Cryptocurrencies are relatively new forms of money. The world’s oldest cryptocurrency which is Bitcoin is only 13 years old. Therefore, it is not surprising that they still lack clear regulations. By the way, the question is, do cryptocurrencies need regulation at all? Or, can they become regulated? What different has UAE’s crypto exchanges have done? Stay with us up to the end of this article to figure out some interesting points regarding the regulation of cryptocurrencies.
Why has regulating cryptocurrencies become so important for the governments?
Cryptocurrencies are not only new, but also revolutionary. They are the only forms of money that are completely digital, unbacked, and peer-to-peer. They don’t rely on governments by any means and can be bought, sold, and transferred independently. Another interesting feature of cryptocurrencies is their transparency. All cryptocurrency transactions are recorded on the blockchains and can be checked by everyone.
However, this doesn’t mean that they threaten users’ privacy. Each transaction has an ID (Tx ID) that can be found in blockchain explorers. The Tx ID shows data like the time and amount of the transaction, but it doesn’t reveal the identity of the sender and the receiver. Cryptocurrencies in general don’t require you to register, pass KYC, give personal and identity data, or conform to some qualifications. Of any gender, any age, any nationality, or any religion you are, you can have a cryptocurrency wallet and use these currencies. This is exactly what terrifies the governments.
Governments traditionally had control over all financial transactions of all citizens of their countries. Some countries even had control over all transactions made throughout the globe. Imagine a system like SWIFT. SWIFT stands for The Society for Worldwide Interbank Financial Telecommunication. All international transactions made through banks must first pass this system and be confirmed by it. In this situation, imagine how much a cryptocurrency like Bitcoin that can be sent to a person on another part of the globe in a few minutes can terrify governments. Cryptocurrencies mean no sanctions and no limitations. With cryptocurrencies, a teenager under 18 can transfer large amounts of money and you can’t stop him/her. This seems like a nightmare to governments, doesn’t it? In such cases comes Crypto Exchanges like Crypto Desk In UAE that considers and verifies the customers ensuring their privacy.
By the way, different governments have had different reactions to cryptocurrencies. Some of them have tried to ban them, some others have accepted them and have revealed their will to regulate them (to minimize scams), and another country like El Salvador has decided to introduce Bitcoin as its official currency. Now the question is: can governments ban or regulate cryptocurrencies at all?
Is regulating cryptocurrencies possible considering their decentralized nature?
The truth is governments can’t ban or regulate cryptocurrencies themselves, but they have some other solutions to limit their citizens’ access. The first solution is that they can regulate cryptocurrency exchanges. All users finally need cryptocurrency exchanges to change their cryptocurrencies into fiat money. Governments can regulate these exchanges instead of cryptocurrencies. For example, cryptocurrency exchanges can set a daily withdrawal amount and require their users to register and pass KYC if their withdrawal surpasses this amount. Some other exchanges also necessitate registration for all services.
Another form of regulation is related to mining activities. This of course makes sense for Bitcoin (or some other proof-of-work blockchains). Governments can ban mining, or they can regulate it in some way that affects users’ mining activities. The most tangible example is the prohibition of mining Bitcoin in China. China was a hub in Bitcoin mining and the prohibition of mining in this country was a surprise that affected Bitcoin’s total hash power.
However, what is obvious is that governments can pose some limitations, but they can’t ban or regulate the whole network of cryptocurrencies. Still a teenager in the US can send Bitcoin to a friend in China and no one can ban this. This is the power of cryptocurrencies and the main reason for governments’ concerns.
Conclusion
When cryptocurrencies were first introduced, a few people believed they could reach the position they have today. Now we are living in a world where cryptocurrencies are compared to the Internet in terms of innovation and impact. Governments have also figured out they are forced to react to these new types of money. However, the reaction they choose to have is very important and may determine their future approach.Source click : https://cryptodesk.ae/
