Although the primary reason for starting the first blockchain-based system was to provide a quick and secure way to make transactions by cutting out regulatory authorities, criminals have taken advantage of the privacy offered by such transactions to launder money. This was one of the reasons for the need of introducing regulations.
According to people from BitFortune, blockchain-based systems evolved and caused disruptions in almost all major industries worldwide. This led authorities to impose regulations to those areas as well.
Due to lack of proper understanding of how this technology exactly works, among other reasons, governments haven’t always been successful in imposing regulations. For example, when China banned cryptocurrencies, its citizens found a way around it by using VPNs.
This is why governments started training economists, software engineers, and security experts to better operate within the blockchain field in order to come up with viable regulations. For instance, the Defense Advanced Research Projects Agency or DARPA uses KSI (Keyless Signature Structure) in order to protect sensitive military data. You’ll hardly find a higher security instance than that.
Meanwhile, some experts suggest that it is possible to introduce taxation for crypto-to-fiat and vice versa trades. Since digital coins and tokens can be traded for fiat money, governments can benefit from the process when the coins are exchanged into their country currencies. For instance, the US government included this kind of tax in its 2018 tax law whereby traders can now be taxed for capital gains.
Also, with taxation, regulators will be able to monitor the exchange platforms where these transactions take place. Hence, this can make it easy for law enforcers to fork out the cybercriminals engaged in money laundering as well as ensure that the taxes are diligently paid.
Moreover, licenses should be offered to fintech firms that plan to carry out exchanges using the blockchain technology. By doing this, they will be forced to ensure that traders rightly use their platforms and thus reduce on the number of felonies. If they fail to do so, authorities could revoke their licenses.
When it comes to ICOs, startups must be asked to prove their legitimacy by providing details of the team responsible for creating the products, those in charge of funds raised, and their refund policy in case they fail. Additionally, ICOs should be advised to first verify investors by using the Know-Your-Customer (KYC) and other anti-money laundering processes to avoid getting conned.
Many people believe that regulation will chase away users. However, others believe that it’s bound to build trust amongst potential users as many are skeptical of using the above mentioned instances of this technology due to the current lack of regulations.
Moreover, even the current users, especially people working with Bitcoin, clamor for regulations in order to further secure their wallets and protect themselves against cybercriminals.
In fact, regulations might scare off these criminals since they always thrive in unregulated environments. For instance, ever since it was discovered that there is a 60% chance of tracing Bitcoin transactions to particular individuals, criminals have been forced to change tactics while others have moved on to other coins.
While regulations might not be able to wipe out cybercrime from the blockchain’s applications entirely, they will manage to control it and thus reduce it.
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