Regulation of cryptocurrencies is a dicey topic. Given the decentralized and trustless nature of such currencies, enforcing active regulation may prove to be challenging. Even so, US officials are inching closer toward achieving such official guidelines for Bitcoin and altcoins. Doing so will solve not one, but two of cryptocurrency’s bigger problems.
Bitcoin Regulation in the United States
For the past few years, regulators have kept a close eye on cryptocurrencies. That makes sense, as this new form of money has made a significant impact on the world. Consumers demand more exposure to price volatility, preferably without buying Bitcoin itself. Financial institutions are also trying to get in on the action by potentially launching cryptocurrency trading desks.
All of these developments put a lot of pressure on lawmakers and regulators. This issue was compounded by the launch of Bitcoin futures contracts. While technically a legal investment vehicle, this is not a regulated offering. Addressing all of these shortcomings is not an easy task. One also has to keep in mind how regulating cryptocurrency is very different from regulating banks. Even so, some correlations can be drawn between the two in the end.
The lack of cryptocurrency regulation also poses a bit of a problem. To many consumers and corporations, it is a “controversial aspect”. This may explain why the global interest in Bitcoin and consorts is still relatively low. Additionally, there is the perceived anonymity aspect associated with Bitcoin. The world’s leading cryptocurrency is pseudonymous and not anonymous, which is a very big difference.
Finding the Right Approach
So far, the US regulators have not made any big impact on cryptocurrency. The one legal requirement most people are familiar with is BitLicense. It is a form of regulation drafted by the NYDFS. Unfortunately, it also drove nearly all cryptocurrency service providers out of the state of New York. That particular approach needs to be avoided at all costs. The Justice Department is trying to remove anonymity and privacy from Bitcoin trading