What Are Cryptocurrencies?
Cryptocurrencies are currencies digitally created by private entities. These currencies are separate from government currencies in that they are created and monitored digitally with ledgers created to track all transactions. They are not created in printed form like government issued monies. Cryptocurrencies are created with a specific maximum number of units with a set distribution and availability schedule to regulate value and prevent any one individual or entity controlling value. Bitcoin, Litecoin, Ethereum, Zcash, Dash and Ripple are among the many currencies now offered. Some actually have stated purpose for their creation drawing people to their cause or concern.
The Value of Currencies
Government issued monies are valued by the economies and actions of each country in the world as compared to other countries. Natural resources, commerce, trade, confidence in the political agenda and many other issues determine the value of a country’s currency,. Many governments have agreements in place to help regulate currency values. Cryptocurrencies are not a tangible asset, existing only as digital code on accounting ledgers. There are no physical assets to determine value. There is no governing agency such as a legislature. More currency may not be created beyond its established guidelines. Value is determined by those willing to accept its value in trade. Yet Cryptocurrencies have become known and valued worldwide.
Regulation of Cryptocurrencies
Herein lies the hindrance to regulating Cryptocurrency. During the dotcom frenzy decades ago many investors took losses, but those losses were reduced to an extent by regulations that were in affect. In the United States where investments are regulated for the protection of it citizens, stocks are regulated, commodity trading is regulated, even foreign exchange markets are regulated. The US has established registration policy regulations for citizens to become involved in Cryptocurrency purchases and sales, but has yet to meet with other world governments to agree on regulating Cryptocurrencies
Cryptocurrencies do not have a regulatory body. The concept of Cryptocurrencies is not an easy concept for many people to wrap their minds around. This presents a problem for establishing any overseeing agency. The fact that worldwide FOREX markets began allowing trade in Cryptocurrencies and then saw Bitcoin, one of the first cryptos and the one with the highest perceived value, reach a valuation of $20,000 per coin and then dropped to a current value of $6,575 has raised concern about the legitimacy of these investment offerings.
The biggest concern for regulation is the potential fraud and the illicit use of these new currencies for terrorist and illegal operations. The coins have risen to a market valuation of over $200 billion. This suggests the digital ‘coins’ are here to stay. This new asset class presents a problem of how to treat this investment. Governments have different classifications of these assets, Some consider them as only non-taxable digital products, others as securities, others as commodities. Until there is a consensus of exactly how to treat Cryptocurrencies regulation remains undetermined. The fact that these offerings represent a taxable revenue source for individual governments will inevitably lead to international agreements for regulation.
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