After the first blockchain went live, the crypto industry remained decentralized until global financial regulators started paying attention to it a few years ago. Regulators will soon have an even bigger impact on crypto assets.
The market is moving towards centralization, which will be characterized by the emergence of services and control mechanisms. Market participants can expect to see new mechanisms for the legalization of financial instruments and taxation in 2022. Regulators can no longer ignore the growing interest of market participants in digital assets.
In general, cryptocurrencies, mining, and blockchain are moving into the legal arena. While this may mean the end of benefits for some private participants, it opens the door for large capital and professional organizations. Local recessions are possible, but cryptocurrencies will survive both increasing regulation and other government initiatives.
Cryptocurrency trading has long been conducted on the basis of anonymity. All users of crypto exchanges are subject to mandatory verification, like in banks, and must confirm their income sources. All blockchain transactions are logged, and several operators on the market (e.g., Chainanalysis and Ciphertrace) assess the risks of wallets. Exchanges can deny trading to users who interact with high-risk wallets. In addition, entire organizations now charge cybercriminals who attack DeFi platforms. Any cryptocurrency is a public network, and tracking money movement on the blockchain is much easier than tracking cash flows.
European countries are most positive about the possibilities of cryptocurrencies. France and Germany have legalized cryptocurrencies for payments and are promoting coordinated regulation at the national and international levels.
The creation of a legal framework in this segment primarily aims to prevent criminal activity, money laundering, and illegal financial organizations. It is more beneficial for states not to ban cryptocurrencies, but to regulate them appropriately through mechanisms including customer identification, bank turnover control, and taxation.
In the United States, the Securities and Exchange Commission, Commodity Futures Trading Commission, and Treasury Department offices are also advocating for new regulations to control cryptocurrencies. If US authorities are forced to take restrictive measures on digital assets, it could hurt cryptocurrency prices and the market outlook. Meanwhile, the chairman of SEC, Gary Gensler, said
last October that the regulator has no plans to impose a ban on cryptocurrencies, as was done in China
. It may be about stricter tax laws and even including crypto investments in citizens' retirement plans. If regulators can reach an agreement on the cryptocurrency industry, it will pay off for both the government and individual investors, who will be better protected by law.
This February, the administration of US President Joe Biden will release
a national strategy on cryptocurrencies. The White House has directed federal regulators to assess the risks and benefits of digital assets. Senior Biden administration officials have already held several meetings on the subject.
In early February, the US House of Representatives introduced the Tax Relief Initiative
, which would provide an exemption from capital gains tax if gains from the use of digital assets do not exceed $200. Currently, digital asset holders in the U.S. must report capital gains based on the value of cryptocurrency not only when they invest, but also when they make payments to the IRS.
The bill explains that under current law, Americans must calculate their gains based on the change in the value of cryptocurrencies against the dollar from the time they purchased the assets to the time they use them, and report that data to tax authorities for every transaction, even when they pay for a cup of coffee with cryptocurrency. This makes everyday use of digital assets almost impossible, and the new bill aims to change that.
Some regions have not yet taken a clear stance on the inclusion of cryptocurrencies in the modern system. While things around the world are moving towards liberalization, governments are constantly wavering between imposing additional restrictions and accepting digital currencies as a fait accompli.
Draft laws are hotly debated by lawyers, economists, legal scholars, government officials, and businesses. Many provisions of these laws are controversial, but the fact that states have recognized and attempted to address society's need for the legal regulation of digital asset transactions is already a major step toward regulating relationships in the industry.
Before our eyes, the cryptocurrency industry
is gaining legal ground and becoming a stable part of public life. Much now depends on governments’ decisions, but the crypto industry can no longer be ignored. The future of global fintech and the digital economy depends on the speed of legalization.