Should Blockchain Technology Be Regulated?

written by Eleojo Usman

The whole point of the blockchain is to be an unregulated means of transferring assets while keeping open records of all transfers happening at each second.

Sometimes government agencies and other regulatory bodies try to put limitations on blockchains or blockchain-related services for security or political reasons.

Attempts To Regulate Blockchain Technologies Around The World

There have been many attempts to regulate the use of blockchain technologies in many countries. The methods used to achieve this vary throughout the world. Here are some examples of how governments have tried to govern how crypto is used in their countries.

• In the US, the Securities and Exchange Commission(SEC) placed sanctions on Initial Coin Offerings or ICOs, which companies use to raise money for different reasons. It also declared that most cryptocurrencies are now classified as ‘securities’.

The Internal Revenue Service(IRS) also gave guidelines on taxing cryptocurrencies since they are considered commodities by the Commodity Futures Trading Commission(CTFS).

• In Europe, the European Union(EU) issued a directive requiring cryptocurrencies and custodial wallet providers to act by the anti-money laundering laws and Know-Your-Customer(KYC) laws that standard banking institutions are subjected to.
• In Japan, cryptocurrency exchanges were granted licenses to operate, while China and South Korea have placed strict laws regulating how crypto is used and exchanged.
• Nigeria was not far behind in imposing laws that limit the use of cryptocurrency in the country. In 2017, the Central Bank Of Nigeria(CBN) warned banking institutions and individuals not to use cryptocurrency as the lack of regulation could result in it being used for criminal acts like money laundering.

There have been many more attempts by the Nigerian government to stop or control the use of cryptocurrency in Nigeria. Unfortunately for them, Nigeria is one of the top crypto adopters in Africa, and we are not stopping anytime soon.

Pros And Cons Of Regulating Blockchain Technology

Even though the whole idea of the blockchain is to have a space free from the laws and limitations of the real world, it doesn’t mean there aren’t some benefits to placing a few rules to curb criminal activities and other illegal practices.

Some benefits include the following:

• Increased Security — Many corrupt individuals are waiting for a chance to make away with your crypto savings, so a little more security wouldn’t hurt anybody. Some blockchains, like Ethereum, use smart contracts to ensure secure and trustworthy transactions.
• Promotes Innovation — You’d think adding rules to regulate cryptocurrency might hold it back a few decades. Not in all situations. It may encourage investments that will further advance blockchain technology.
• Has the potential to prevent illegal activities — Many criminals have used the anonymity the blockchain provides to hide illegally gotten money through the use of cryptocurrency. Regulations may make it easier to identify suspicious activity and locate these individuals.
• Prevents tax evasion — Tax evasion is not a new topic. Many famous individuals have been fined heavily for refusing to pay taxes. Some have taken to hiding their riches in cryptocurrency to avoid these fines. This is unfair to regular citizens who have to pay their taxes without knowledge of cryptocurrency.
• Provides legal protection — Regulations can give legal protection to individuals and businesses involved in blockchain-related services.

There are quite several disadvantages to regulating crypto. A few of them include the following:

• Delays Innovation — Strict laws can restrict the growth of blockchain technology. Companies may lose access to resources and the knowledge they need to thrive because they have to comply with regulations.
• Restricts the freedom blockchain technology provides — regulations may interfere with how consumers interact freely with these technologies. This can be seen as a violation of their right to privacy and ability to make financial decisions freely.
• Makes it difficult for crypto-related businesses to operate — Businesses may struggle to comply with the restrictions placed on them. Some companies have had to shut down because the regulations were impossible to comply with. This resulted in their businesses having to close down.
• Increased Cost of Operation — Regulations can affect the cost of operation for blockchain-related companies. These businesses can decide to increase the prices of their products to avoid running out of business.

A lot of businesses and individuals have been affected by blockchain regulations around the world. Some have allowed crypto communities to thrive, while many have run quite a lot of blockchain-related companies out of business.

The attempts to regulate the blockchain are not stopping anytime soon, nor are we. Kite Financial has broken through barriers to give you quality service from anywhere in the world. And if you’re stressing about the regulations and how they may impact you, we’ve created a game called Clay to help you relax while you learn more about the financial world. Visit our website for more details.