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The rapidly evolving nature of the crypto market has posed stark challenges for regulators in understanding the underlying technology and subsequently devising informed policies and procedures. This evolution is also characterized by a shift from isolation to collaboration in terms of global regulation.

In an exclusive interview with global regulatory expert and author Nirvana Smith, she said, There's really been a push for international cooperation, which I think will continue and really establish some kind of common standards. This transformation has been necessitated by the global demand for oversight in the cryptocurrency markets, particularly from regulators in the United States.

In fact, Kevin OLeary of Shark Tank fame, in a recent Fox Business appearance, voiced concern that US regulatory obstacles incongruent with international norms could drive crypto innovation out of the US. He said, Where do you think all this innovation is going to go? Its going to go to the UAEUAE. Its going to go to Abu Dhabi.

Regulatory Challenges In The Cryptocurrency Market

The international landscape for cryptocurrencies presents diverse regulatory obstacles. Given their unique nature and technological underpinnings, a primary challenge is determining their legal classification. Many countries have grappled with how to apply traditional financial regulatory structures to these distinct digital assets, stated Smith. Should they be categorized as currencies, securities, as was done in the US by the SEC with regards to ICOs; or perhaps they warrant an entirely new classification tailored to their uniqueness?

The second challenge is the understanding of the underlying technology, blockchain, that powers cryptocurrencies. This complex, decentralized, and distributed ledger technology requires a deep understanding for effective regulation. It is pivotal for regulators to comprehend this technology thoroughly, to avoid crafting regulations that could potentially stifle innovation or overlook potential risks.

The third challenge presents itself in the form of taxation. The quasi-anonymity that cryptocurrencies offer makes third-party reporting arduous, thus posing a significant challenge to the implementation of taxation. Policymakers are tasked with creating mechanisms that can effectively monitor and tax cryptocurrency transactions. Despite the potential revenue from cryptocurrency taxation, the risk of evasion of VAT and sales taxes poses a greater threat.

Consumer protection in the face of potential scams, specifically with the advent of initial coin offerings and decentralized finance platforms, forms the fourth challenge. The proliferation of these new financial technologies exposes consumers to new risks and potentially fraudulent activities. Consequently, regulators need to put the necessary safeguards in place to protect consumers against these possible risks.

The fifth challenge lies in the outdated mindset among regulators. There is a tendency to apply traditional financial services regulatory approaches to the cryptocurrency market. However, given the unique nature of cryptocurrencies, they necessitate a unique regulatory approach.

Lastly, the self-interest of individual countries and financial institutions poses a significant challenge to creating a fair playing field. Smith said, We want to have smart regulations in place, not stupid regulations that suppress competition or stifle innovation. We still want to be innovating and having competition, because that's how the economy's going to churn. The future of cryptocurrency regulation should focus on collaboration, global standards, and a balanced approach promoting innovation while ensuring responsible growth.

In their recent joint report, the International Monetary Fund and the Financial Stability Board cautioned against blanket bans on cryptocurrency activities. They argue that such broad prohibitions could lead to the migration of activities to other jurisdictions, thereby creating spillover risks. Instead, they propose comprehensive regulations and targeted restrictions to mitigate the associated risks.

Due to the global nature of cryptocurrencies, cross-border coordination is crucial. According to Smith, each country has its regulations, but these could have global implications, thus highlighting the need for international cooperation and common standards. She adds, Cryptos are inherently global, and obviously each country has its own regulations, but the international community is realizing those regulations could cause ramifications elsewhere.

The shift from isolation to collaboration in the cryptocurrency regulatory landscape is a clear indication of the industry's maturation. The persistent pursuit of self-interest is gradually giving way to a more cooperative approach, with a focus on establishing effective, intelligent regulations. With that said, recent progress indicates the future of cryptocurrency regulation will be characterized by increased international cooperation, the creation of global standards, and a balanced regulatory approach that does not stifle innovation but ensures its responsible growth.

