The Benefits and Dangers of Cryptocurrency (Bitcoin) Regulation
Cryptocurrency(Bitcoin regulation) is the process of regulating the use and trade of cryptocurrency(bitcoin) through a regulatory framework. Regulating the use and trade of bitcoin is both advantageous and disadvantageous.
In this article , we shall make mention of few countries with a favourable legislation for bitcoin and those with unfavourable ones.
There are many types of cryptocurrencies but the most popular and widely used is Bitcoin, which is invented in January 2008 ny the Pseudonymous Satoshi Nakamoto.
The decentralized nature of bitcoin and other digital asset was an attribute designed to make it immune from any government or central authority control. However, this does not strip the government or its authorized agent like the central bank of a country from providing certain regulatory framework to guide the usage and transactions involving bitcoin. The fear that cryptocurrency adoption, usage and transaction will, if left unchecked , affect the value, recognition and usage of the local/fiat currency has prompted many countries to either ban or restrict the use of cryptrocurrency.
Thus the legality or otherwise of cryptocurrency is dependent on the country/jurisdiction in question. Thus the fear that cryptocurrency will displace the traditional currency and thus put the government in an awkward position has led to some country to either ban or restrict the use of cryptocurrency.
Generally, creating a cryptocurrency friendly legislation to allow, encourage and promote the use and trade of bitcoin and other related cryptocurrencies will provide a strong boost to economic competitiveness. However if left unchecked, it will definitely constitute a threat to the fiat money of a country.
It should be noted that inasmuch as some countries do not make the usage of bitcoin and other cryptocurrencies illegal, its status as money or commodity varies with differing regulatory implications. Thus while some countries/states have explicitly allowed the use of bitcoin and other cryptocurrencies, others have either banned or restricted it.
Cryptocurrency(Bitcoin) regulation in some countries
For instance, the European Union generally has passed no specific legislation regarding the status of bitcoin as a currency but has however, stated expressly and unequivocally that VAT/GST is not applicable to fiat currency to bitcoin and vice versa conversion.
According to the European Central Bank, traditional financial sector regulation is not applicable to bitcoin on the ground that traditional financial regulators are not involved as actors.
The European court of Justice in 2015 ruled that the exchange of fiat currency for bitcoion units is exempted from VAT.
In Norhern African countires like Algeria, Morocco and Egypt, the purchase, use, sale and holding of cryptocurrency is prohibited. In Egypt specifically, it is prohibited under the Islamic law. In Nigeria, the Central Bank in January 2017, through a circular, informed the general public that transactions involving bitcoin and other cryptocurrencies have been banned . Subsequently a committee was set up by the CBN and Nigerian Deposit Insurance Commission and this led to the legalization of bitcoin usage and transactions in Nigeria.
In the Western countries like United States, Canada, Mexico etc, the use and trade of bitcoin is legal. Bitcoin ATM has been installed so many places for accessibility and usage. other countries where use of bitcoin and related cryptocurrencies are legal include Jamaica, Trinidad and Tobago, Costa Rica, etc.
In Brazil, the use and trade of bitcoin though not banned or restricted, is highly not encouraged.
BENEFITS OF CRYPTOCURRENCY(BITCOIN) REGULATION
No matter how good and favourable the use of any asset is, once it is unregulated, abuse will set in. Cryptocurrency has been an alternative medium of exchange. If its usage is not regulated, it may present a threat to the fiat currency of a country . So in considering the economic benefits of allowing the use of cryptocurrencies, regulations should be made to check it to avoid abuse.