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Cryptocurrencies: the complexity of regulation



The development of online trading has led to a frequent increase in the use of cryptocurrencies. Many investors are opting for these virtual currencies due to their volatility in trading and financial markets.

In fact, cryptocurrencies have no clear system or legal code. Therefore, these trading assets present some risks. Moreover, it can be quite difficult to master these digital items.

Is it possible to regulate virtual trading currencies, how can this be done? Answers.

Need for an international legal framework for cryptocurrencies.

Currently, the financial market includes more than 2000 cryptocurrencies. As the least supervised financial flows, they facilitate illicit transactions.

One of the reasons is the lack of legal means in the field of cryptocurrencies. An important reason for the development of :

  • Money laundering;
  • Tax evasion;
  • Data sales and illegal arms transactions;
  • Terrorist financing.

To solve this, discussions are underway among officials to establish a specific code for cryptocurrencies. However, for the time being, the development of legal provisions is still under discussion due to the complexity of the subject. It should not be forgotten that these assets have a global impact.

As a reminder, cryptocurrencies owe their success to the absence of a legal system (bank, code, financial market system, legal platform…). This facilitates their use in the financial market and makes illicit transactions more present in France and in the rest of the world.

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Discussions on the regulation of cryptocurrencies have made it possible to detect the advantages of this regulation. Indeed, the legal regulation of these assets allows :

Promote the creation of new business sectors.

Cryptocurrency information and financial advisory establishments may emerge. This allows a cryptobroker to work normally and legally with a well-established legal system, which is not yet the case. In this circumstance, in More information about cryptocurrency brokers. would no longer be mandatory. It would be enough to choose cryptocurrencies adapted to one’s own needs to carry out legal transactions on the financial market (Bitcoin, Ethereum, Litecoin, etc.).

Leading to technological innovations.

With a serious and effective legal means, taming the price of cryptocurrencies would be a piece of cake. In fact, this type of regulation often leads governments to take measures to manage the price and the trading industry. To do so, the implementation of powerful and secure tools is essential. In other words, it would encourage technological innovation and research of all kinds.

A difficulty in regulating cryptocurrencies

Many countries are moving slowly to regulate cryptocurrencies. This new trend is due to the importance of these assets for investors. More than 130 countries have published legal provisions concerning these digital items.

The diversity of cryptocurrency regulation around the world manifests itself in various ways.

The use of specific legal terminology in relation to cryptocurrencies.

The naming of cryptocurrencies changes from country to country.

  • In Argentina, Thailand and Australia, for example, the cryptocurrency is called “virtual currency”.
  • In Canada, China and Taiwan, the term “virtual commodity” is used.
  • In Germany, this digital item is better known as a “crypto-token.”
  • In Switzerland, it is a “payment token”.
  • In Italy and Lebanon, the cryptocurrency is called a “cybercurrency.”
  • In Honduras and Mexico, it is called a “virtual asset.”
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The tendency of some States to opt for simple caveats.

Most states are in the habit of issuing warnings through the central bank. These notices usually contain warnings about the danger of cryptocurrencies. It is through these notices that the government informs users of blockchain trading platforms of the risks involved in these digital assets.

This demonstrates the regimes’ non-involvement in the regularization of these digital items. Indeed, cryptocurrencies are not guaranteed by the State like real money. The latter simply warns citizens about the lack of regulation of the institutions in charge of virtual currencies.

Moreover, investment in cryptocurrencies is done at the risk of blockchain users. In the absence of a concrete legal system, the millions of users of trading platforms have no legal recourse in case of litigation.

The regulation of cryptocurrencies through other legal provisions.

Studies on the Blockchain network and trading platform have determined that cryptocurrencies promoting illegal transactions. Several states are struggling to find a suitable legal means on cryptocurrencies.

However, they have tried to minimize the damage. They have chosen to strengthen legal provisions on money laundering, counter-terrorism and organized crime.

Now, regulations on these issues incorporate cryptocurrencies. For example, cryptocurrency entities must comply with the provisions on money laundering and terrorist financing. This is the case in Canada, Australia and the Isle of Man.

The restriction of cryptocurrencies

Aware of the dangers of the lack of legal means in the matter, some countries have restricted investments in cryptocurrencies on their territory.

  • In Algeria, Bolivia, Morocco, Nepal or Vietnam, it is forbidden to invest in virtual assets.
  • In contrast, in Qatar and Bahrain, blockchain users can invest in cryptocurrencies, but outside the border.
  • In China, Bangladesh, Iran and Lithuania, cryptocurrency activities are accepted, but strictly regulated.
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The regulated use of cryptocurrencies.

Some countries are in favor of the use of cryptocurrencies.

For example, France has strengthened legal provisions on digital assets used for money laundering and terrorist financing. The government is aware of the shortcomings in this area and is proposing a strict framework. It wants to propose a legal system that will put an end to anonymity in transactions on the cryptocurrency market.

In the United States, the federal trend is the creation of a virtual currency. This project is held back by the fight against illicit activities and tax evasion. However, this does not prevent federal states from introducing legal provisions on these elements.

In Wyoming, the project refers to the constitution of financial institutions (banks, financial institutions, market houses, etc.) entitled to legally own these digital assets.

The draft unified regulation for the European Union.

A draft law on cryptocurrencies in the European Union is currently under consideration. The member states of the organization want to supervise the use of cryptocurrencies. The Brussels commission wants to create its own supervisory system for each form of digital currency (Bitcoin, Ethereum, Litecoin, etc.). In addition, the commission wants to limit the number of cryptocurrencies that can be used in France and the European Union. If the MiCA Directive is accepted, this should be possible.

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