Im the founder ofColumbia Advisory Partners, LLC, a certified CPA andCFP, plus the co-founder of bothDefi Steward, co-founder ofPlannerDAO. PlannerDAO aims to increase cryptocurrency access and adoption within the financial planning community. As the founder of Defi Steward, I guide investment advisers in managing digital assets for their clients. In addition, Im an adjunct professor of finance at Gonzaga University. I hold and trade modest amounts of BTC and ETH because Im passionate about what the future economy holds for the world of financial planning. I'm committed to promoting economic freedom and universal fiduciary standards.

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Embracing Collaboration Over Isolation: Navigating The Shift In Global Cryptocurrency Regulations - Forbes

It is crucial investors be able to answer the question "What is cryptocurrency?" before jumping into the high-risk space.

At the height of the cryptocurrency wave in 2021, investors couldn't get enough of the trendy investment and the adjacent blockchain technologies, with many jumping in before they could even answer the question "What is cryptocurrency?".

The leader was and still is Bitcoin, the world's largest cryptocurrency. It hit an all-time high near $68,000 in November 2021. Over the next year, it shed 75% of its value as investors lost confidence in high-risk assets due to the Federal Reserve's use of rising interest rates to slow inflation.

All cryptocurrencies, including Bitcoin, were hit especially hard by the changing investment climate.

Nearly a year later, some sanity has returned to the digital currency market, which makes it an excellent time for Kiplinger to provide a primer for investors unfamiliar with cryptocurrency and the industry behind it.

Vanguard is one of the most prominent asset managers in the world. Its website's "How to Invest" section provides a good definition of cryptocurrency.

"A cryptocurrency is a digital asset stored on blockchain technology that serves as a type of currency or store of value. Unlike traditional currencies, cryptocurrencies aren't backed by major governments or developed economies," states the Vanguard website.

There's that word "blockchain" again. What does blockchain technology have to do with cryptocurrencies?

Blockchain technology enables cryptocurrencies like Bitcoin to view and verify transactions between two parties through a decentralized network of users known as nodes. These nodes validate and record these transactions rather than through a single authority or middleman.

The Bitcoin blockchain, for example, contains every Bitcoin transaction that's ever taken place, divided into blocks. When stacked on each other, these blocks create a chain of blocks, or a blockchain.

Story continues

"Finding and publishing new blocks is what Bitcoin miners do to earn bitcoins," states a Coinbase help page explaining the Bitcoin blockchain. "Whenever a new block is broadcast, approximately every 10 minutes, a quantity of bitcoins is received by the miner who solved that block. Bitcoin miners keep the network secure, and this is how they are rewarded. This system ensures that all transactions are valid, and keeps the bitcoin network secure from fraud."

Investors have been asking themselves "Why own cryptocurrency?" ever since Bitcoin was created in 2009.

Proponents of the digital asset argue that decentralized finance takes the power of money creation away from central banks and bankers, democratizing the global financial system.

Cryptocurrencies are especially effective for transferring funds across borders quickly and efficiently to people living in countries with volatile currencies or significant cross-border restrictions, etc.

The other reason to own cryptocurrencies such as Bitcoin is as an investment. There is a school of thought that cryptos provide a hedge against inflation.

To be such a beast, they must provide a store of value into the future, meaning they are worth the same or more with time. Further, they must be exchangeable for things like gold, U.S. dollars, etc. Lastly, they must have limited supply increases over time.

Bitcoin, for example, has a capped limit of 21 million. There are currently around 20 million Bitcoins. Every 10 minutes, approximately 6.25 bitcoins are mined and put into circulation. The limit is not expected to be reached until 2140.

This scarcity may make Bitcoin more expensive as the limit draws closer, but that's purely hypothetical.

Three of the most significant advantages of cryptocurrency are accessibility, faster transactions and transparency.

Cryptocurrency markets operate 24 hours a day, seven days a week. Whether you're in your living room at three in the morning in the U.S. or traveling overseas, you can buy and sell digital assets without any concern your crypto exchange will be closed. It's always open.

