Initial Coin Offerings on blockchain platforms have painted the world red for tech startups around the world. It is revolutionizing and rewarding a decentralized network that can award tokens to users who support an idea with money.
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Profit-spinning turned Bitcoin into an “asset” that delivered huge returns to early investors in 2017. Investors and Cryptocurrency exchanges around the world seized the opportunity to offer themselves huge returns, leading to the rise of multiple online exchanges. Other cryptocurrencies such as Ethereum, Ripple and other ICOs promised even better results. (Ethereum grew more than 88 times in 2017!)
With ICOs getting millions of dollars in the hands of startups within days, government governments initially decided to look at the fastest ever fintech development, which had the potential to raise millions of dollars in a very short period of time.
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Countries around the world are thinking about regulating cryptocurrencies
But regulators became cautious as the technology and its underlying implications gained popularity, as ICOs began to scrutinize funds worth billions of dollars… That too in proposed plans written in white papers.
At the end of 2017, governments around the world seized the opportunity to intervene. While China completely banned cryptocurrencies, the US SEC (Securities and Exchange Commission) highlighted the risks to vulnerable investors and proposed treating them as securities.
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A recent warning statement from SEC Chairman Jay Clayton, released in December, warned investors:
“Please also recognize that these markets span national borders and that significant trading may occur on systems and platforms outside of the United States. Invested funds may travel abroad without your knowledge. As a result, risks, including market risk, may increase. Regulators such as the SEC, we may not be able to effectively track down bad actors or recover funds.”
This was followed by India’s concerns, where Finance Minister Arun Jaitley said in February that India was not familiar with cryptocurrencies.
A circular issued by the Central Bank of India to other banks on April 6, 2018 asked banks to sever ties with companies and exchanges involved in cryptocurrency trading or transaction.
In Great Britain, the FCA (Financial Conduct Authority) announced in March that it had formed a cryptocurrency task force and would enlist the help of the Bank of England to regulate the cryptocurrency sector.
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Different laws, tax structures between nations
Cryptocurrencies are mostly coins or tokens launched on a cryptographic network and can be traded worldwide. Although cryptocurrencies are more or less valuable around the world, countries with different laws and regulations can provide different returns for potential investors who are citizens of different countries.
Different laws for investors in different countries would make calculation of returns a tedious and cumbersome exercise.
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This would mean an investment of time, resources and strategies, causing unnecessary prolongation of the processes.
Instead of many countries enacting different laws for global cryptocurrencies, a uniform global regulatory authority should be formed, with laws that apply across borders. Such a move would play a major role in improving legal cryptocurrency trading around the world.
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Organizations with a global purpose, such as UNO (United Nations), World Trade Organization (WTO), World Economic Forum (WEF), International Trade Organization (ITO) have played an important role in uniting the world on various fronts.
Cryptocurrencies were created with the basic idea of worldwide fund transfer. They have more or less similar value in exchanges, except for negligible arbitrage.
A global regulatory authority to regulate cryptocurrencies worldwide is the need of the hour and can set global rules to regulate the newest funding idea. Right now, all countries are trying to regulate virtual currencies through legislation, which is in the process of being written.
If other economic superpowers can agree to introduce a regulatory authority with laws that do not recognize national borders, then this would be one of the biggest advances in designing a crypto-friendly world and promoting the use of one of the most transparent fintechs. system everâ€Š-â€Šblockchain.
Universal regulations consisting of subsections related to laws related to cryptocurrency trading, refunds, taxes, penalties, KYC procedures, exchanges and penalties for illegal hacks can provide us with the following. advantages.
- Profit calculation can be very easy for investors worldwide as there would be no difference in net returns due to uniform tax structure.
- Countries around the world may agree to share a certain portion of profits as taxes. Therefore, the countries’ share of taxes collected would be uniform throughout the world.
- Time could be saved when forming multiple committees, following bills and legislative debates (like the Indian Parliament and the US Senate).
- There is no need to go through the harsh tax laws of each country. Especially those involved in multinational trade.
- Companies offering tokens or ICOs would also comply with the said “international law”. Therefore, the calculation of after-tax income would be a cakewalk for companies
- A global structure would require more companies with better ideas, thus increasing employment opportunities worldwide.
- The law may be supported by an international watchdog or general currency regulation, which may have powers to blacklist an ICO offering that does not comply with the rules.
It’s not all good when it comes to a law that would regulate cryptocurrencies worldwide. There are for sure disadvantages as well.
Getting the world’s financial leaders together to draft a law can be time-consuming. Discussions and consensus can be difficult
- Countries or economies that offer tax-free structures may not agree to pass a law that establishes a universal tax policy.
- Global watchdogs or regulatory authorities tracking ICO-related regulatory developments may not sit well with some countries.
- Universal law can cause the world to divide into factions. Countries that don’t accept cryptocurrency like China may not be part of it.
- Law may be the brainchild of economically powerful nations who can design it in their own interests.
- This law would be centralized, unlike cryptocurrencies which are decentralized in nature, with a global regulatory body.
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 Organization (ITO), the World Trade Organization and the World Economic Forum have some of the best brains defining the global economy.
They can be part of a body that would come together and define the economic prosperity of the world. They would help draft cryptocurrency rules around the world and could be part of the regulatory body that would be the guide and beacon for thousands of ICOs around the world. It takes time in the beginning, but it would make things easier for the times to come.