Cryptocurrency: how will it be monitored and taxed?

Cryptocurrencies are still beyond the control of governments and central banks. Their meteoric rise in the United States in recent years and above all the risk linked to their volatile nature and the possibility of being manipulated by acts of piracy, money laundering activities or by errors in the absence of a legal framework, have prompted US financial authorities to consider regulation of the sector.

Treasury Secretary Janet Yellen has called for the crypto industry to be subject to the same rules and federal regulatory oversight as the traditional financial system. Such a call prompts an answer to the following question: what is cryptocurrency and why do financial authorities want to regulate digital assets at all costs? It looks like the days of the free market where crypto moves without restrictions are coming to an end. Last March, President Joe Biden signed an executive order directing US federal agencies to implement a policy of regulations on digital assets such as cryptocurrencies.

Speaking at a recent conference at the American University in Washington, the Treasury Secretary pledged to work with the White House and other agencies over the next six months to develop recommendations on how to regulate these assets.

In this new reality, many still do not know what cryptocurrencies are, let alone why the government is deciding to bring them into the scope of regulation. According to Maysam Behravesh, founder of a crypto company in Sweden, a digital asset is “anything of value, produced and stored digitally or online through blockchain technology and computer work”.

In a statement to MAP, he explains that digital assets can include “cryptocurrencies or coins and tokens which are decentralized and not subject to any government or regulatory authority control. the central bank”. They can also refer to digital currencies issued and controlled by the government (i.e. national). There are now hundreds of cryptocurrencies, such as Bitcoin and Ethereum, which are traded on exchanges. crypto exchange all over the world. These cryptocurrencies now account for more than $2 trillion of the global economy, Behravesh says, noting that in this case, the potential for disruption becomes enormous especially since the short history of these currencies has been marked at this day by extreme volatility with large fluctuations up and down.

“With such huge market capitalization spread across national territories, governments are trying to both minimize destabilizing effects on respective national economies and capitalize on the new source of decentralized wealth and value 24/7″ , he continues.

For Rosanna Myers, the head of a California tech company and crypto mining expert, “Crypto and the technology behind it can represent both a source of disruption and a field of opportunity for states and national banks. “Crypto is extremely nascent,” she says, noting that “what most people don’t realize is that there are plenty of opportunities to get involved beyond investing. Every day, hundreds of projects emerge from all over the world and have the potential to grow exponentially”.

Myers further observes that one of the facets of cryptocurrency is the ability to “mine” on the web. “Mining is the security and validation engine of blockchains,” she says. “This is how new tokens, such as bitcoin, are created and transactions are securely authenticated so the network can operate and grow. For proof-of-work blockchains, this is done with powerful computers that run non-stop, solving complex mathematical puzzles to write and secure new transactions”, specifies the expert. She notes, however, that “not all projects depend on mining and not all succeed,” adding that mining underpins much of the current infrastructure as it validates and secures the blockchain.

“It’s a great way to earn a relatively passive income while supporting the networks.” The expert also points out that 1.7 billion adults worldwide are “unbanked, meaning they cannot access financial systems to save, borrow or invest their money. They cannot protect or increase wealth”. She suggests that crypto “changes all of that because it allows anyone with an internet connection to access financial services.” The scale of the impact is enormous, notes this follower of these assets, indicating that just recently, Ukraine raised more than 60 million dollars from private donors accepting donations in cryptocurrencies.

“Key regulations and infrastructure are maturing, which means the question is no longer whether crypto will last, but rather how it will be monitored and taxed,” says the expert. Recently, the United States became the world capital of “mining” after China placed companies operating in this sector on the list of prohibited activities, both for financial and environmental reasons.

“Texas has evolved into a major hub because one of the most important factors [pour une exploitation minière réussie] is the low cost of energy. My company has chosen to use 100% renewable energy and has found hydropower extremely economical,” says Myers.

Other states are eyeing crypto like Wyoming which has just paved the way for virtual currency. He passed a first-of-its-kind bill that would allow the state to accept tax payments in the form of digital currencies. Arizona wants to follow suit.

According to El Mostafa Belkhayate, finance expert and chief strategist at Dubai-based Springbox AI FinTech, the universe of digital assets offers “huge potential for all countries”.

Asked by MAP about the future of crypto, he argued that “nothing can stop the advance of crypto.” Like the authorities of a large number of countries, the American Secretary of the Treasury nevertheless insists that “regulatory frameworks should be designed to support responsible innovation while controlling risks – in particular those which could disrupt the financial system. and the economy” in general.

In this sense, the International Monetary Fund calls for “comprehensive international standards” that address the risks to the financial system of crypto assets, their associated ecosystem, and related transactions, while fostering an enabling environment for useful products and applications of these. assets.

“Global crypto regulation should be comprehensive, consistent, and coordinated,” the Bretton Woods institution recommends.

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Cryptocurrency: how will it be monitored and taxed?

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