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Cryptocurrencies aren’t going away anytime soon. That much is certain. According to a report by CryptoCoinsNews, the number of existing digital currencies has surpassed 1,500, which is only expected to increase in the following years. However, the latest news from authorities regarding cryptocurrencies and their impact on society is mixed. Governments are still trying to determine what exactly cryptocurrencies are and how to regulate them appropriately so that investors don’t lose money after buying into them. Many governments have already created their own cryptocurrency regulations. Still, there is growing pressure for other countries to follow suit with their rules within the coming months and years. Here are some things you need to know about crypto regulations as well as how they might affect your investments in the future:
What is cryptocurrency regulation?
Cryptocurrency regulation is a set of laws, rules, and policies that govern the use and trading of cryptocurrencies. It is a complex area of law that is developing quickly. But the basic components are simple. This is a space where everyone can create, issue, and trade a digital token. The tokens have many uses, but buying and selling things online is the most common. The tokens can also be exchanged for goods and services, pay for internet access, or other cryptocurrencies. Trading these tokens is conducted on a digital platform, like a stock exchange. Cryptocurrencies are stored electronically, like digital money. Cryptocurrency exchanges facilitate trading and operate like stock exchanges, listing the prices of cryptocurrencies and allowing trading between customers. Governments are grappling with how best to regulate this new asset class. They are trying to balance the interests of cryptocurrency users and investors, who have dreams of high profits from investing in cryptocurrencies, against the interests of society, which may include the need for transparency and protecting people from fraud.
Japan: Cryptocurrency subject to new laws and regulations
Japan is one of the first major governments to regulate cryptocurrencies. In April, the Japanese government recognized Bitcoin as a legal method of payment. So from now on, businesses in Japan can start accepting Bitcoin as a payment method and individuals can use it to buy goods and services from other businesses. The Japanese government also created a Financial Services Commission to oversee and regulate cryptocurrency exchanges, like QUOINEX. The commission is currently drafting laws governing how cryptocurrencies are traded, including setting rules for the safety of customer assets.
SEC: Initial coin offerings (ICOs) illegal, securities fraud
The U.S. Securities and Exchange Commission (SEC) is trying to stop the growing number of fraudulent initial coin offerings (ICOs). The SEC has warned investors to be wary of fraudulent ICOs that promise high returns on little investment. The SEC says that ICOs that offer securities without following the appropriate laws and regulations are illegal. The SEC also says that cryptocurrencies are assets and therefore must be registered with the SEC. If unregistered, investors can be breaking the law and risking heavy fines if they sell their cryptocurrencies without registering the trade as well.
European Union: Bitcoin as a commodity and payment method only
The European Union is trying to navigate between Bitcoin’s potential to be used widely for illicit activities and its potential as a viable financial instrument. The EU has created a task force to study how cryptocurrencies could be used for tax evasion and money laundering. The EU is considering a range of regulations for cryptocurrencies to help curb these potential uses. While the EU is trying to regulate cryptocurrencies, it is also opening its doors to Bitcoin in hopes that it could be used for legitimate transactions. For example, the EU is working on a law that would make it easier for businesses and people to pay each other using Bitcoin.
South Korea: Ban on all anonymous accounts and trading in cryptocurrencies
South Korea has decided to ban anonymous accounts and trading in cryptocurrencies. The regulation was implemented after the exchange of cryptocurrencies at the Infinity Economics Hack, where hackers stole $7 million worth of cryptocurrencies. The government said that anonymous accounts and trading of cryptocurrencies would allow hackers to operate anonymously and evade punishment. The government also blasted the “irrational” use of cryptocurrencies, saying that the recent craze for investing in cryptocurrencies could easily be reversed if people understood the risks and the “very slim” profit potential. The South Korean government is also trying to regulate cryptocurrencies. Most recently, the government announced that it is looking into a plan to make cryptocurrencies more closely regulated. The plan does not include a total ban on trading, but it would require investors to have more information about where they are putting their money.
The United States of America. Stronger rules are coming soon
The United States government has been trying to figure out what cryptocurrencies are and how to regulate them since they first came into existence. However, the recent Mt. Gox incident and the US law enforcement’s crackdown on Silk Road 2.0, a marketplace for selling illegal drugs using anonymous currency, has pushed the US government to act. As a result, the US government is not only trying to regulate cryptocurrencies like stocks, bonds, and money, they are considering classifying them as commodities.
Cryptocurrency regulation is still a relatively new field of law and is changing quickly. While governments are trying to figure out a way to regulate the growing number of cryptocurrency users, investors, and exchanges, investors should be aware of the risks and protect themselves from fraud.
Reminder: I am not your financial advisor.
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The Future of Machine War II
In late 2021, I wrote an article about A.I. vs. Blockchain. I realized it was closer than I expected.
Web2 is leading a future of technological centralism.
The way we see the world in ancient is what we saw became what we believed. Later, the enlightenment process helped humans realize what they had seen was disguised by the nature principle. Once we tested our assumption and received accurate results, we thought we had mastered the nature principles. Yet, we did not make the world better than we thought we could.
We are living in a world in which companies know more than you than yourself. Companies can likely tell you what you should believe without letting you know.
The secret weapon that companies like Google invented is A.I. or Artificial Intelligence.
If A.I. can think like a person, it can easily replace you! Since companies got all your data, you freely offer them by using their free services, and they can replace you one day without you realizing it.
