The tremendous buzz around Bitcoin’s astronomical rise these past couple of months has attracted the interest of regulators. Everyone from the US Securities and Exchange Commission to India’s Finance Ministry is closely watching the developments.
If you have recently picked up a newspaper, you would have read about SEC’s latest charge against XRP and Ripple. The SEC claims that XRP is a ‘Security’ and not a ‘Currency’ and should have sought prior approvals before raising more than $1.6 Billion.
The increasing inflow of capital into Bitcoin has made its valuation increase to $500 Billion.
In this article, we look at how and why regulators, the world over are analyzing and assessing Bitcoins and other cryptocurrencies. We will conclude by predicting, what can the ecosystem expect in the form of regulations going into 2021.
Regulators and Bitcoins: A Love-Hate Affair
First things first. Bitcoin’s independent and zero-control nature makes regulations very difficult. As the source of the same is not a government or a central bank, the decentralization has its own pros and cons.
Let us start with the pros. Lack of control means that authorities cannot bring the hammer down on rules and regulations too hard. It also means that they have to tentatively tread in order to not ignite the ire of the people who are investing their fortunes into Bitcoins. For more information, you can visit this link
Regarding the cons, no regulations also mean that small retail investors would be the worst affected when something goes south. It also means that illegal agents might crowd the ecosystem and the governments will pull their hands away.
One major change, which has happened is that big forces, with a lot of financial power and political clout, have taken an increasing amount of interest in Bitcoin. We are talking about billions in investments from people who have sources on the Hill.
This has made regulators start to engage and not adopt too hard of a stance with Bitcoins and cryptocurrencies.
Bitcoin Taxation, Rules, and Regulations: What you should know
The bitcoin system allows for Bitcoins to be taxed according to Capital Tax Gains. In simple words, to give you a comparison, the taxation models follow the real estate one very closely. To break it down even further, Bitcoins are classified as securities and not currencies by most national governments the world over.
This is something, which is very attractive to investors as it seeks to reduce the taxation burdens. However, it also means that there is a certain level of control and that the decentralization is not at 100% percent!
Institutional investors state that if the government starts collecting basic taxes, it would not want to kill something. So, at the end of the day, they welcome some form of regulation, oversights, and protection from the authorities.
If you look at Europe, countries like Germany, Switzerland, and others have already introduced mainstream banking to Bitcoin. In these places, the government and regulators are trying to make it as formal and official as possible and create income.
Expectations from Regulators on Bitcoins in 2021
With Joe Biden set to take over the American Presidency in January 2021, the community expects relaxation. In fact, some reports are already making rounds as to the regulations being toned down.
This is important because what the United States does in terms of crypto regulations is likely to have a worldwide impact. Other countries are closely watching the US and hope to adopt their taxation norms and regulations accordingly.
Insiders that are familiar with the matter state that one thing is for sure in 2021, more engagement between authorities and cryptocurrencies. They say that at the end of the day, governments can benefit from taxations and investors can benefit from returns.
The Final Word
There is no doubt that as Bitcoin becomes much more mainstream, we can expect positive engagement. It also means that the newer technologies can be looked into to create a better and much more integrated financial and commercial world in the next coming years.
HussaiN is a full-time professional blogger from India. He is passionate about content writing, Tech enthusiast & computer technologies. Apart from content writing on the internet, he likes reading various tech magazines and several other blogs on the internet.