to get ahead of myself. These are human systems after all, and they’re not infallible. However, we’re building the future as we speak! For more information, visit, like or follow us on the platforms listed below: .
