The Use of Cryptocurrency
While there are many benefits to the use of cryptocurrency, there is also much skepticism from the general public. Much of this concern centers around legal protection associated with transactions. Search the Internet and outline what legal protections exist for Bitcoin users in the US and other countries.
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Cryptocurrency is a type of digital currency, using digital files as money. This type of currency involves encryption of data string in denoting a unit of currency and is monitored and organized by a peer-to-peer network identified as blockchain, serving as a secure ledger for transactions (Liu & Tsyvinski, 2021). The main concerns of cryptocurrencies and blockchain technology in carrying out transactions have erupted numerous questions on the security of the transactions and thus forcing different countries to regulate the cryptocurrencies. This paper discusses the different approaches of various countries in regulating Bitcoin, one of the world-spread CryptocurrencyCryptocurrency, to protect the user or consumer.
Despite the numerous consumer safety concerns raised by different countries and states, very few have developed regulations to protect users legally. In the United States, Bitcoin is classified as a money transmitter, a medium of exchange but not a legal tender, and thus taxed accordingly as a commodity (Calin, 2021). No specific federal laws protect the users in the United States, but every state is at liberty to develop state laws regulating and protecting the users from unfair or illegal transactions. The California Code of Virtual Currency described Bitcoin as a virtual currency, and through Assembly Bill No. 1326, the code calls for licensure for any person engaging in any virtual currency business within the state (Hughes 2017; Tampi, 2017). This code protects the users by providing them with a legal backbone to follow up on wrong or fraudulent actions performed by licensed traders.
Like in California, France adopted a similar approach in protecting the users of Bitcoin and other cryptocurrencies. In France, crypto firms are required to register with the Financial Markets Authority, a French financial regulator, and thus boost the traceability of the transactions through legal forums (Dasha, 2021). The French law has also banned anonymous transactions by reducing the KYC limit to $0. According to Ruslina (2019), countries from Europe, including France and Germany, initiated a plan to implement joint regulations in oppressing the digital currency market in protecting the users. This ensures that every transaction is recorded and protected under the law to protect the consumer from any form of a fraudulent transaction. The Monetary Authority of Singapore requires the bitcoin dealers buying, selling, or facilitating the exchange of cryptocurrencies to always verify the identities of their customers to report any suspicious transactions. Japan is one of the countries concerned about the existence of bitcoin within the digital market. The country’s financial regulation body classifies Bitcoin and other cryptocurrencies as an asset that can pay a person for the price of goods or services offered. This shows that Japan accepts cryptocurrencies as an item of trade. In protecting the user, the regulation body requires the crypto-asset providers (CAESP) to be registered by the FSA and that the CA custody should keep the customer’s assets in an offline environment to protect the user’s privacy (Wang, 2021).
The legal framework across the world generally lacks the grip in protecting the users against fraudulent actions of crypto assets. In most countries, the key focus is on the licensing procedure to ensure no anonymity in transacting cryptocurrencies. The regulators focus on improving the traceability of the transactions and not the privacy of the transactions. There is a major concern on how the details of the transacting users are laid bare on the platforms. The Japanese regulatory authority has thus shown its commitment to control online fraud by limiting the online crypto assets to a maximum of 5% of a person’s total assets. The rest are kept offline, and this protects the privacy of the user. Mohamed & Al-Jarod (2019) call for the integration of safe technology to facilitate digital identities, macro controls, and distributed security such as Man4Ware.