Meeting Cryptocurrency’s Regulatory Requirements

Meeting Cryptocurrency’s Regulatory Requirements

Cryptocurrency is a new and exciting technology, and like many disruptive techs, has regulation playing catch-up. The scramble to try to strictly legislate against cryptocurrency has given way to a more reasonable roadmap, and lawmakers across the world are now implementing reasonable measures, with the USA in particular focusing on bringing cryptocurrency into line from its status as a ‘speculative vehicle’. Financial compliance is a notoriously tricky world to traverse, but staying on the right side is crucial to remaining assured, both legally and financially. Recent events are pointing the way for businesses to ensure their crypto affairs are in order.

The tax question

The first and most pressing question concerns, of course, tax. The US government is starting to come down hard on cryptocurrency traders who haven’t paid their fair share of tax, and this has culminated in an official DoJ Office of Public Affairs announcement authorizing the use of John Doe summons on one cryptocurrency exchange. A huge hit for the company in question, it brings in the specter of IRS investigations, and should be a prompt for trading platforms and companies to get organized. How? Cryptocurrency taxation currently remains a fairly simple matter, and centers around capital gains and net investment. Platforms must ensure that their users are aware of their responsibilities, and that any commission owned by platforms and traders is also subjected to the correct tax filings.

A better environment

These changes may soon become easier to navigate with the influence of big banks. Institutional money lenders and holders hold a lot of sway within lawmaking, and are also able to wield financial muscle to put new technology into place. Forbes are now reporting that consumers at large want their providers to start having the place to store digital currencies, with banks only holding off on the basis of the regulatory compliance problems it currently causes. However, if the market does speak and banks are nudged ever-closer to being open and willing to host digital coins, it may well be that the regulatory environment becomes easier to navigate. Current proposed legislation at least hints at a more easily navigable regulatory climate.

Changes to come?

In December, Vox reported on one particular issue that may ring alarm bells for cryptocurrency traders and firms. Regulation seeking the use of KYC measures within cryptocurrency could significantly shift the burden of responsibility from buyers and on to platforms and larger traders, and make the anonymity factor that has made Bitcoin so interesting to many digital citizens a thing of the past. If these regulations do come in, the regulatory compliance requirement placed on businesses will change drastically – CoinBase, one of the larger platforms, has described the measures as potentially painful in compliance terms.

Things may, then, get more difficult for Bitcoin traders. However, it could also become more clear, and in line with common methods and processes concerning compliance. Keep your eyes peeled for new regulation – it will come thick and fast, and the authorities won’t be far behind in enforcing it.

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