Without all conspiracy theories behind what Google may or will secretly develop, A.I. reaching consciousness is … impossible.
If it does, Google has successfully made a human – dumb!
The most advanced A.I. – Tesla Autopilot Program cannot distinguish objects between humans and other moving objects during driving.
Using technology makes people dumber than they think because it takes away your consciousness – the ability to think uniquely!
Blockchain is the future of decentralization.
We need a peer-to-peer system to regain consciousness and break the chain from Web2.
It gives individuals the power to rethink information.
Think about today’s media; all information is filtered to offer readers without any surprise. News is data that Web2 selected specifically for you to read.
We need a decentralized system so that you can receive unfiltered information and gives you a surprise that sparks ideas of imagination.
Web2 is afraid of the blockchain because they are too big to fail.
They mimic the blockchain by creating a centralized node system – social media network.
It is a net growing outward through a single point. Only the problem is that connection is facilitated by technology. And the biggest failure is such technology has a single point of failure problem.
And they cannot escape the law of economics – the law of diminishing. So we will see Web2 grow slower due to the law of diminishing that they require more data with few increments of advancement through A.I. without any breakthrough because A.I. is a deterministic system that works with a lack of randomness.
In Web2, they assumed everyone was stupid, and they offered solutions to everyone.
In Web3, everyone is good and should anticipate solving a problem together.
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Financial sanction to mixers
Have you heard about financial sanctions from the US on virtual currency? At least, I have not yet. But the US Department of Treasury has issued sanctions on two crypto services: Blender.io and Tornado Cash.
To clarify, the US sanctions on tools but not target specific entities or groups of people.
So why bother to sanction something that the government probably won’t be able to sanction in the first place?
What is a mixer?
A cryptocurrency mixer, sometimes referred to as a tumbler, is a tool for money laundering. The sole purpose of the invention is to make transactions untraceable.
How to mix?
Even crypto is pseudo-anonymous, but it is traceable through your wallet address. A mixer is a black box service to filter your traceable wallet address into the untraceable wallet address.
How to wash your money clean in the traditional way?
The assumption is you will not get caught at each stage, and then you place your dirty money in a bank through companies and use the funds to purchase legal goods like houses or luxury goods.
There are mature regulations and rules to stop you from putting your dirty money into banks.
Digtial money landury
A Crypto mixer or tumbler is a service to pool dirty digital currency in their favor and redistribute it into designated wallet addresses or addresses randomly generated.
It is a challenge to stop transactions because there is no entry point for law enforcement to stop at each stage.
Tornado Cash is the king of the mixer. Unfortunately, there is just no way to trace transactions anymore. It is a smart contract with zk-SNARKs (zero-knowledge proofs) that does not require revealing a wallet address during transactions and ghostly distributed funds without leaving any traces.
This tool is the ultimate weapon that the government has to shut down, or there is no way to prevent transactions.
Let’s change the future – legally.
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Why there is not crypto banking exist
We have always heard about cryptocurrencies, crypto exchange, banking, and trading platforms, but we do not really grasp the idea of crypto banking. Crypto banking is a contradicted idea. If crypto is to replace banks and give users full control of digital money, why do you put your crypto into the bank? The new research paper argued that there are risks for banks to adopt crypto, but they did it anyway.
Banks want crypto
Cryptocurrency has a rough road at the beginning and continues to experience a bumpy road ahead. The institutional investors were watching its performance. In early 2017, institutional investors had opportunities to adopt crypto, but they found out the return of the investments was less than traditional financial assets. Regulations were not a concern for some individual institutional owners, but banks were conservative at the time. As a result, some investors adopted it in early 2018 than banks did. Then suddenly, the crypto market took off in 2020, leaving many banks to regret their decision in 2017. Many banks set up their digital investment group to rush into the market and increase prices. Of course, many of their investment positions are instead of shadow positions. It is unclear how much they have been invested in and what vehicles they took to invest in cryptos.
Crypto exchange is a bank-like platform for crypto. Banks offered a place to purchase fiat currency. Crypto exchange did the same duty as traditional banks did. Since there was a gap between the crypto and banks, the crypto exchange took responsibility and offered crypto services. The crypto exchange took off after 2020, and they left banks in the dust. Then, crypto winter came in early 2022, and banks again hesitated to enter the crypto and started denouncing crypto usage, particularly in the Defi area. But interestingly, they tried to find ways to get into crypto without being directly exposed to cryptocurrencies—hint: through hedge funds.
How much banks exposure to crypto
We do not know how much banks have been exposed to crypto. We learned that the big Wall Street players were exposed to the services of the digital asset through State Street of their $41.7 trillion assets. Some have been exposed due to Luna’s collapse and 3AC bankruptcy. But again, no specific dollar amount was provided.
Since the crypto winter, institutional investors have been cautious about crypto exposure. However, crypto exchanges are the winner again. They are exposed to crypto and take risks more than banks do. As a result, they likely will weather the uncertainty. Furthermore, there is no need for crypto banking to handle your crypto assets since many such services will not survive long in the crypto environment.
Crypto is resilience
Despite its fluctuating price and unsecured assets, crypto is resilient to phase out any bad business ideas and bad actors in the economy who wants to or try to dominate the market but who transfers risks to users to believe they are the one who should take responsibility for their carelessness. Unfortunately, those business models will not survive long.
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