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Facebook Joins the League: What You Need to Know About Cryptocurrencies Becoming A Threat to National Economies

Nicholas Otieno

Posted on August 13, 2019 10:15

1 user

With the recent rise of cryptocurrency players, Facebook and even The People’s Bank of China have not taken things lightly, and have decided to test the waters on the crypto markets. It’s quite interesting to see how things unfold. But financial regulators have already pointed fingers at crypto currencies as being a threat to national economies. Here is what you need to know.

Just like Google, Amazon, and other technology giants, Facebook has shown interest in launching its own cryptocurrency called Libra. Emerging news also indicates that The People’s Bank of China also intends to issue its own digital currency.

The rising trend shows why cryptocurrency players don’t want to take chances, but are keen on capitalizing on the booming crypto market.  

Meanwhile, regulators are uncertain about how to keep up with the changing environment. Many influential people in policy circles oppose digital currencies on the premise that they are a threat to national economies.

Furthermore, many regulators worry about criminals who increasingly use crypto currencies for illegal activities.

The misuse of digital currencies is prevalent. It is high time to address the challenges encountered in the market.

Here are four ways regulators can prevent cryptocurrencies from becoming a threat to national economies.

1. Anonymity

Anonymity inhibits cryptocurrency transactions from being sufficiently monitored, thus allowing shady transactions to take place outside the regulatory framework. Consequently, criminals use virtual currencies to get easy access to “clean cash.”

Anonymity is also an enabler of tax evasion. As people's identities are concealed, the tax authority doesn’t know who is entering the taxable transaction and can’t sanction nor detect tax evasions. Regulators, therefore, need to address the anonymity surrounding cryptocurrencies.

2. Mandatory Registration

The current voluntary registration system paves the way for the illicit use of cryptocurrencies. Establishing a mandatory registration for cryptocurrency users is thereby a better approach to combat tax evasion, terrorist financing, and money laundering.

3. Legal Framework

The existing legal framework fails to overcome the problems mentioned above. Of late, there are no rules to deal with anonymity involving the transactions of virtual currencies. Current legal frameworks do not include players in crypto currency markets, either. This leaves blind spots in the struggle against tax evasion, terrorist funding, and money laundering.

Individuals with malicious intent can look for such blind spots. If they succeed, it could bring devastating consequences.

That’s why expanding the scope of the legal framework is an absolute must.

4. International Collaboration

Borders do not bind crypto players and cryptocurrency transactions. Therefore, it is insufficient to counter the challenges of tax evasion, terrorist funding, and money laundering on a national scale. International collaboration is essential to enforce and impose rules on combating these problems effectively.

Take Away

A mechanism of regularization that will hold crypto players accountable for their cryptocurrency activities must be introducted. Such a move would prevent technology from being used for illegal purposes.  

 

 

Nicholas Otieno

Posted on August 13, 2019 10:15

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Source: CS Monitor

Around the world, regulators are setting rules for the cryptocurrency market, as concerns about virtual currency sales' transparency...

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