Commentary of Government Regulation of Cryptocurrency
What if authorities of all the countries of the globe make a decision to drive cryptocurrency out of business? Which diversionary routes can the industry utilize?
Government may establish control over cryptocurrency transactions, regulating such things as the amount of money to be sent, payment recipients and the frequency of payment conduction.
We cannot predict how the audience will respond to such governmental steps. But we have some examples connected with prohibition of marijuana, alcohol or online poker.
In order to undermine the credibility of networks government bodies can carry out some attacks which may result in the violation of trust, but it doesn’t mean the effect will be long-termed. Nothing prevents governments from generating a great amount of addresses, conducting transactions between these wallets at a high frequency to clog networks.
It is also possible to organize direct attacks on blockchain networks. Authorities have the possibility to establish control over 51% of the whole hash power through the arrangement of enough computational resources. Such actions are also can bring discredit on blockchain-powered projects.
Naturally, this would result in the loss of trust in this individual network which would lead to the collapse of the project’s token or coin price.
In case of such attacks on Bitcoin people would switch over to other projects, for example, Litecoin together with Ethereum. Average participants would lose funds while the most well-informed and sophisticated one may become extremely wealthy.
In fact, there are no attacking methods to create the long-term effect. Of course, such actions can be the reasn of cause short-term fears, but today governments have no opportunity, or in more exact terms, ability to stop or clamp down on cryptocurrency projects.
There is another case scenario. Authorities can outlaw the fiat-to-cryprocurrency exchanges. It means, banking institutions will be forced to stop all the transfers connected with cryprocurrencies and freeze fiat-denominated wallets.
The United States had a similar experience when the Internal Revenue Service attempted to establish the control over fiat-to-crypto exchange transfers demanding the full list of the Coinbase users. But due to the enormously large amount of data the Service requested data about users involving in deals which exceed $25,000.
This connection of fiat currency and virtual money is considered to be the key vulnerability of the cryptosystem because of the strong governmental influence. At the same time, in case you convert money into cryprocurrency and store in personal virtual wallets, your funds are beyond of authority reach. For instance, governmental bodies have no chance to close down DEXes such as Ox, SWAP, OmiseGo as well as Kyber.
People’s Bank of China limitations and SEC’s Guidance
The American and Chinese regulators can be seen as the clearest examples of governmental monitoring related to cryptocurrencies.
The United States Securities and Exchange Commission intends to force all the ICOs to meet the requirements of securities laws while issuers are issuing securities. In is also said that ICOs launched before the announcement of SEC’s instruction won’t be taken to court without warning.
The Securities and Exchange Commission has launched investigations into the functioning of a wide range of widely known networks such as BCAP and MCAP, ICN as well as NMR, DNT together with SAN as well as MLN, several of which are doubtless securities, among them BCAP, MCAP, and ICN. The BCAP project was launched as directed by securities acts. The rest of these projects aren’t considered to be securities with NMR not being traded at all.
The People’s Bank of China proclaimed ICOs out of law requiring the issuers to refund their investors. Such step is much more ruthless than SEC’s actions, but to estimate its effect we need more time.
There was a lot of ambiguity before the announcement of the SEC’s guidance. Despite there are no answers to some questions as well as the SEC’s intention to classify utility tokens, regulatory clarity in complex have beneficial effects on the industry, making the world of cryptocurrency stronger.
On a short-term horizon regulators are about to actively combat scams, frauds, as well as the projects violating currently ongoing securities laws which will lead to insignificant panics, but should not influence the vital capacity of the most authoritative companies developing the strongest protocols.