Is Cryptocurrency a Threat to the Financial System?

 

Cryptocurrency Issue Approached Differently Across Globe

Cryptocurrencies are revolutionary. Since Bitcoin first came on the scene, each country has approached the cryptocurrency issue differently. There seems to be no consensus when it comes to how to handle cryptocurrencies. Of course, there are countries that do not support use of digital currency within their borders. For instance, China began a campaign against crypto last year. Since then, the country has broadened its efforts to clamp down on the cryptocurrency industry.

Crypto-related Events Forbidden in Guangzhou

According to media reports, China is even going after events promoting crypto-related activities. In fact, as The Star Online reports, the campaign is spreading beyond Beijing. The publication reveals that a special economic zone in Guangzhou will no longer allow crypto-related events. Interestingly, this area that is free from central government control. In essence, it is an “free” economic zone that caters to trending technologies regardless of the central government’s stance.

Unfortunate as that may be, that is the official position of the Chinese government regarding cryptocurrencies. However, many other governments have not come out explicitly to support or condemn crypto. For instance, in the USA, digital currencies are not illegal. In fact, majority of the leading cryptocurrency-related companies are American. What is different is that regulatory bodies are yet to decide how to regulate the cryptocurrencies.

Price Fluctuations

Repeatedly, authorities cite the unfavorable nature of the cryptocurrencies when it comes to stability. Unfortunately, many governments cite the wild fluctuations in the prices of cryptocurrency for not creating regulatory frameworks. Reuters recently reported that the ECB will not launch deeper into crypto due to price instability. Further, Mario Draghi, President of ECB said the crypto underlying technology lacks enough testing.

However, the sentiment is not uniform. In Ukraine, authorities want to introduce taxes on cryptocurrencies. Although the focus is just expanding the tax base, the move sends important signals regarding crypto adoption in Ukraine. Basically, the move implies a government approval of the digital assets.

Taxing Digital Assets

Recently, Cryptovest reported a BX3 Capital partner insisting that cryptocurrencies are beneficial to global economic growth. Michael Minihan, the partner, says governments should overhaul their tax codes to encompass digital assets. Specifically, he singles out the US as being the leader in creating a regulatory framework for cryptocurrencies.

Unsurprisingly, most of the governments restricting crypto use insist the digital currencies threaten financial stability. In fact, the CryptoCoin reporter recently reported the IMF issuing threats against Marshall Islands regarding cryptocurrencies. The report regards the fact that Republic of Marshall Islands (RMI) is offering a national cryptocurrency. In a 58-page report, the IMF cites global financial stability as reasons why RMI should not launch a national cryptocurrency.

However, whether or not digital assets truly endanger the financial system is up for debate. Evidently, there are countries already operating national digital tokens. In fact, Iran is planning to issue its own digital token to help circumvent international sanctions. Surprisingly, most governments have chosen to play “passive observers” to the unfolding cryptocurrency drama.

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