the backdrop
The Initial Coin Offering on blockchain platforms has painted the world red for tech startups around the world. A decentralized network that can assign tokens to users who back an idea with money is revolutionizing and rewarding.
Profit-generating Bitcoin turned out to be an “asset” for early investors that generated multiple returns in 2017. Cryptocurrency investors and exchanges around the world capitalized on the opportunity, generating huge returns for themselves, which which led to the rise of multiple online exchanges. Other cryptocurrencies like Ethereum, Ripple and other ICOs promised even better results. (Ethereum grew more than 88 times in 2017!)
While ICOs put millions of dollars in the hands of startups in a matter of days, ruling governments initially chose to keep an eye on the fastest fintech development in history that had the potential to raise millions of dollars in a very short period of time.
Countries around the world are pondering the regulation of cryptocurrencies
But regulators grew wary as the technology and its underlying effects gained popularity as ICOs began to consider billions of dollars worth of funding, that too in proposed plans written in white papers.
It was at the end of 2017 that governments around the world took the opportunity to intervene. While China banned cryptocurrencies outright, the US Securities and Exchange Commission (SEC) highlighted the risks they pose to vulnerable investors and proposed treating them like securities.
A recent warning statement from SEC Chairman Jay Clayton, published in December, warned investors to mention,
“Also keep in mind that these markets extend across national borders and significant transactions may occur on systems and platforms outside of the United States. Your invested funds may quickly travel abroad without your knowledge. As a result, risks may be amplified, including the risk that market regulators such as the SEC may not be able to effectively prosecute bad actors or recover funds.”
This was followed by concerns from India, in which Finance Minister Arun Jaitley said in February that India does not recognize cryptocurrencies.
A circular sent by the Central Bank of India to other banks on April 6, 2018 called on banks to sever ties with businesses and exchanges involved in cryptocurrency trading or transactions.
In Great Britain, the FCA (Financial Conduct Authority) announced in March that it had formed a cryptocurrency task force and would receive help from the Bank of England to regulate the cryptocurrency sector.
Different laws, tax structures in all nations.
Cryptocurrencies are mainly coins or tokens launched on a crypto network and can be traded globally. While cryptocurrencies have more or less the same value around the world, countries with different laws and regulations can lead to differential returns for investors who may be citizens of different countries.
Different laws for investors in different countries would make calculating returns a tiring and cumbersome exercise.
This would imply an investment of time, resources and strategies that would cause an unnecessary lengthening of the processes.
The solution
Instead of many countries establishing different laws for global cryptocurrencies, there should be the constitution of a uniform global regulatory authority with laws that apply across borders. Such a move would play a major role in improving legal cryptocurrency trading around the world.
Organizations with global objectives such as the UN (United Nations Organization), the World Trade Organization (WTO), the World Economic Forum (WEF), the International Trade Organization (ITO) have already played an important role in uniting the world on different fronts.
Cryptocurrencies were formed with the basic idea of transferring funds around the world. They are roughly similar in value on trades, except for negligible arbitrage.
A global regulatory authority to regulate cryptocurrencies around the world is the need of the hour and could establish global rules to regulate the newest way of funding ideas. Right now, all countries are trying to regulate virtual currencies through legislation, the drafting of which is in process.
If economic superpowers with other countries can create a consensus to introduce a regulatory authority with laws that know no national borders, then this would be one of the biggest advances towards designing a crypto-friendly world and increase the use of one of the more transparent fintech. system will never - the blockchain.
A universal regulation consisting of subparts related to cryptocurrency trading, returns, taxes, penalties, KYC procedures, laws related to exchanges, and penalties for illegal attacks can give us the following advantage.
- It can make calculation of earnings very easy for investors around the world as there would be no difference in net earnings due to uniform tax structures.
- Countries around the world can agree to share a certain part of the profits as taxes. Therefore, the countries’ share of the taxes collected would be uniform throughout the world.
- The time needed to set up numerous committees, draft bills followed by debate in the legislative arena (like the Indian Parliament and the US Senate) could be saved.
- There is no need to go through the strenuous tax laws of each and every country. Particularly those involved in multinational trade.
- Even companies offering tokens or ICOs would comply with such ‘international law’. Therefore, the calculation of income after taxes would be a piece of cake for companies
- A global structure would require more companies to come up with better ideas, increasing job opportunities around the world.
- The law may be assisted by an international watchdog or global currency regulator, which may have powers to blacklist an ICO offering that does not adhere to the regulations.
Not all are advantages, when it comes to a law that would govern cryptocurrencies throughout the world. There are certain
disadvantages also.
Bringing the world’s financial leaders together to come together and draft legislation may take time. Discussions and bringing them to consensus can be challenging
- Countries or economies that provide tax-free structures may not agree to accept the law that establishes a universal tax policy
- Global watchdog or regulatory authority interference in following up on ICO-related regulatory developments might not go down well with some countries.
- Universal law can result in the world splitting into factions. Countries that do not support cryptocurrencies like China might not be a part of it.
- The law may be the brainchild of economically strong nations that could design it to serve their best interests.
- This law would be centralized with a global regulatory body unlike cryptocurrencies which are decentralized in nature.
conclusion
The world has been united for the better. Whether it’s creating a peaceful world after World War II, or coming together for better laws and trade treaties.
The International Trade Organization (ITO), the World Trade Organization and the World Economic Forum have some of the best brains defining the global economy.
They can join and be part of a body that would define the economic prosperity of the world. They would help draft global cryptocurrency standards and can be part of the regulatory body that would be the guide and beacon for thousands of ICOs around the world to improve. Initially, this may take time, but it would make things easier for times to come.
