In the year 2020, while the COVID-19 pandemic was sweeping the world, so too was something else, people’s belief and understanding in cryptocurrency. Suddenly, something that was once only know to the select few, became known by the masses, creating a new space for businesses to move into. And as soon as the businesses started to adopt cryptocurrency, the government of many developed countries began to make some fateful decisions that are about to come to the light.
Why Cryptocurrency Is Bad For Governments
If you haven’t figured it out by now, governments hate cryptocurrency. This is because the government is a business, and it makes money by printing money, taxing money, and most important of all, controlling money. Cryptocurrency takes away all of this from the government, as it is a form of money to government can’t print, can’t track, and can’t control. This has led to governments becoming very upset.
While they may look on the outside as if they are posed to accept cryptocurrency, this is because the government, especially the US government, has to tread lightly on topics like these. This is because the government is democratic, and a step in the wrong direction could have citizens calling fowl play. And now that cryptocurrency is so widespread, the government is quickly realizing this is no longer something they can say is used just by criminals. This means they will have to find some other way to regain control of a financial system that is beginning to slip through their fingers.
What Governments Plan To Do
Governments, most notable the US government, plan to implement several new restrictions that will hinder and discourage the use of cryptocurrencies as opposed to fiat currencies. These new regulations will require all cryptocurrency companies to collect KYC data from their users, as well as track where every transaction is going. Additionally, all transactions processed on the platform will have to be transparent, and the US government will retain the right to stop, prevent, and freeze transactions and accounts as they see fit. But it doesn’t end there, they plan to ban all transactions that aren’t attached to full user information.
This sounds horrible, and it is, as it is basically the government trying to take a system that is growing and flourishing in the benefit of the people and smash it into the mold of government control. And these regulations will effectively destroy most of what cryptocurrency companies stand for as facilitators of private transactions. Not only that, but one of the cool things about cryptocurrency is that it was accessible to everyone. Now the same people who can’t get a bank account also won’t be able to get cryptocurrency, putting them back at square one.
What Will the Results Be?
Before you being to panic too much, you should know that the government may think that this will fix the cryptocurrency problem, but it honestly will only cause changes, or waves in the cryptocurrency world. These new rules will apply to cryptocurrencies where there is a company overseeing them, like most stablecoins, however, it is impossible to apply these rules to Bitcoin. Why? Because Bitcoin is a computer software, not a company. It has no license to threaten to revoke, nor a company to go after, and the government can’t control it no matter how hard they try.
What the government will do though, is they will require companies that manage wallets to monitor transactions for them. And they will impose regulations that will discourage, or illegalize transactions with an unregistered wallet (an unregistered wallet is any open software wallet that isn’t controlled by a company). This will make it very difficult for those who value privacy to send or receive cryptocurrency from any friend who uses one of the government complying wallets. And this creates a problem because most government approved wallets will be the ones that are the most user friendly like Coinbase and Kraken.
This will force users to transfer their cryptocurrency over to a government approved wallet or risk being unable to spend or cash it out except by a peer-to-peer transfer with another individual with an unregistered wallet. The government, especially the US government, hopes that this will bring big time cryptocurrency investors that have been hiding from taxes out of the woodwork.
When Will This Happen?
Unfortunately, the wheels for these regulations are already in motion. The Financial Action Task Force (FATF) has already released the ‘guidelines’ it will request that companies will follow and that governments will enforce back in March 2021. And before you point out that these are just requested guidelines, you should know that governments almost always follow an adopt these regulations lest they face scrutiny from other developed nations. Therefore it is expected that almost all countries will adopt these new cryptocurrency regulations. And why wouldn’t they? These regulations give the government back the fiscal power they have recently felt slipping from their grip.
The new regulations are still in debate, but the FATF has already collected feedback from the countries involved and plans to announce its finalized regulations sometime in October 2021, meaning these regulations will come down the line to affect citizens in just a few months.
What Should You Do?
Honestly, at this point there isn’t anything that can be done. Soon these regulations will be law, destroying the amazing taste of privacy that cryptocurrency has given the world these past twelve years. The good news is, peer to peer transactions will remain out of the governments control, but they will still require identifying information if made on a government approved wallet.
The best thing you can do is get yourself set up with a wallet that is not associated with a company that will take your information, and encourage your friends to do the same. But be aware that it may later become difficult to cash out from these wallets through an exchange unless you find one that is in a country that doesn’t follow the FATF regulations. You also should be on the lookout for emails from companies you transact cryptocurrency through to find out just what they will be requiring and tracking. This way you will be prepared to know what loss of privacy to expect.
The only good news out of all of this is that this may just be the push that cryptocurrency needs to be widely adapted by countries all over the world. But do you really want something that is so transparent and government controlled to be adapted? After all, these new regulations are taking the crypto out of cryptocurrency and just leaving the currency behind. On the bright side, at least international transactions may be faster—unless they restrict those too.
Overall, for cryptocurrency enthusiasts who have been with the technology for a long time, this news is absolutely devastating. But for those who want to spend their Bitcoin at the grocery store via a Coinbase debit card, enjoy.