International Regulations for Cryptocurrencies Will Create Win-Win Situations

The backdrop

Initial Coin Offering on blockchain platforms has painted the world red for tech startups across the world. A decentralized network that can allocate tokens to the users supporting an idea with money is both revolutionizing and awarding.

Profit-spinning Bitcoin turned out to be an ‘asset’ for early investors giving manifold returns in the year 2017. Investors and Cryptocurrency exchanges across the world capitalized on the opportunity to spell enormous returns for themselves leading to the ascent of multiple online exchanges. Other cryptocurrencies such as Ethereum, Ripple, and other ICOs promised even better results. (Ethereum grew by more than 88 times in 2017!)

While the ICOs landed millions of dollars in the hands of startups within a matter of days, ruling governments initially chose to keep an eye on the fastest fintech development ever that had the potential to raise millions of dollars within a very short period.

Countries all across the globe are mulling over regulating cryptocurrencies

But the regulators turned cautious as the technology and its underlying effects gained popularity as ICOs started mulling over funds worth billions of dollars - that too on proposed plans written on whitepapers.

It was in late 2017 that governments across the world seized the opportunity to intervene. While China banned cryptocurrencies altogether, the SEC (Securities and Exchange Commission) in the US, highlighted risks posed to vulnerable investors and has proposed to treat them as securities.

A recent warning statement from SEC Chairman Jay Clayton released in December cautioned investors mentioning,

“Please also recognize that these markets span national borders and that significant trading may occur on systems and platforms outside the United States. Your invested funds may quickly travel overseas without your knowledge. As a result, risks can be amplified, including the risk that market regulators, such as the SEC, may not be able to effectively pursue bad actors or recover funds.”

This was followed by India’s concerns, wherein Finance Minister Arun Jaitley in February said that India does not recognize cryptocurrencies.

A circular sent by the Central Bank of India to other banks on April 6, 2018, asked the banks to sever ties with companies and exchanges involved in trading or transacting in cryptocurrencies.

In Britain, the FCA (Financial Conduct Authority) in March announced that it has formed a cryptocurrency task force and would take assistance from the Bank of England to regulate the cryptocurrency sector.

Different laws, and tax structures across nations

Cryptocurrencies majorly are coins or tokens launched on a cryptographic network and can be traded globally. While cryptocurrencies have more or less the same value across the globe, countries with different laws and regulations can render differential returns for investors who might be citizens of different countries.

Different laws for investors from different countries would calculate returns a tiring and cumbersome exercise.

This would involve an investment of time, resources, and strategies causing unnecessary elongation of processes.

The Solution

Instead of many countries framing different laws for global cryptocurrencies, there should be a constitution of a uniform global regulatory authority with laws that apply across borders. Such a move would play an important part in enhancing legal cryptocurrency trades across the world.

Organizations with global objects such as the UNO (United Nations Organisation), World Trade Organisation (WTO), World Economic Forum (WEF), and International Trade Organisation (ITO) have already been playing an important part in uniting the world on different fronts.

Cryptocurrencies were formed with the basic idea of the transference of funds all across the world. They have more or less similar values across exchanges, except for negligible arbitrage.

A global regulatory authority to regulate cryptocurrencies across the world is the need of the hour and might lay down global rules for regulating the newest mode of financing ideas. Right now, every country is trying to regulate virtual currencies through legislation, the drafting of which is under process.

If the economic superpowers with other countries can build a consensus introducing a regulatory authority with laws that know no national boundaries, then this would be one of the biggest breakthroughs towards designing a crypto-friendly world and boost the use of one of the most transparent fintech systems ever - the blockchain.

A universal regulation consisting of subparts related to cryptocurrency trading, returns, taxes, penalties, KYC procedures, laws related to exchanges, and punishments for illegal hacks can yield with the following advantages.

1. It can make the calculation of profits super easy for investors across the world, as there would be no difference in the net profits because of uniform tax structures
2. Countries all over the world may agree to share a certain part of the profits as taxes. Therefore the share of countries on the taxes collected would be uniform all across the world.
3. The time involved in constituting numerous committees, and drafting bills followed by discussions in the legislative arena (Like the Parliament in India and the Senate in the US), could be saved.
4. One need not go through the strenuous taxation laws of every country. Particularly those involved in multinational trading.
5. Even the companies offering tokens or ICOs would comply with the said ‘international law’. Therefore, the calculation of post-taxation incomes would be a cakewalk for companies
6. A global structure would call for more companies to come up with better ideas, thereby increasing employment opportunities across the world.
7. The law may be assisted by an international watchdog or regulatory for global currencies, which may have powers to blacklist an ICO offering that does not adhere to the norms.

It is not all advantages when it comes to a law that would govern cryptocurrencies all over the world. There are certain disadvantages as well.

Uniting the world’s financial leaders to come together and draft a law might be time taking. Discussions and bringing them to a consensus might be challenging

1. Countries or economies providing tax-free structures may not agree to accept the law that provides for a universal taxation policy
2. The global watchdog or the regulatory authority’s interference in monitoring ICO-related regulatory developments might not go well with some countries
3. The universal law may result in the world is divided into factions. Countries that do not support cryptocurrency like China might not be a part of it.
4. The law may be the brainchild of economically strong nations who might design it to suit their best interests.
5. This law would be a centralized one with a global regulatory body, unlike cryptocurrencies which are decentralized in nature.

Conclusion

The world has been together for the better. Be it making a peaceful world after World War II, or coming together for better trade laws and treaties.

The International Trade Organisation (ITO), the World Trade Organisation, and the World Economic Forum have some of the best brains that define global economics.

They can come together and be a part of a body that would define the economic prosperity of the world. They would help draft global cryptocurrency norms and may be a part of the regulatory body that would be the guide and lighthouse for thousands of ICOs across the world for the better. Initially, this may be time taking but would make things easy for the times to come.

Source by Asheesh K Shukla