U.S Introduces Regulations To Increase Blockchain Adoption

10:49 PM RAWAT 0 Comments

Blockchain has proposed has several use-cases for the industry. With its transparency, immutability, and privacy features, it offers several advantages to the industry. Ease of financial scrutiny and oversight of peer-to-peer financial transactions being the most common one. No wonder, world’s leading tech companies have big plans to capitalize on this trend. 

1.      Facebook is expected to launch Libra stable coin that is compliant to regulators and is expected to be used by 2.5 billion Facebook users.

2.      Russia is creating a multinational cryptocurrency in collaboration with Eurasian Economic Union and BRICS countries. The currency can be used by 41% of the world population.

3.      Tether has already launched a Yuan-pegged stable coin called CNHT which allows peer-to-peer money transfer via blockchain-based devices.

While these trends pave way for innovation in the financial services industry and make life easier. It comes with threats and challenges. For instance, money laundering for illicit activities via cryptocurrencies, exchanges have been a growing activity. Recently the U.S government charged two Chinese nationals with laundering $100 million via 113 virtual cryptocurrency accounts after hacking a cryptocurrency exchange by North Korean actors who were trying to evade U.S. sanctions. 

Curbing such activities is important for widespread adoption of blockchain technology. Blockchain technology serves several purposes. Its recent applications across retail, healthcare, supply chain, and other industries has gained approval from industry stalwarts. The technology, however, still lacks in several respects like scalability and computation power, depriving it from mass scale adoption. These areas are still researched and worked upon. Eventually, these shortcomings will be addressed. However, use of cryptocurrencies for illicit use need to be contained from early on. 

U.S government has taken some serious steps in this direction and introduced regulations for the industry. 

1.      Cryptocurrency Intelligence Program 

Darknet is a playground of illicit activities and cryptocurrencies fund transfer. As users and most activities on darknet are anonymous, tracking cryptocurrency fund transfers is challenging. The Immigration and Customs Enforcement (ICE) agency has developed an innovative technique to track unlicensed crypto activity. The agency enforces 400 statutes that can curb illegal movement of crypto fund. To materialize this effort, the agency has training its agents.

The program seeks to identify unlicensed capital flows across peer-to-peer market places, online forums, crypto exchanges, and other online communities suspected of illegal activities. 

2.      New Crypto regulations 

Swiss secret bank accounts have been used for money laundering for a long time. Steven Munchin, the U.S Secretary of Treasury said its agency will introduce regulations around cryptocurrencies and expose secret accounts, and further aid in the adoption of blockchain technology. 

Munchin expressed that his only intention is to ensure that law enforcement can see where the money is flowing and there’s no money laundering. 

3.      IRS issued a tax compliance form 

Cryptocurrencies have been increasingly in use. It’s only fair that income made from virtual currency is reported and tax is levied on it. In September 2019, IRS issued a tax compliance in 2019 Form 1040 Schedule 1 asking taxpayers to declare their interest in virtual currency and whether they have sold, received, or exchanged any virtual currency.

The introduction of declaration of involvement with crypto will make it easier for IRS to watch over whatever small number of crypto users exist.

Blockchain industry is growing.While the technology presents an enormous opportunity to create decentralized, transparent, and more secure infrastructure for financial transactions, it also presents threats due to illicit use.As cryptocurrencies increase in adoption, it is only fair that regulations are increased to contain the threats associated with it. 

      If you’re a crypto user, look out for new regulations. If you’re not, be ready to adopt a virtual currency, sooner or later.