Initial coin offerings on blockchain platforms have painted the world red for tech startups around the world. A decentralized network that can distribute tokens to users backing an idea with money is both revolutionary and rewarding.
Profit-spinning Bitcoin proved to be an “asset” for early investors, giving multiple returns in 2017. Cryptocurrency investors and exchanges around the world jumped at the opportunity, which gave them huge returns, leading to the rise of numerous online exchanges. Other cryptocurrencies such as Ethereum, Ripple and other ICOs have promised even better results. (Ethereum grew by more than 88 times in 2017!)
While international commodity organizations brought millions of dollars into the hands of start-ups within days, the ruling governments initially chose to keep an eye on the fastest fintech development ever, which had the potential to raise millions of dollars in a very short period of time.
Countries around the world are considering regulating cryptocurrencies
But regulators have grown wary as the technology and its underlying effects have gained traction, as ICOs have begun to consider billions of dollars worth of funds — also on proposed plans written in white papers.
In late 2017, governments around the world jumped at the chance to intervene. While China has banned cryptocurrencies entirely, the SEC (Securities and Exchange Commission) in the US has highlighted the risks they pose to vulnerable investors and proposed treating them as securities.
A recent cautionary statement from SEC Chairman Jay Clayton issued in December cautioned investors by mentioning,
“Please also note that these markets span national borders and that significant trading may occur on systems and platforms outside of the United States.” Your invested funds can quickly travel abroad without your knowledge. As a result, risks may be increased, 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 India’s concerns, with Finance Minister Arun Jaitley in February saying that India does not recognize cryptocurrencies.
A circular sent by the Reserve Bank of India to other banks on April 6, 2018, asked banks to sever ties with companies and exchanges involved in cryptocurrency trading or transactions.
In the UK, the FCA (Financial Conduct Authority) announced in March that it had formed a cryptocurrency task force and would take help from the Bank of England to regulate the cryptocurrency sector.
Different laws, tax structures in different nations
Cryptocurrencies are primarily coins or tokens launched on a cryptographic 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 provide different returns for investors who may be nationals of different countries.
Different laws for investors from different countries would make calculating returns a tedious and cumbersome exercise.
This would involve investing time, resources and strategies, causing unnecessary prolongation of processes.
Instead of many countries creating different laws for global cryptocurrencies, there should be the constitution of a single global regulatory body with laws to apply across borders. Such a move would play an important role in improving legal cryptocurrency transactions around the world.
Organizations with global purpose like UN (United Nations), World Trade Organization (WTO), World Economic Forum (WEF), International Trade Organization (ITO) are already playing an important role in uniting the world on various fronts.
Cryptocurrencies were created with the basic idea of transferring funds around the world. They have more or less similar value in the exchanges except for the minor arbitrage.
A global regulatory body to regulate cryptocurrencies worldwide is the need of the hour and can establish global rules to regulate the latest way of funding ideas. Currently, each country is trying to regulate virtual currencies through laws that are in the process of being drafted.
If the economic superpowers with other countries can build a consensus to introduce a regulatory body with laws that know no national boundaries, then this will be one of the biggest breakthroughs towards designing a crypto-friendly world and will encourage the use of one of the most -transparent financial technology system everâ€Š-â€Šblockchain.
A universal regulation consisting of subsections related to cryptocurrency trading, refunds, taxes, penalties, KYC procedures, exchange-related laws and penalties for illegal hacks can give us the following advantages.
It can make calculation of profits extremely easy for investors worldwide as there will be no difference in net profits due to uniform tax structures
Countries around the world can agree to share a certain portion of profits as taxes. Therefore, the states’ share of taxes collected will be the same throughout the world.
It can save the time required to set up multiple committees, draft bills followed by deliberations in the legislative arena (such as the Parliament in India and the Senate in the US).
You don’t need to go through the strict tax laws of every country. Especially those involved in multinational trade.
Even companies offering tokens or ICOs will comply with the said “international law”. Therefore, calculating the income after tax would be easy for companies
A global structure will require more companies to come up with better ideas, thus increasing job opportunities around the world.
The law could be aided by an international watchdog or regulatory body for global currencies, which could have the power to blacklist an ICO offering that doesn’t adhere to the norms.
These are not all the advantages when it comes to a law to govern cryptocurrencies around the world. There are certain disadvantages as well.
Getting the world’s financial leaders to come together and draft a law could take time. Discussions and bringing them to consensus can be challenging
Countries or economies providing tax-free structures may not agree to adopt the law that provides for a universal tax policy
Global watchdog or regulatory intervention in monitoring ICO-related regulatory developments may not go down well with some countries
Universal law can cause the world to split into factions. Countries that do not support cryptocurrency like China may not be part of it.
The law may be a figment of the imagination of economically powerful nations who could design it to suit their best interests.
This law will be centralized with a global regulatory body unlike cryptocurrencies which are decentralized in nature.
The world was together for the better. Whether it’s creating a peaceful world after World War II or uniting 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 minds defining the global economy.
They can come together and be part of a body that will determine the economic prosperity of the world. They will help draft global cryptocurrency norms and may be part of the regulatory body that will be a guide and beacon for thousands of ICOs around the world for the better. This may take time initially, but it will make things easier for later times.