The crypto industry is the future of finance. But with digital currency wildly spreading its roots without any regulation, there’s an increased pressure on the concerned authorities to act soon, for avoiding a kind of collateral damage that can’t be undone.
The rapid speed with which the crypto industry has grown in the last few years is fortunate and a matter of concern. On the one hand, that's because it points to innovative ways of dealing with a financial crisis. On the other hand, there is very little regulatory oversight over this industry.
There has been a seismic shift in the mass urban approach: from ‘relying on bankers to safeguard their money’ to ‘wanting to take control of it.’ So, what started as a thought project during the 2008 financial crisis is now, a two trillion-dollar industry.
- When a hacker steals the key to your private account, he makes away with a lot of money. This does not happen in the case of paper currency.
- Crypto is a highly speculative asset and is thus a potential cover for crimes like money laundering. Thus, there has been an increasing emphasis on the idea that there must be a limit on the number of Bitcoins that can be generated (the upper limit, at present, is 21 million).
- Cryptocurrency is decentralized, in contrast to paper currency.
- Also, in case of an impending hack, there’s no warning by an authority that there’s a danger to the account. (In the traditional case of paper currency, the bank sends text messages, emails, or notifications in the app to tell you that your savings are at risk).
- On a 5 pound note, it’s written that ‘I promise to pay the bearer on demand the sum of five pounds.’ So, there’s written proof of the fact that the currency’s value is five pounds. Also, the value has been assigned by a regulatory authority: the Central Government. Digital money is practically invisible money. And something that is essentially invisible cannot be regulated.
- Though providing a better level of privacy, Bitcoin mixing services offer ample money laundering opportunities for criminals. That’s because these allow users to mix their coins with other users, making it almost impossible to detect the destination addresses. In short, the ties between the inputs and output addresses are obfuscated.
- The problem is made even more complex by the fact that there is an enormous amount of bitcoin addresses and every address has a different role.
- Another concern among regulators is the lack of consumer protection with regard to cryptocurrency. In the case of paper currency, if your money is credited to someone else’s account, there are mechanisms to undo that and credit the same to your account. But if your digital (and mined) money is gone, it is gone for real.
- Already, Bitcoin money laundering is taking place, with Bitcoin transactions being made under pseudonyms. The criminals use pseudonymous Bitcoin addresses to hide the illegal source of funds.
To sum it all, everyone’s participating in the game, but nobody keeps track of the scores. So, experts say that regulation should come up in such a manner that innovation can continue.