Who is the authority for Bitcoin & is Bitcoin a legal tender?
Introduction
Cryptocurrency is a digital exchange of money without involving any individual being. There’s no presence of any physical coin or bill, it’s all online. The whole system of cryptocurrency is online in computers, hence created from computer codes. It can be operated from anywhere; one need not go to the ATM or bank for the transaction. The members of the network, who verify new transactions, a process involving intense mathematical computations, are called “miners” and are rewarded for their service with additional bitcoins.
Who is the Authority?
It is a decentralized money system, which means there isn’t one authority, central party or institution in charge. Different unique blocks of connections are validated on the blockchain network through computing “consensus,” in software. Bitcoin was discovered in 2009 by an alias named Satoshi Nakamoto, but it isn’t known who that was, and that person or group doesn’t have control over bitcoin today. Therefore, no one controls or manage cryptocurrency everyone is the owner of their currency. It can be easily controlled with private keys or passwords; one will get after creating an account and investing.
Cryptocurrency in World
Every supreme authority or government is debating about regulation and management of cryptocurrency in their respective countries. While some nations have maintained a general Bitcoin-friendly stance, issuing guidance to support its use, others remain undecided, having yet to put forth any official decisions on legality or acceptance, some states are planning to ban the use of cryptocurrency in their country.
However, some countries feel that allowing cryptocurrency would ultimately result in loss of economic status and shift towards decentralized economies globally. Some of the countries including China, Russia, and Colombia have even banned Bitcoin and other cryptocurrencies,[1] outlawing their use and investment, also some countries are coming up with laws to ban the use and investment of cryptocurrency in their country.
Regulations in the USA
The U.S. has shown its willingness to accept the use and investment of cryptocurrency and formulated some rules and regulations to use cryptocurrencies in the country. Major decisions regarding the implementation were taken at the agency level, which includes the Department of Treasury, Securities and Exchange Commission (SEC), Federal Trade Commission (FTC), Internal Revenue Service (IRS) and Financial Crimes Enforcement Network (FinCEN) – all of which hold differ in their definitions of “cryptocurrency,” as well as their stances on how regulation should be applied.
FinCEN refused to accept cryptocurrency used as legal tender in the country, it does consider exchanges as money transmitters subject to their jurisdiction. Meanwhile, the IRS recognised it as property and has issued tax guidelines for cryptocurrency.
Despite the agencies have shown interest, the federal government has not yet exercised its constitutional power to regulate blockchain to the exclusion of states, they have asked individual states to make and implement their own rules and regulations.
In June 2015, New York became the first state in the U.S. to regulate virtual currency companies through state agency rulemaking. As of 2019, 32 states have introduced legislation accepting or promoting the use of Bitcoin and blockchain distributed ledger technology (DLT), while a few have already passed them into law. Some of these states have also established task forces to study the technology’s use further.
In the year 2017, Bitcoin took a major step and it was granted the same financial status and safeguards as traditional assets.[2] The FTC has provided cryptocurrency with a trading platform operator LedgerX approval to become the first federally regulated digital currency options exchange and clearinghouse in the U.S.
Also, in June 2019, SEC-registered clearing and execution company Apex Clearing launched a trading proposal for broker-dealers and financial advisors to motivate their clients to trade the four major cryptocurrencies – Bitcoin, Bitcoin Cash, Ethereum, and Litecoin – through its subsidiary Apex Crypto.
As of the recent reports of February 2020 from the higher authorities, Bitcoin[3] has become legal in the U.S., Japan, the U.K., and most other developed countries. But the legal status of bitcoins is still in controversy, in emerging markets. China has imposed heavy restrictions[4] on Bitcoin without criminalizing the holding of bitcoins. India has directed its banks to not deal in bitcoins and banned few cryptocurrencies in the country, but overall India is still unclear on bitcoins.
Although, the countries where bitcoin is legal, they treat cryptocurrency like any other asset. Tax laws in those countries have created trouble for users to invest in cryptocurrencies. For tax purposes, bitcoins are usually treated as property rather than currency. Still in most parts of the world bitcoin is not treated as legal tender.
Bitcoin exists in a deregulated marketplace, so there is no centralized issuing authority. Bitcoin addresses do not require Social Security Numbers or other personal information like standard bank accounts in the United States. That initially raised concerns about the use of bitcoins for illegal activity.
In its early years, the perceived anonymity of Bitcoin led to many illegal uses. Drug traffickers were known to use it, with the best-known example being the Silk Road market[5]. It was a section of the so-called dark web[6] where users could buy illicit drugs. All transactions on the Silk Road used bitcoins. It was eventually shut down by the FBI in October 2013. However, Bitcoin itself has several serious flaws for those who seek anonymity. In particular, it creates a permanent public record of all your transactions. Once an individual is linked to a unique address, that person can be connected to other transactions using that same address. Competing cryptocurrencies, such as Monero and Zcash, now provide much better privacy protection. Given this situation, illegal activity is moving away from Bitcoin.
[1] https://www.investopedia.com/articles/forex/041515/countries-where-bitcoin-legal-illegal.asp
[2] https://www.engadget.com/2017-07-26-bitcoin-federal-regulation-exchange-ledgex-protection.html
[3] https://www.investopedia.com/terms/b/bitcoin.asp
[4] https://www.investopedia.com/news/bitcoin-banned-china/
