Over the past decade, cryptocurrencies have become the most popular assets. Digital currencies have gained popularity by becoming one of the decentralized features in the modern world. The transparency and decentralized agenda has made it an enemy of most states in the world today. Regimes have challenged the anonymity associated with cryptocurrencies. Governments are, in turn, introducing stricter regulation policies towards the same.
Russia is the latest to introduce a regulatory framework. The country was depending on large crypto quantities from crypto possessions and mining farms. These benefits are now in jeopardy if the regulations are passed.
Currently, there are several reasons why governments would want a regulatory framework. In this article, we will be dissecting the possible causes. Here are the top three reasons why governments want to regulate crypto;
For Taxation Purposes
Taxation is always the number one reason why governments want to regulate anything. And cryptocurrencies are no exception, especially where millions of dollars in the levy on capital gains are involved. The capital gains tax is a tax on the profits realized after the sale of the non-inventory asset and is higher than the amount on the sale.
Cryptocurrencies, naturally are tradeable assets and they fall under the capital gains bracket although they don’t necessarily have to in general economic terms.
A trader with a significant boost in financial capability from crypto profits would want to inject back the funds in the economy. However, when large chunks of the same amounts of benefits are taken away, it diminishes the circulation factor of the finances.
The more a citizen has a better purchasing power, the more likely they are to contribute to the economy. Either by buying startup products or spending on a different day to day items.
When a crypto investor is made aware that his gains will be taxed, they will likely not cash out of the benefits. The investor would rather keep them in crypto form and continue trading. Now, when they know they are free to spend, they’d cash out and diversify on the various assets like real estate, etc.
In the end, you will find that this is the most different law any government can implement. Taking the funds away from tradefable assets prevents the funds from being invested back in the economy
Natural Security Reasons
It’s probably the most justifiable reason governments introduce crypto regulations. The prevention of money laundering and terrorist financing is a legitimate reason for government crypto regulation, but is it really that big?
Well, most crypto scams in the world today depend on the anonymity of crypto to launder scammed money outside the country and liquidate it. But this issue can be solved if they are forced to justify their transactions. Then, the scams and money laundering issues would naturally decrease as well as terrorism
Control Over The Financial One
The government, most of the cases, want to regulate crypto to remove the anonymity factor. Norway and Sweden are looking to retain the gaming business monopoly desperately.
In the country of the above name, no company has the right to provide gaming services. Only the state has powers to do so.
Once the government has made a choice, you can only accept and prepare for the outcome. But as it makes the decision, it’s the best option to comply with set regulation.