The benefits of this accessibility to crypto beginners are debatable. However, cryptocurrencies have always been about democratizing finance. Anyone, anywhere, at any time can make a trade. That's what makes it appealing to investors.

Market participants have always been interested in faster and, where humanly possible, cheaper transactions. In the case of cryptocurrencies, faster transaction speeds are critical because they influence the overall adoption of cryptocurrencies.

"For example, if it takes 10 minutes for a Bitcoin transaction to be confirmed, it may not be practical for buying a cup of coffee," wrote The Baltic Times in an April 2023 article about cryptocurrency scalability and transaction speeds.

Transparency is a critical benefit of cryptocurrencies too. Their open-source code provides real-time, accurate results for auditors. That's essential for regulators seizing cryptocurrency used in criminal activities.

"According to the Financial Action Task Force (FATF), seizure rates of illicit funds within the traditional financial system are around 0.1% meaning regulators have recaptured about one-thousandth of the funds known to have been used for criminal activity. The seizure rate for crypto: 27%, according to [Uniswap Legal Chief Salman] Banaei," Consensus magazine deputy managing director Daniel Kuhn wrote in April 2023.

As a result of this move to decentralize finance, countries such as the U.S. have looked to regulate cryptocurrencies further. In early June 2023, the U.S. Securities and Exchange Commission (SEC) sued Binance and Coinbase Global (COIN), the world's two largest cryptocurrency exchanges.

The SEC's lawsuit against Binance accused the company of knowingly operating an unregistered exchange, as well as offering and selling unregistered securities. The complaint against Binance included 12 cryptocurrencies, such as Solana and Polygon.

The separate SEC lawsuit against Coinbase claims that it, too, operated an unregistered exchange, offering and selling unregistered securities.

"We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions," the SEC said in a statement.

If you are new to cryptocurrency, it is crucial to understand that the industry remains in transition. There remain many regulatory challenges from agencies such as the SEC.

This makes any investment including in diversified crypto ETFs potentially volatile and possessing above-average risk.

Here is the original post:
What Is Cryptocurrency? - Yahoo Finance

The rapidly evolving nature of the cryptocurrency market has presented significant challenges for regulators worldwide. Understanding the underlying technology and developing informed policies has proven to be a complex task. However, there has been a noticeable shift from isolation to collaboration in global regulation, driven by the need for oversight in this growing industry.

One of the primary challenges in regulating cryptocurrencies is determining their legal classification. Various countries have grappled with whether to categorize them as currencies, securities, or to create a new classification tailored to their unique nature. This classification is essential for applying traditional financial regulatory structures effectively.

Another challenge lies in comprehending the underlying technology behind cryptocurrencies: blockchain. Regulators need to develop a deep understanding of this complex, decentralized, and distributed ledger technology to craft effective regulations. Failing to do so could result in stifling innovation or overlooking potential risks.

Taxation presents a further challenge. The quasi-anonymity of cryptocurrencies makes it difficult to monitor and tax transactions effectively, posing a significant hurdle for policymakers. Balancing the potential revenue from cryptocurrency taxation with the risk of tax evasion is crucial.

Consumer protection is also a concern, particularly with the rise of initial coin offerings (ICOs) and decentralized finance platforms. Regulators must establish safeguards to protect consumers from potential scams and fraudulent activities associated with these new financial technologies.

An outdated mindset among regulators, applying traditional financial services regulatory approaches to the cryptocurrency market, is another challenge. The unique nature of cryptocurrencies demands a fresh and unique approach to regulation.

Furthermore, the self-interest of individual countries and financial institutions poses a significant obstacle to creating a fair playing field. The focus should be on establishing smart regulations that encourage competition and innovation while ensuring responsible growth.

International cooperation and common standards are crucial in addressing these challenges. The International Monetary Fund (IMF) and the Financial Stability Board (FSB) recommend comprehensive regulations and targeted restrictions instead of blanket bans. They emphasize the need for cross-border coordination due to the global nature of cryptocurrencies.

