Cryptocurrencies are quite a controversial topic if we view it a state issue and not as an individual issue. The fact that they are so new and more in-tune with the younger generation, leaves the governments across the world, creating legislation from scratch or copying each other.
However, many don’t understand why these countries would intervene with cryptocurrency regulation and what is their primary motive. Let’s give it a general overview and see what these countries would gain if they introduced laws and legal frameworks for cryptos.
The sweet tax money
Taxing the population is one of the primary incomes of a country. Some have it high some have it low, but it does not create a disproportion about viewing new assets that the population may involve themselves with.
For example, in order to tax an individual citizen, the government needs to know their level of income. This is usually done by assessing the citizen’s personal holdings, his transfer history or his monthly salary. The tax is usually paid by the employer of the individual, but it still is an out-flowing resource for the citizen.
Cryptocurrencies prevent that “research” part for the government. This means that even if they know that the individual is receiving payments via cryptocurrencies, it will be very hard to determine how much they get and how frequently. Furthermore, if they press the matter and “demand” information, that is getting extremely close to the “Human Rights” issue that nobody wants to tangle with.
By regulating cryptocurrencies, the governments can restrict or direct their citizens towards trusted companies that willingly disclose customer profit or income information, which is then appropriately taxed.
Having something in the country that cannot be directly influenced by the lawmakers is something dangerous for the state. Well, it may not be dangerous, but politicians tend to paint it that way. You’ve probably heard it numerous speeches like “We need to learn about it first”, “It’s new and dangerous, we need time”. The immediate reaction to this new financial asset would be to ban it or restrict it as much as possible. That is indeed a correct approach, as long as it is temporary.
You see, the most prominent case about government being skeptical about cryptocurrencies is Norway. According to Norskcasino.online, the lawmakers in the country are concerned that cryptocurrencies may lead to illegal gambling operators bypassing local regulations. This was first thought of when Norway banned a few operators from its borders. (source: here). Russia is another good example, where the government was concerned about potential terrorist financing via cryptocurrencies, therefore is speeding up the regulation process as much as it can. In fact, the president himself set a deadline for the lawmakers.
There is a pattern with pretty much any country. The government doesn’t want to damage the status quo, therefore they incorporate the innovation into the status quo.
There are of course other reasons why a government may regulate cryptocurrencies. Some of them just hope for innovation, which will promote new businesses, encourage loans and strengthen the economy. Or it could just be to provide more jobs to the population. There are thousands of reasons, but the ones I mentioned above are the most pressing ones so far.
Giorgi is a news reporter and financial analyst at www.forexnewsnow.com He has 3 years of experience in analyzing the financial markets of Forex and cryptocurrencies. He also likes making hidden jokes in his articles.