The document introduced by Satoshi Nakamoto back in 2009 was much more than just a novel means of data storage or a debut for a fancy coin. The fundamental idea was about no one having power over your finances and over the financial system as a whole. But just as Eminem stopped being a street gangster, crypto has lost some of its original ideas. Let us take recourse through crypto regulation history to understand why. The First Regulations Everything began in 2013 when Bitcoin rose to $750 in price. The 2013 guidance issued by the US Financial Crimes Enforcement Network (FinCEN) clarified that virtual currency exchanges and administrators are subject to the same regulations as traditional money operators, among other things. around Under said guidance, businesses that fell under these definitions were subject to the Bank Secrecy Act (BSA), registration under FinCEN as a money services business (MSB), and an anti-money laundering program. The guidance also specified that suspicious activities and transactions over a certain threshold are to be reported, and records of certain transactions are to be kept for at least five years. This guidance was significant because it was the first time a US regulatory agency specifically addressed the issue of virtual currencies and money transmission, paving the way for other countries to follow. The Japanese government followed in 2014 by recognizing Bitcoin as a legal means of payment with related licensing requirements for cryptocurrency exchanges – the first time a national government recognized Bitcoin, legitimizing it in the eyes of consumers and investors alike. The Japanese government required exchanges to register with the Financial Services Agency (FSA), Japan's financial regulator, all in response to the collapse of Mt. Gox, a local cryptocurrency exchange that over 850,000 Bitcoins, around $500 million at the time. lost Current State of Crypto Regulation Worldwide What’s up with the US? SEC: The US Securities and Exchange Commission (SEC) has taken an active role in regulating cryptocurrencies, particularly initial coin offerings (ICOs), clarifying that many ICOs are securities offerings and subject to federal securities laws, later bringing enforcement actions against a number of companies and individuals involved in ICOs, alleging violations of securities laws. By and large, the SEC's actions have helped promote transparency and protect investors. FinCEN: The Financial Crimes Enforcement Network (FinCEN) issued guidance on the application of money transmission regulations to virtual currency exchanges and administrators. Virtual currency businesses are required to register with FinCEN as a money services business (MSB), implement an anti-money laundering (AML) program, comply with the Bank Secrecy Act (BSA), report suspicious activities and transactions over a certain threshold, and maintain records of certain transactions for at least five years. FinCEN's guidance has helped prevent money laundering and other illicit activities in the industry. IRS: The Internal Revenue Service (IRS) issued guidance on the tax treatment of cryptocurrencies – they are to be treated as property for tax purposes, taxes applying to gains or losses on the sale or exchange. Individuals and businesses must report their cryptocurrency transactions on their tax returns. The IRS's guidance has helped clarify the tax implications of using cryptocurrencies and has provided guidance to taxpayers and tax professionals. State-level regulations: Many states have their own regulations and guidelines to provide additional consumer protection and promote transparency in the industry. However, such a patchwork of regulations can be difficult for businesses to navigate. And The EU? Fifth Anti-Money Laundering Directive (5AMLD): The 5AMLD, which came into effect in January of 2020, requires EU member states to implement stricter AML requirements for cryptocurrency exchanges and custodian wallet providers, including mandatory registration with national authorities, KYC/AML procedures, and reporting of suspicious activities. The 5AMLD also defines stablecoins and requires exchanges to perform due diligence on customers involved in such transactions. Markets in Crypto-Assets Regulation (MiCA): In September of 2020, the European Commission proposed MiCA – a comprehensive regulatory framework to harmonize crypto regulations across the EU, covering licensing, capital requirements, investor protection, and marketing restrictions. It also introduces a new category – "significant asset-referenced tokens," subject to additional requirements. Digital Operational Resilience Act (DORA): DORA, proposed by the European Commission in December of 2020, aims to establish a comprehensive framework for the digital operational resilience of financial institutions, including those dealing with cryptocurrencies. DORA sets out requirements for risk management, incident reporting, and outsourcing, among other areas. What’s next? The imperfect nature of crypto regulation leaves much to be desired. Here are some outlooks on the issue and its development as far as 2024. Entity Obligations All DAOs, NFTs, and DeFis functioning on EU territory will have to comply with all AML regulations and rules. And that means: Member states should ensure that access to information held in the beneficial ownership registers must be ensured to combat money laundering and terrorist financing. Clarifications on digital assets must be provided to financial intelligence units to combat money laundering. Transactions Caps Anyone aiming to send or receive more than 1,000 euros in crypto will have to identify themselves and comply with KYC rules and restrictions. Banned Organizations EU governments are discussing whether crypto mixers, privacy wallets, and tumblers should be allowed. Chances are high that such tools will be banned or restricted. Though crypto is losing its original ideological bedrock, regulations and clear rules mean bigger players entering the market. Regulations mean that billions of dollars will flood DeFi. Coming Up Next As always, it’s a trade-off between freedom and opportunity. Crypto is changing for good under the rising tide of stricter and global regulation. Whether that’s good news or bad news is for every individual to decide on their own. But one thing is certain - the founding principles of blockchain and decentralization, like transparency and financial freedom, have been sacrificed in favor of investing safely and market order.

The writer is smart, but don't just like, take their word for it. #DoYourOwnResearch before making any investment decisions or decisions regarding you health or security. (Do not regard any of this content as professional investment advice, or health advice)

The is an opinion piece based on the author’s POV and does not necessarily reflect the views of HackerNoon.

Why We Need Crypto Regulation

Too Long; Didn't Read

People Mentioned

@alexanderray

Credibility

RELATED STORIES