The shift towards collaboration in the cryptocurrency regulatory landscape indicates industry maturation. The future of cryptocurrency regulation should prioritize increased international cooperation, the establishment of global standards, and a balanced approach that promotes innovation while ensuring responsible growth.

Original post:
Regulatory Challenges and the Case for International Cooperation ... - Clayton County Register

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According to a recent study by foreign exchange education platform Forex Suggest, Hong Kong is the most cryptocurrency-ready jurisdiction in the world because of its long history as a regional centre of trade and commerce, its favourable tax regime, the large number of cryptocurrency ATMs and businesses operating in the blockchain and related industries in the city.

Hong Kong has no capital gains tax, and only frequent cryptocurrency trading is treated as income, which is then subject to profits tax, capped at 16.5 per cent.

Around the world, billions of dollars in income go unreported annually in digital asset trading. In the US, which imposes capital gains tax on the sale of cryptocurrency and income tax on cryptocurrency mining, the standard tax form now asks whether the individual has engaged in virtual currency transactions.

The European Union passed legislation in April that will require the tracing of cryptocurrency transactions. India has a 30 per cent tax on cryptocurrency profits and also requires exchanges to deduct a 1 per cent tax on transactions above a certain amount and pay that tax to the central government.

It is clear that cryptocurrencys adoption into the tax system has been hindered by several challenges. One issue is the anonymous nature of cryptocurrency transactions, which complicates government tracking and regulation. Furthermore, the diversity and constant evolution of cryptocurrencies make it challenging for governments to stay abreast of all developments.

A significant portion of the population also lacks a clear understanding of the mechanisms and regulations related to cryptocurrency, which can impede its effective use. Even though the Organisation for Economic Cooperation and Development has developed a framework for the exchange of cryptocurrency-related information between countries, its full-scale implementation still awaits further regulatory efforts. Moreover, the rapid changes in the cryptocurrency sector can make it difficult for government agencies to keep up.

To navigate these challenges, policymakers could initiate several measures. A starting point would be to clearly define the tax implications of cryptocurrency use. Concurrently, they could launch educational campaigns to inform the public about the significance of fulfilling tax obligations on cryptocurrency earnings and provide insights into the workings of digital currencies. For example, cryptocurrency tax calculators are now available for some jurisdictions.

These actions could facilitate safer use of cryptocurrencies, ensuring they are integrated into the economic system in a manner that is beneficial to all parties.

Professor Haitian Lu and Dr Sirui Han, Policy Research Centre for Innovation and Technology, Hong Kong Polytechnic University

Hong Kongs talent gap may be more evident in industries such as healthcare, the biosciences, information technology and artificial intelligence. Enticing people to work in these and other industries facing a shortage of local talent should be the main focus.

But I have observed that some of those so-called top talent under categories B and C of the scheme took on jobs that locals could handle, such as administration, marketing, human resources and even insurance. This would affect local fresh graduates who are looking for jobs.

When reviewing new applications or visa renewals, the government should consider professional necessity rather than just where the applicant earned their degree.

Chloe Hui, Yuen Long

We are inundated by junk calls for which we have to pay roaming charges if we answer them when travelling. If we do not answer, the call gets diverted to ones voice mail and then one is charged as the call is completed. So is the answer then to disable ones voice mail?

Why should a consumer have to choose between inconvenience (disabling voice mail) and paying for incoming roaming calls, thereby making the telecoms companies richer. Surely this is not something the government would like to encourage.

Narayan Mulchandani, Repulse Bay

The captain of the Hong Kong Golf Club said, We have a world-class golf course but it is only used as a public park. What is the point? I say, We have a huge swathe of land but its only used to serve a very small group of privileged people. What is the point?

Ringo Yee, Tuen Mun

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Hong Kong needs a clearly defined and well communicated cryptocurrency tax regime - South China Morning Post