Could Bitcoin be Deemed illegal?


With recent interest and market exposure soaring, thousands of people around the world have begun to buy cryptocurrency – investing in the likes of Bitcoin despite volatile prices and increasing scrutiny from international regulators.

For many, one of the chief fears informing their decision to buy – or avoid – cryptocurrency is the the worry that governments around the world could effectively outlaw Bitcoin, leading to a collapse in the international market and leaving the fortunes of many to dwindle to nothing.

While views on the legality of Bitcoin (and cryptocurrencies in general) tend to vary from nation to nation, the good news is that 2017 and early 2018 have both signalled the willingness of legislators to rather adopt cryptocurrencies and blockchain technology, or regulate them to ensure the safety of consumers.

While to early Bitcoin adopters (who believe in the decentralized financial system cryptocurrencies might offer) regulation might seem an abhorrent idea, introducing legislation to cryptocurrencies might not only introduce more people to digital currency markets, but might further minimise the possibility of cryptocurrency bans outright.

Why would regulators want to ban Bitcoin?

In principle, cryptocurrencies such as Bitcoin represent an immense challenge to governments, central banks, and the current monetary system; one where it is incredibly difficult to regulate payments or enforce contracts (agreements) made where cryptocurrency is the tender in question.

Bitcoin, and cryptocurrencies in general, have enjoyed a less than stellar reputation thanks to some of their earliest adopters. Before its mainstream adoption by legitimate traders all around the world, Bitcoin found an early home within illegal circles operating on the internet thanks to the fact that the cryptocurrency is decentralized and does not pass through a central regulator.

Similarly, Bitcoin has developed a reputation for ‘money-laundering’ or ‘fraud’, given the fact that the nature of cryptocurrencies yields a fast and near-anonymous transaction that can be used easily to facilitate the purchase of illegal goods or even a ransom.

Some nations around the world have argued that the emergence of Bitcoin marks a new and easy way for citizens to escape paying tax, given the ability of a party to transact without disclosing their identity.

Total bans? Not likely

However, the possibility of banning cryptocurrency outright would be a tremendous task on behalf of national governments or financial regulators. Given that blockchain technology has its basis in the fact that it operates like a public, distributed ledger all around the world, authorities would be hard-pressed to curb the ability of anyone with a computer to access a cryptocurrency network.

An authority could hinder access to cryptocurrencies through several ways – such as prohibiting local cryptocurrency operations, or deeming the purchase of cryptocurrency for a national fiat currency illegal.

However, that would do little to stop an interested investor from using offshore funds to purchase cryptocurrency, nor stop them from banking their profits offshore.

Regulation and adoption

To that end, many governments around the world have signalled their interest in regulating cryptocurrencies to accordingly tax and track trades, and to ensure that law will easily be able to resolve disputed payments in a court of law.

CoinInsider reveals that nations such as South Africa have confirmed their intent to create research settings to study cryptocurrency regulation, while other countries such as Russia and Kazakhstan have announced the creation of a national cryptocurrency. Venezuela, in one interesting use case, even plans to create a cryptocurrency pegged to the price of its oil exports.

Other laws may soon govern the use of Initial Coin Offerings, which are a start-up sale that new cryptocurrencies hold upon launch in a similar fashion to how a company that is about to go public and issue shares might hold an Initial Public Offering (IPO).

While there is nothing that is inherently malicious about Bitcoin, nations around the globe will likely continue to express differing stances on cryptocurrency for years to come. It may not be long, however, before cryptocurrencies enjoy official stature in law through regulation, or nations themselves begin to create national digital currencies for all citizens to use and trade.

Governments around the world may attempt to ban Bitcoin and prohibit the use of other digital currencies – however, the appeal in leveraging blockchain technology, as well as avoiding the difficult task of preventing access to cryptocurrencies – may well lead many nations to embrace Bitcoin, Ethereum, Litecoin, and many more digital currencies in law.

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