A relatively unknown committee known as the U.S. Senate Committee on Banking, Housing and Urban Affairs late last month on the future of Bitcoin. Specifically under discussion was Bitcoin’s future as a relatively unregulated currency and the possible role of cryptocurrencies alongside traditional currencies regulated by a central bank. Chairman of the U.S. Senate Committee on Banking, Housing and Urban affairs, Senator Mike Crapo, acknowledged that the time for potentially banning Bitcoin has passed.
Different countries have responded is vastly different ways to the encroachment of Bitcoin into respective domestic markets underwritten by their particular central banks. China, for instance, softened its approach towards Bitcoin recently. The Bank of China even went so far as to showcase a Bitcoin infographic on its website. Predictably, the European Central Bank and the financial services authorities in the United Kingdom have thundered that Bitcoin is lacking in intrinsic value and could topple like a house of cards at any moment.
How about the Internal Revenue Service? How do they feel about crytocurrencies like Bitcoin? For now, the IRS appears to be treating cryptocurrencies as legitimate in some sense since they will send out 10,000 letters to individuals who didn’t report income related to cryptocurrencies. The IRS is keen on receiving taxes related to this unreported income. Those in the crytocurrency world, however, are more concerned with the government’s lack of clear guidance towards future regulations.
Fresh legislation for cryptocurrencies of all stripes is likely on the horizon; crytocurrency experts and investors in Bitcoin simply want to have a general idea of the likely paths that that future regulation could take so that they can prepare accordingly. Determining how a cryptocurrency, like Bitcoin and Dash, are to be regulated is merely a starting point. If the government decides to be creative, you could see regulations hamstring cryptocurrencies as an asset class and plummeting the value of something like Bitcoin by increasing the sheer cost of doing business. Government intervention would also increase uncertainty about buying and selling cryptocurrencies, which would probably throw cold water on investors’ enthusiasm.
Another route that the government could go in regulating the flow of cryptocurrencies is establishing restrictions, such as the import restrictions swirling around the sale and purchase of physical gold. The current state of regulation is piecemeal, decentralized, and makeshift, so more guidance – and, frankly, clear direction – is needed from the government vis-a-vis various cryptocurrencies.
